Bankruptcies: 2009 Is Already One for the Record Books

With the Dow up around 10,000, here's a dark indicator to add to the mix: A record number of companies have filed for bankruptcy so far this year. Through Oct. 15, 4,585 U.S. companies filed for protection under Chapter 11, says Richard Peterson, a director of Standard & Poor's (MHP) Market, Credit & Risk Strategies unit. That's up 12% from last year on that date. Of those, 249 are companies taken private (or invested in) by buyout firms. That's a record, too—a 68% increase from the previous high of 148 over the same period in 2008. "Bankruptcies will continue to rise," predicts Henry Miller, chairman of investment bank Miller Buckfire, which advises on restructurings. Private-equity-backed companies remain vulnerable, he says, because so many were bought at the top of the market and loaded up with debt in the belief they would grow at a healthy clip. Now "it's not clear the economy will recover sufficiently" to meet those expectations, he says, adding that "debt capital markets also may not be in a position to refinance obligations as they come due." The biggest bankruptcy this year: General Motors, with $91 billion in assets. The private equity-backed casualties include Charter Communications (CHTRQ) ($13.6 billion), owned by entities controlled by Microsoft (MSFT) co-founder Paul Allen since 1998, and Reader's Digest ($2.8 billion), bought by investors led by Ripplewood Holdings in 2007.