The Effects of Bankruptcy Around the World

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Yellow Belt
The figures for bankruptcies both personal and for companies looks to be rising all over the world.

Here are some figures for the UK, US, and Switzerland.

In the US there are basically two forms of bankruptcy, chapter 7 and chapter 11. It seems that for some companies it's actually been beneficial for them to go for a chapter 11 order, which has helped them to continue trading.


United Kingdom

At the same time, 4,607 companies went into liquidation - 52 per cent more than a year earlier.

Meanwhile, the number of companies falling into administration in England and Wales in the final three months of 2008 also soared.

They stood at 2,018, up from 575 a year ago, according to the Insolvency Service.


United States

Lonnie Wallace looks out his office window at Jim Palmer Trucking near the Wye and sees smoke rising from the towering stacks at Smurfit-Stone Container Co.

He knows the worry that consumes the employees and his business associates who work at the struggling linerboard plant in Frenchtown.

When Smurfit-Stone filed for Chapter 11 bankruptcy protection two weeks ago, the president of the Missoula-based national trucking business cringed.

“My first reaction was, ‘Oh, no. We are in the same situation,' ” recalls Wallace, whose own company filed Chapter 11 in July. “Timing for us is pretty critical for all of our projected budgets in our bankruptcy plan, and Smurfit, one of our clients, is a part of that.”

What came next, he says, was a flood of empathy.

“I now know exactly what goes on behind the scenes with this kind of thing and I now sympathize with everyone involved with that process. I know the folks at Smurfit had to have meeting after meeting, review after review, to find out what their best options were.”

“I felt sorry for them and I felt their pain,” Wallace says. “But now, six months into our own Chapter 11 process, I also knew there probably was a little relief in sight for them.”

Across the nation, more American companies are seeking Chapter 11 bankruptcy protection, not as a way to avoid their debts, but rather as a way to reorganize their finances and become stronger.

“A lot of businesses are looking at it more as a business planning option and not as a last resort,” said Andy Patten, a Billings area attorney who specializes in Chapter 11 bankruptcy and represents some of the state's most high-profile cases, including the Yellowstone Club.

“I think companies are less hesitant to use it today than in the past because it doesn't quite have the same negative taint as it may have decades ago,” Patten said. “Probably because there is such an explosion in corporate and individual bankruptcy. It's just not that unusual anymore, given the airlines and companies like Texaco and other big national companies that have successfully gone through Chapter 11.”

When a large corporation such as Smurfit-Stone files for Chapter 11, it's a good sign the company is fighting to stay alive, said Dick Samson, a Missoula bankruptcy attorney.

Of all the bankruptcy chapters, the one most people don't want to hear is Chapter 7.

“Chapter 7 is when a company or individual pretty much throws in the towel and doesn't have the funds to make ends meet, and asks that debts be discharged,” he said. “Chapter 11 means there's still hope, that there is a need and a desire to keep going.”

Smurfit-Stone is just one of many publicly held companies that have sought Chapter 11 protection in recent months. Last week alone, national retailers Fortunoff and Spectrum Brands Inc. filed under Chapter 11, on the heels of a growing list of other companies that includes Circuit City and Nortel Networks.

Judging from the number of calls his office is handling - everything from used car dealerships in Billings to real estate companies in the Gallatin and Flathead valleys - and the rumblings from colleagues and businesses across the state, Patten fully expects more bankruptcies to come.

“I think there is a kind of general malaise about the future and the economy,” Patten said, “and businesses are starting to look at all of their options now instead of waiting for a wreck to deal with.”

On Wallace's desk at Jim Palmer Trucking is a massive, 2-inch-thick document. It's the company's new, ever-evolving business plan that he and his management team are writing and rewriting daily as part of the firm's bankruptcy proceedings.

By March, the final plan, which is the result of stakeholder participation and negotiations, is expected to gain court approval.

“We didn't see our bankruptcy coming,” Wallace explains, flipping through the pages.

For two years, Jim Palmer Trucking had been working hard to streamline operations and refine its business operations. The efforts were paying off, but just when it looked as if the company would climb out of debt, fuel prices doubled.

Between the unprecedented, unexpected increase to the budget and an aging fleet in constant need of costly maintenance work, the company began to crumple under the financial crush.

Things hit rock bottom when the company was a month late on some of its truck payments, and financial lenders showed up in July to repossess 89 of Jim Palmer's 305 rigs.

“In the 18 months prior to Chapter 11, we had made so much progress and then the fuel crisis happened,” Wallace says. “If that hadn't hit us, it would have been such an internal success story. It would have been such an achievement to know we turned this company around.”

Yet Chapter 11, and the hold it puts on debts the company owes to unsecured creditors - mostly suppliers, many of them local business - has allowed the company to take desperately needed steps.



ZURICH, Feb 6 (Reuters) - Unemployment in Switzerland rose to its highest level in 2 years in January, data showed on Friday, as companies axed jobs at a faster rate in reaction to the economic downturn.

The increasing unemployment adds to a recent string of dire news from the economy, piling more pressure on the Swiss National Bank to take unconventional measures to support the economy, which is facing its deepest recession in decades. The unemployment rate rose to 3.3 percent, up from 3.0 percent in December and the highest level since January 2007, the State Secretariat for Economic Affairs (SECO) said.

The total number of unemployed rose to 128,430 in January, also the highest in 2 years. When adjusted for seasonal swings, the unemployment rate inched up to 2.9 percent from 2.8 percent in December.

Analysts had expected an adjusted rate of 2.9 percent and an unadjusted rate of 3.2 percent.

"Short-time work has risen further, also indicating that unemployment is rising. And this will continue, probably at a faster rate," Sarasin analyst Alessandro Bee said.

"So far the Swiss economy has kept up pretty well. The strong decline is just starting now," Bee said.

The SNB had anticipated the downturn in time, slashing its its target for the 3-month Swiss franc LIBOR aggressively to just 0.5 percent, but it might sill have to turn to unconventional easing measures to help the economy, he said.

The Swiss central bank has already flagged it might use means such as intervention to weaken the Swiss franc or the purchase of government and corporate bonds.

Export-oriented manufacturers such as textile machinery and car parts maker Oerlikon and Rieter or chemicals group Clariant have announced to cut thousands of jobs as foreign demand for Swiss products is dwindling fast.

Many more firms have announced short-time work, a government subsidised measure to reduce overall working hours and usually a last resort for companies to avoid lay-offs.

The Seco said the number of workers receiving payment for short-time work more than doubled in November compared to October.

On Friday, Swiss electronics group Cicor Technologies became the latest firm to announce the introduction of this measure in one of its division.
"This should have two effects: it will match capacities to the lower demand, and it will help protect the jobs of Cicor's highly skilled specialists, thus maintaining the company's technological leadership," the group said.
So far, low unemployment has bolstered consumer confidence and spending and cushioned some of the slump in exports.

The central bank forecast in December that Switzerland's economy may shrink by 0.5 to 1.0 percent this year, which would be the deepest recession for the country in decades.

But indicators such as the KOF growth barometer tumbled to all-time lows, prompting economists to cut growth forecasts.

Bankruptcies in Switzerland rose 27 percent from a year ago to 375 in January, financial information publisher Dun & Bradstreet said on Friday, the fifth monthly rise in a row.
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