The last four months of the year have seen a big jump in U.S. companies filing for bankruptcy protection. Among these filings was the largest of 2011, Jon Corzine's MF Global, in October.
In fact, four of the 10 largest bankruptcies of 2011 — which span across industries including aviation, telecommunications, energy and banking — were declared just last month.
According to ratings agencies Moody's and Standard & Poor's, the rising trend of corporate defaults is expected to continue into 2012, given global growth uncertainties, the debt crisis in Europe, and tightening funding conditions.
Because of sluggish demand, sectors like retail, media and entertainment and oil and gas are set to be the most vulnerable, according to a December report from Standard & Poor's.
We’ve ranked the top 10 bankruptcy filings of 2011, using data from banktruptcydata.com. The rankings are based on assets listed in each debtor’s last annual report (10-K) filed with the Securities and Exchange Commission before the bankruptcy filings.
Click ahead to see the largest U.S. bankruptcy filings.
By: Ansuya Harjani
Posted on Dec. 30, 2011
Assets: $1.15 billion
Bankruptcy date: Dec. 12
Lee Enterprises is a newspaper publisher in the United States, producing over 40 dailies in 23 states across the country, including the St. Louis Post-Dispatch.
Founded in 1890, Lee, whose alumni include Mark Twain, has been struggling with falling advertising revenue and declining readership — two issues plaguing the entire newspaper industry.
The company also faces a high level of debt, partly brought on by its acquisition in 2005 of another publishing house, Pulitzer. Lee paid almost $1.5 billion for the company founded by Joseph Pulitzer, who created the Pulitzer Prize for Journalism and Literature.
The Pulitzer deal was funded largely through debt, which Lee expected to roll forward periodically, according to The Des Moines Register. However, the onset of the global financial crisis in 2008 made refinancing difficult.
Earlier this year, Lee tried to repay its loans and push back its maturities via a junk bond sale. However, the company had to scrap the plan due to poor market conditions, according to Dow Jones.
Loaded with $1 billion in debt that matures in April 2012, Lee filed for Chapter 11 bankruptcy protection to work with its creditors on extending debt repayments until the end of 2015.
With most of Lee’s creditors on board with its refinancing plans, it hopes to emerge from Chapter 11 bankruptcy within 60 days of the filing. The company said in a statement that the bankruptcy would have no impact on its business and the production of its newspapers.
Assets: $1.38 billion
Bankruptcy date: Feb. 16
Virginia-based TerreStar Corp, a mobile satellite network operator, filed for bankruptcy protection in February, several months after its subsidiary TerreStar Networks and 12 of its affiliates went in for similar restructuring in October 2010.
TerreStar Corp, which provides “anywhere” network coverage across the U.S. and Canada launched one of the world’s biggest commercial communication satellites in 2009 at an estimated cost of $300 million. The company planned to provide smartphone users access to either AT&T's cellular network or its satellite network, when they were out of coverage. It also launched its own smartphone called the Genus, but the phone failed to gain traction.
The company was weighed down by heavy debts. The total liabilities of TerreStar Networks and its 12 affiliates was $1.64 billion, according to the quarterly report filed with the SEC in June 2010 before the bankruptcy filing.
TerreStar Networks withdrew from its 2010 restructuring plan in February this year and put itself up for sale. Five months later in July, satellite-TV provider Dish Network, which was keen to gain access to TerreStar Networks’ spectrum licenses, bought the company for $1.38 billion.
Assets: $1.43 billion
Bankruptcy date: Feb. 16
Borders Group, once the second-largest book retailer in the United States after Barnes & Noble, was regarded as a killer of small town booksellers when it first began expanding operations in the U.S. during the mid-1990s.
The 40-year-old bookstore chain, which operated over 600 stores together in the U.S. and Asia Pacific, has faced fierce competition the rise of online retailers and the eBook market — the fastest growing segment of book sales.
Borders attempted to expand its own Internet presence. However its website, which was launched in 2008, did not gain as much traction as that of Barnes & Noble and Internet-only retailer Amazon.com.
While the bookseller attempted to cut costs and boost sales by shutting down unproductive stores and overhauling its website, its efforts weren’t sufficient. Saddled with $1.3 billion in liabilitiesand declining book sales, Borders filed for Chapter 11 bankruptcy protection in February this year.
The company has been liquidating its remaining assets, including retail outlets, store leases as well as intellectual property. Barnes & Noble purchased the company’s customer list in an attempt to win share. It also bought the rights to Borders.com, which has been replaced by a redirect to Barnesandnoble.com since October.
