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10-13-2004, 10:16 AM
By Tom Locke
The Denver Business Journal
Updated: 8:00 p.m. ET Oct. 10, 2004
Business bankruptcy filings and total bankruptcy filings were flat in Colorado in the third quarter versus a year ago and down from the second quarter.
But observers aren't ready to call it a turnaround yet.
Third-quarter Colorado business bankruptcies numbered 174, exactly the same as the year-ago quarter, and down 23 percent from the 225 filed in the second quarter, according to data from the U.S. Bankruptcy Court for the District of Colorado.
Meanwhile, total third-quarter bankruptcies of 6,757 were down just a tad from the 6,782 posted a year ago in Colorado and down 12 percent from the 7,691 in the second quarter.
"It seems like things are leveling off to me, actually," said Denver bankruptcy attorney Lee Kutner.
Many of the Chapter 11 reorganization bankruptcy filings he's seeing are not economy-driven, he said. Sometimes businesses are filing because of market-niche, foreclosure or litigation issues, as opposed to economic issues, he added.
Looking at total bankruptcy filings, which are dominated by consumers, Kutner wasn't particularly optimistic. "I don't think individual financial situations have improved significantly," he said. "There's still reduced employment. There's low incomes."
Indeed, many of his clients are people who once were working for, say, $100,000 a year and now are making $50,000, or were making $50,000 and now earn $30,000, he said.
Kutner said once the uncertainty of the general election in November is removed, businesses might be willing to hire more and invest more.
But he warned that jobs aren't the only problem. The bankruptcy problem is also due to high credit card debt and overleveraged homes.
With the third-quarter numbers, is it time to call a turnaround?
"If there's a turnaround, it's probably slight," Kutner said.
The year-over-year numbers are flat, and those are the ones to look at, he said. "To me, it seems like things aren't getting worse, but they're not getting better."
Max Fulton, senior associate in the Denver office of New York-based turnaround management firm Alvarez & Marsal Inc., is also hesitant to call a turnaround just yet. It's a "bit premature" at this point, and three or four quarters of positive data are needed before drawing any conclusions, he said.
The year-over-year leveling off of bankruptcy filings in the third quarter follows a second quarter that posted an all-time high of total Colorado bankruptcies for a single quarter and the highest number of business bankruptcies in a single quarter since the third quarter of 1993.
In general, though, Fulton said the lower number of business bankruptcy filings in the third quarter "definitely reflects the [Colorado] economy picking up and getting better."
He noted the first half of 2004 was better than the last half of 2003, and the Colorado outlook has improved in the third quarter of this year from the second quarter. He thinks the improving state economy will have a positive impact on Colorado business bankruptcies next year.
"I think as we move into 2005, we're going to see this number decline [versus 2004]," he said.
Nationally, partly because of its expectations that a healthier 2005 will lead to less turnaround management demand, Alva-rez & Marsal is expanding into new business consulting areas outside of distressed companies, Fulton said.
© 2004 Denver Business Journal
The Denver Business Journal
Updated: 8:00 p.m. ET Oct. 10, 2004
Business bankruptcy filings and total bankruptcy filings were flat in Colorado in the third quarter versus a year ago and down from the second quarter.
But observers aren't ready to call it a turnaround yet.
Third-quarter Colorado business bankruptcies numbered 174, exactly the same as the year-ago quarter, and down 23 percent from the 225 filed in the second quarter, according to data from the U.S. Bankruptcy Court for the District of Colorado.
Meanwhile, total third-quarter bankruptcies of 6,757 were down just a tad from the 6,782 posted a year ago in Colorado and down 12 percent from the 7,691 in the second quarter.
"It seems like things are leveling off to me, actually," said Denver bankruptcy attorney Lee Kutner.
Many of the Chapter 11 reorganization bankruptcy filings he's seeing are not economy-driven, he said. Sometimes businesses are filing because of market-niche, foreclosure or litigation issues, as opposed to economic issues, he added.
Looking at total bankruptcy filings, which are dominated by consumers, Kutner wasn't particularly optimistic. "I don't think individual financial situations have improved significantly," he said. "There's still reduced employment. There's low incomes."
Indeed, many of his clients are people who once were working for, say, $100,000 a year and now are making $50,000, or were making $50,000 and now earn $30,000, he said.
Kutner said once the uncertainty of the general election in November is removed, businesses might be willing to hire more and invest more.
But he warned that jobs aren't the only problem. The bankruptcy problem is also due to high credit card debt and overleveraged homes.
With the third-quarter numbers, is it time to call a turnaround?
"If there's a turnaround, it's probably slight," Kutner said.
The year-over-year numbers are flat, and those are the ones to look at, he said. "To me, it seems like things aren't getting worse, but they're not getting better."
Max Fulton, senior associate in the Denver office of New York-based turnaround management firm Alvarez & Marsal Inc., is also hesitant to call a turnaround just yet. It's a "bit premature" at this point, and three or four quarters of positive data are needed before drawing any conclusions, he said.
The year-over-year leveling off of bankruptcy filings in the third quarter follows a second quarter that posted an all-time high of total Colorado bankruptcies for a single quarter and the highest number of business bankruptcies in a single quarter since the third quarter of 1993.
In general, though, Fulton said the lower number of business bankruptcy filings in the third quarter "definitely reflects the [Colorado] economy picking up and getting better."
He noted the first half of 2004 was better than the last half of 2003, and the Colorado outlook has improved in the third quarter of this year from the second quarter. He thinks the improving state economy will have a positive impact on Colorado business bankruptcies next year.
"I think as we move into 2005, we're going to see this number decline [versus 2004]," he said.
Nationally, partly because of its expectations that a healthier 2005 will lead to less turnaround management demand, Alva-rez & Marsal is expanding into new business consulting areas outside of distressed companies, Fulton said.
© 2004 Denver Business Journal