U.S. April Business Bankruptcy Filings Increase 49% (Update2)
By Bill Rochelle and Bob Willis
May 6 (Bloomberg) -- Business bankruptcy filings in the U.S. increased 49 percent in April from a year earlier, the biggest gain so far in 2008, as the slowing economy prompted more companies to shut down.
Business petitions rose to 5,173 during the month, according to statistics compiled from court records by Jupiter eSources LLC in Oklahoma City. Total bankruptcy filings, including those by individuals, were up 31 percent from a year earlier to 93,096, the group said.
Signs of distress, such as bankruptcies and foreclosures, are rising as economic growth has slowed to its weakest pace since the last recession in 2001. The economy lost jobs in April for the fourth month in a row, for a total of 260,000 jobs cuts so far this year.
The latest casualty is Tropicana Entertainment LLC, the owner of 11 casinos that filed for bankruptcy reorganization last night. Tropicana blamed its filing in part on a $2.1 billion cash acquisition of five casinos two years ago which company President Scott Butera said represented, in retrospect, the ``height of the real estate market.''
``When you go into a downturn, the cyclical industries tend to get hit,'' said Mike Englund, chief economist at Action Economics LLC in Boulder, Colorado. ``Any sudden downshift in growth will generate rises in these numbers.''
As the U.S. faces its worst housing recession in a quarter century, almost 650,000 properties were in some stage of foreclosure during the final quarter of 2007, up 112 percent from a year earlier, Irvine, California-based RealtyTrac, which monitors foreclosures, said last week.
Foreclosures and bankruptcies alike are increasing as falling home prices make it harder for those in the U.S. to refinance before adjustable-rate mortgages reset. Median prices for existing homes fell in 22 metropolitan areas in February, down 7.7 percent from a year earlier, the National Association of Realtors said April 22.
Tougher lending standards are also making it harder for small businesses and homeowners to stay afloat. The Federal Reserve said yesterday the proportion of U.S. banks making it tougher for companies and consumers to borrow approached a record in the past three months as the credit crunch intensified.
1.1 Million Filings
Mike Bickford, president of Jupiter's Automated Access to Court Electronic Records service, said in an e-mail that he anticipated 2008 bankruptcy filings will total about 1.1 million compared with 827,000 in 2007 and 590,000 in 2006, after a new federal law took effect in October 2005 that made it harder for people to erase debt.
There were more than 90,000 total bankruptcy filings in March, Jupiter eSources reported last month. Computed on the basis of daily filings of all types, April petitions declined less than 2 percent compared with March, halting increases in the first three months of 2008.
More than 18,000 businesses filed for bankruptcy protection in the first four months of 2008 to liquidate or reorganize. Through April, about 2,700 companies sought relief from creditors under Chapter 11 of the federal bankruptcy code. Almost 43,000 businesses went into bankruptcy last year, including more than 6,200 in Chapter 11.