Assets: $1.78 billion
Bankruptcy date: Nov. 17
General Maritime is the second-largest owner of oil tankers in the U.S. The operator of a fleet of 33 vessels has been hurt by falling oil demand, multi-year low freight rates and an oversupply of ships.
In early 2010, General Maritime took on heavy loans to purchase seven tankers for $620 million, as the oil transportation industry began to show sings of a recovery.
However, by the time the vessels were delivered, the recovery started to wane and the company was forced to take tightening measures.
General Maritime began a cost-cutting drive and started a search for investors to help refinance its existing debt. It was able raise $200 millionin loans, but that was not enough to stay out of bankruptcy court. It filed for Chapter 11 protection in November.
Since then, investment management firm Oaktree Capital has agreed to make a $175 million equity investmentin the company, and a group led by Nordea Bank Finland has offered up to $100 million in financing to aid General Maritime through its reorganization process.
The company said these deals would help reduce its debt burden, boost liquidity and safeguard over 1,000 jobs.
Assets: $2.42 billion
Bankruptcy date: July 30, 2011
Indiana-based Integra Bank operated 52 banking centers and 100 ATMs in Kentucky, Indiana and Illinois before it filed for Chapter 7 bankruptcy in July.
The lender, which had strong community banking operations, struggled with high debt levels and suffered on account of itsexposure to the commercial real estate sector, according to the Indianapolis Business Journal.
Approximately half of the bank’s lending activity was linked to commercial properties — a market segment that was hit hard by the U.S. recession. A fall in commercial real estate prices eroded the value of the properties the bank held as collaterals.
In August last year, it was ordered by federal banking regulators to increase capital ratios as they had fallen below the required levels. Integra tried to raise capital by selling some remotely located branches and by attempting to recover unpaid loans.
Unable to improve its capital ratios, regulators shut Integra down. Under a Federal Deposit Insurance Corporation-assisted transaction, Integra Bank sold its assets and deposits to competitor Old National Bank. Starting July 30, banking offices of Integra Bank opened for business as branches of Old National Bank.
According to analysts Old National Bank’s acquisition of Integra Bank has helped the former’s bottom line. In the third quarter, Old National Bank’s net income increased by more than 40 percent from the same period last year.
Assets: $3.51 billion
Bankruptcy date: Sept. 7
NewPage, the Ohio-based papermaker owned by Cerberus Capital operates mills in the United States and Canada. Together, the mills produce about 3.5 million tons of paper a year used in printing newspapers, magazines and advertising brochures.
But in recent years, falling newspaper circulation, as a result of competition from online sources, and a shift toward online advertising reduced demand for its paper. In addition, higher prices of wood, chemicals and pulp have weighed on NewPage’s earnings. The company reported a net loss of $229 million for the six months ended June 30, 2011.
NewPage has been trying to restructure $4.2 billion of debt since earlier this year, but said jittery suppliers have begun cutting off credit, leaving liquidity "severely constrained," according to filings in Delaware's bankruptcy court, reported by Reuters.
NewPage, which filed for court-supervised restructuring at the beginning of September, has received a commitment led by JPMorgan Chase for up to $600 million of creditduring its bankruptcy. Since then, the company has stepped up its cost cutting efforts.It shut down an unprofitable mill in Nova Scotia, Canada.And it is currently looking for a buyer for the plant, according to CBC News.
Some of its contractors and suppliers who are still owed money were recently angered by the company’s decision to go ahead with a bonus plan worth $1.5 million for 15 NewPage company executives.
Assets: $4.21 billion
Bankruptcy date: Nov. 23
California-based PMI Group is the United States’ third-largest private mortgage insurer. Since the U.S. housing bubble burst in 2007, PMI Group has had to pay out billions to compensate lenders to whom it sold insurance.
As a result, in August, PMI’s main operating unit, PMI Mortgage Insurance, together with another unit PMI Insurance, was ordered to halt the sale of new policies by the Arizona Department of Insurance, as its funds fell short of regulatory requirements in the state.
Two months later, PMI Mortgage Insurance along with PMI Insurance were seized by the Arizona insurance regulator because losses on mortgage defaults had drained the firm’s finances. They were also ordered to pay claims at just 50 percent, with the remaining amount deferred to an undetermined date.
