Have We Hit Bottom? Reading Tea Leaves in Bankruptcy Statistics

September 17, 2010 at 1:03 pm Leave a comment

Not quite the bottom, but getting closer.

Bankruptcy filings rose 20 percent in the 12-month period ending June 30, 2010, according to statistics released by the Administrative Office of the U.S. Courts.

This is generally hailed as bad news; at most the Economist is invoking Schumepeterian creative destruction as necessary evil before new growth can blossom.So what’s the good news?

The speed of the increase in total filings has slowed down significantly: quarterly filings in the second quarter of 2010 were 422 thousand. That’s up 11% from the same quarter a year ago (then 381 thousand), and 9% from the first quarter in 2010 (then 388 thousand).

It’s still getting worse, just not as fast any more.

And the business side of things seems to slowly improve: business bankruptcy filings in the same 12-month period ending June 30, 2010 increased only 8% to about 60 thousand. That’s a much more modest increase compared to the groundswell of an increase of 63% in the same 12-month period in 2009 and 42% in 2008. Quarterly business bankruptcy filings actually peaked in the second quarter of 2009 at 16 thousand and have since receded somewhat to around 15 thousand filings per quarter.

That’s still high, but leveling off.

Gunther Hofmann is a Vice President of The Brenner Group and has done extensive work in valuations, M&A, venture capital, and corporate finance with significant international experience in small firms as well as global corporations. Gunther earned a Masters Degree in Electrical Engineering and Business Administration from Darmstadt University of Technology in Germany, and was a Visiting Scholar at UC Berkeley. He is a holder of the Chartered Financial Analyst designation, and a member of the National Association of Certified Valuation Analysts. Gunther is Chairman of the Software/IT Industry Group of the German American Business Association (GABA).

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Entry filed under: Financial Advisory, Restructurings, Shareholder Services.

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