NCPA - National Center for Policy Analysis

Corporate Bankruptcies are Actually Dropping

August 16, 2002

Despite the recent well-publicized troubles of companies such as US Airways, UAL and Dynegy, fewer companies are defaulting on loans now than at the first of the year. And fewer are being tarred with the lowest credit ratings.

  • The default rate of companies peaked at 4.95 percent in February -- then dropped to 4.35 percent as of July 1.
  • Analysts say that most of the weak companies that were funded in the 1990s boom have already failed.
  • Only 49 companies had been tagged with a weakest link "CCC" credit rating or lower as of August 9 -- down 17 percent from 59 in January.

Only 129 publicly traded companies have filed for bankruptcy this year -- one bankruptcy every 1.8 days, according to BankruptcyData.com. That's down a bit from the pace in 2001, when a company filed for bankruptcy about every 1.4 days.

"The poor credit quality of the late 1990s has worked itself out," observes Fitch Ratings director Paul Mancuso.

Source: Matt Krantz, "Bankruptcy Picture Really Not So Bleak," USA Today, August 16, 2002.

For text

http://www.usatoday.com/money/companies/2002-08-15-bad-debt-ratings_x.htm

 

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