Three years ago the Lehman Brothers bankruptcy filing set off a ripple effect that ended up being a tsunami of other banks to file for bankruptcy. Along with many banks filing bankruptcy there was a slew of corporate failures also. As the US economy continues in a downward spiral many are expecting the ripple effect to begin again with some big companies fighting to survive. There has been a list of companies from restaurant chains, green energy, all the way down to the paper industry that have ended up in Chapter 11 bankruptcy this summer.
Reasons for the economic downturn include lackluster consumer spending, combined with the tightened lending practices of the banks. With a shaky bond market and banks not lending other industries are threatened to fall also such as tourism, shipping, media and real estate.
Although Kodak denies filing for bankruptcy, it has been confirmed that a law firm has been retained that is known for taking companies through bankruptcy. The company states they are being advised on a strategy to overcome losses. Many bankruptcy experts believe that a double-dip US recession will trigger a catastrophic string of failures that would only rival the bankruptcy filing of Lehman Brothers in 2008. The Lehman Brothers bankruptcy was the largest bankruptcy filing in the history of the United States.
As companies continued to deny their filing for bankruptcy, restructuring law firms are getting busier and busier. Experts are wondering and treading carefully on making any predictions on whether a bankruptcy title wave would happen. Many experts are watching closely the amount of money that banks are willing to lend a company in trouble. This will be a telltale sign that the economy slides into something similar as a European debt crisis.
The naysayers can’t refute the data that showed the Chapter 11 bankruptcy filings are on the rise with 10 companies with over $100 million in assets or filing bankruptcy in September alone. Prior to that, there were the highly publicized failures of Evergreen Solar and Solyndra. It’s hard to pick trends, but it sure looks like there will be an increase in many other corporations filing bankruptcy in the next couple years.