The parent company launched a court bid to overturn the seizure, saying it had $2 billion in cash and enough liquid investments to pay claims through December 2013. But the court countered its claim with the judge sayingPMI’s mortgage subsidiary is “currently insolvent.” In its filing, it listed its debt as $736 million as of Aug. 4.
The insurer, which has faced 16 straight quarterly losses up to June 30, 2011, hopes to reach a deal with regulators to resume writing new policies, according to court papers. A hearing on the appointment of a receiver to take over the two units is scheduled for Jan. 10.
Assets: $9.95 billion
Bankruptcy date: Nov. 7
Dynegy Holdings, a unit of power producer Dynegy Inc. filed for bankruptcy in November. Since the financial crisis of 2008, Houston-based Dynegy, which operates power plants across the United States, has been suffering from falling demand for wholesale electricity as well as weak power tariffs.
A decline in natural gas prices, which have plummeted over 45 percent in the last two years, created a glut of cheap power. Together with a negative economic environment, the company was also reeling under a high debt load of $6.2 billion.
Dynegy Holdings bankruptcy filing was unusual because it protected shareholders of the parent company, Dynegy Inc., including investor Carl Icahn, at the expense of bondholders of Dynegy Holdings, according to The Wall Street Journal.
The paper reported that Dynegy transferred assets related to coal-powered plants from Dynegy Holdings to Dynegy Inc.
The reorganization under Chapter 11 is expected to help it ease its debt load and restructure its expensive leases on power plants. However, the plan is yet to be approved by the bankruptcy court and is subject to further negotiations with stakeholders.
Assets: $25.09 billion
Bankruptcy date: Nov. 29
AMR is the parent company of American Airlines, the third-largest carrier in the United Sates.
An innovator in the aviation sector, 80-year-old American Airlines was the first to introduce automated reservation systems (in 1946) and to offer a frequent-flier program. However, in recent years, the carrier has faced waning travel demand, soaring fuel prices as well as an aging fleet. The airline has an average fleet age of 15 years, making it one of the oldest and least fuel-efficient amongst its rivals.
Labor costs have been one of the largest financial burdens for the company. In its 2010 annual report, American Airlines estimated that its labor costs were around $600 million more per year than its rivals. According to the Pension Benefit Guaranty Corp., the airline’s pension plans covering 130,000 workers and retirees are currently underfunded by $10 billion.
While competitors like United Airlines and Delta Air Lines have used bankruptcy as an opportunity to restructure labor agreements, American Airlines was the only major U.S. carrier not to have undergone bankruptcy proceedings until its filing in November.
The carrier had been in contract negotiations with pilots for many years in an effort to lower its labor costs. But when the last round of talks, which started in 2008, ended in failure, parent company AMR filed for bankruptcy.
Under Chapter 11, American Airlines plans to restructure its debt and aircraft leases as well as work on its network strategy to eliminate unprofitable flying routes. The carrier will also upgrade its fleet, purchasing 32 planes from Boeing, which it believes will help reduce its fuel bill and make it more competitive. CEO Tom Horton has also said the restructuring efforts will result in job cuts.
Assets: $40.54 billion
Bankruptcy date: Oct. 31
The biggest bankruptcy case of the year, derivatives broker MF Global is also the largest Wall Street firm to collapse since Lehman Brothers in September 2008.
The more than 200-year-old firm, which made money by charging fees for brokering futures and options trades, was headed by Jon Corzine — a former Goldman Sachs executive and former U.S. senator and New Jersey governor.
The company’s risky bets on European sovereign debtwere personally overseen by Corzine, according to The New York Times, and led to the firm’s demise.
The paper reported that in late 2010, Corzine increased the firm's exposure to European government debt from $1.5 billion to $6.3 billion. But an escalating debt crisis in the euro zone pushed the firm to the edge. In October, Moody’s cut its rating on MF Global to a notch above junk.
In a bid to save the company from collapse, Corzine attempted to sell the firm's assets. But on Oct. 30, talks with suitor Interactive Brokers fell apart after regulators discovered funds were missing from customer accounts, according to the Times.
MF Global officially filed for bankruptcy protectionon Oct. 31, and is currently liquidating its assets around the world, leading to mass layoffs. All 1,066 of its brokerage employees were fired in early November, some of whom discovered their termination directly from news reports.
Corzine, who resigned as chief executive earlier this month, faces the possibility of indictment. He has denied knowledge of the missing client funds, according to Reuters.
“I simply do not know where the money is, or why the accounts have not been reconciled,” Corzine said in his testimony before the U.S. House of Representatives Committee on Agriculture on Dec. 8.