Posted by Chris O'Sullivan
Article by Mike Spector (Wall Street Journal)
The bankruptcy boom is going bust -- for now.
The financial crisis created one of the worst periods in U.S. history for corporate bankruptcies, felling the likes of Circuit City Stores Inc., General Motors Corp. and CIT Group Inc., the giant lender to small businesses.
Now corporate failures have slowed, as companies once on the verge of default have found a new life. These companies are now refinancing their balance sheets with new debt, pushing out maturities on existing loans or using distressed-debt exchanges to avoid a bankruptcy filing.
Speculative-grade companies -- or those with "junk" credit ratings -- have issued about $123 billion in new bonds this year, compared with roughly $48 billion in all of last year, according to data provider Dealogic. That's on pace to challenge 2006's record issuance of more than $143 billion, Barclays Capital analysts said late last week.
At the height of the credit crisis in January, Moody's Investors Service predicted that as much as 16.4% of U.S. junk-rated companies would have defaulted in the past 12 months. Some analysts said the default rate might not peak until early 2010.
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