Chapter 11 Filings Are on Pace to Set Record

U.S. corporate bankruptcies are headed for a second straight record year after filings by Adelphia Communications Corp., Global Crossing Ltd. and Kmart Corp.

Last year, 255 publicly traded companies, led by Enron Corp., put $260 billion of assets under court protection. This year, 113 companies with $149.3 billion in assets have filed. WorldCom Inc., with $103.8 billion, may seek Chapter 11 protection after acknowledging it hid expenses to boost profit.

The recovering economy hasn’t been enough to stem a bankruptcy trend fueled by corporate scandals and a stock market downturn.

“The worst isn’t over by any means,” said Ken Buckfire of investment banking firm Miller, Buckfire Lewis & Co. “I don’t see any decrease in the volume of bankruptcies for the next year and a half to two years.”

Enron, with $63.4 billion in assets, filed the largest Chapter 11 case in the U.S. in December. It would be dwarfed if WorldCom declares bankruptcy. The long-distance telephone company said it’s trying to work out a plan with banks to avoid Chapter 11.

“I’ve never seen the magnitude and the concentration of financial failures in such a short period of time,” said corporate lawyer David Heiman of Jones, Day, Reavis & Pogue, who has handled some of the biggest Chapter 11 restructurings. “There are some huge companies where the value has simply evaporated.”

Five of the eight largest Chapter 11 cases have been filed since December. Besides Enron, they are telecommunications company Global Crossing, with $25.5 billion in assets; Adelphia, with $24.4 billion; retailer Kmart, with $17 billion; and NTL Inc., Britain’s biggest cable TV operator, with $16.8 billion.