Largest Bankruptcies in World History
Most of you already know that bankruptcy is a way of dealing with debts where a court makes an order against you if you are unable to pay your debts. Nearly 19% of individual bankrupts are under the age of 30, In the last few years there’s been a noticeable trend in the rise of the number of young people declaring bankruptcy, with the majority of individual bankrupts being under the age of 30. Corporate Bankruptcies is somewhat different than individual Bankruptcy. Let’s have a look at some of the world’s largest corporate bankruptcies starting with “Lehman Brothers”.
01. Lehman Brothers Bankruptcy
· Bankruptcy Date: 09/15/2008
· Assets: $691 billion
Lehman Brothers Holdings Inc. was a global financial-services firm which, until declaring bankruptcy in 2008, participated in business in investment banking, equity and fixed-income sales, research and trading, investment management, private equity, and private banking. It was a primary dealer in the U.S. Treasury securities market.
Lehman Brothers filed for Chapter 11 bankruptcy protection on September 15, 2008. The bankruptcy of Lehman Brothers is the largest bankruptcy filing in U.S. history with Lehman holding over $600 billion in assets. According to Bloomberg, reports filed with the U.S. Bankruptcy Court, Southern District of New York (Manhattan) on September 16 indicated that J.P. Morgan provided Lehman Brothers with a total of $138 billion dollars in “Federal Reserve-backed advances.” The cash-advances by JPMorgan Chase were repaid by the Federal Reserve Bank of New York for $87 billion on September 15 and $51 billion on September 16.
It was well known that Lehman, an Alabama cotton trader turned banking behemoth, was the biggest bankruptcy in US history. But nobody anticipated quite what would follow – a week that has become known on Wall Street as the great panic of 2008.
02. Washington Mutual Bankruptcy
· Bankruptcy Date: 09/26/2008
· Assets: $327.9 billion
On September 26, 2008, Washington Mutual, Inc. and its remaining subsidiary, WMI Investment Corp., filed for Chapter 11 bankruptcy. Washington Mutual, Inc. was promptly delisted from trading on the New York Stock Exchange, and commenced trading via Pink Sheets. All assets and most liabilities (including deposits, covered bonds, and other secured debt) of Washington Mutual Bank’s liabilities were assumed by JPMorgan Chase. Unsecured senior debt obligations of the bank of were not assumed by the FDIC, leaving holders of those obligations with little meaningful source of recovery.
On Friday, Sep. 26, 2008, Washington Mutual Bank customers in the branches were given a letter that said the combined JPMorgan Chase and Washington Mutual Banks have 5,400 branches and 14,200 ATM’s in 23 states. Washington Mutual account holders were able to continue banking as normal. Deposits held by Washington Mutual became now liabilities of JPMorgan Chase.
03. WorldCom Bankruptcy
· Bankruptcy Date: 07/21/2002
· Assets: $103.9 billion
WorldCom founded in 1963, it grew to be the second largest long-distance provider in the U.S. It was purchased by WorldCom in 1998 and became MCI WorldCom, and afterwards being shortened to WorldCom in 2000. WorldCom’s financial scandals and bankruptcy led that company to change its name in 2003 to MCI. The MCI name disappeared in January 2006 after the company was bought by Verizon.
WorldCom’s bankruptcy filing in 2002 was the largest such filing in U.S. history. The WorldCom scandal is regarded as one of the worst corporate crimes in history, and several former executives involved in the fraud faced criminal charges for their involvement. Most notably, company founder and former CEO Bernard Ebbers was sentenced to 25 years in prison, and former CFO Scott Sullivan received a five-year jail sentence, which would have been longer had he not pleaded guilty and testified against Ebbers. Under the bankruptcy reorganization agreement, the company paid $750 million to the Securities & Exchange Commission in cash and stock in the new MCI, which was intended to be paid to wronged investors.
04. General Motors Bankruptcy
· Bankruptcy Date: 06/01/2009
· Assets: $91 billion
General Motors Company, also known as GM, is a United States based automaker with headquarters in Detroit, Michigan. By sales, GM ranked as the largest U.S. automaker and the world’s second largest for 2008. GM had the third highest 2008 global revenues among automakers on the Fortune Global 500. GM manufactures cars and trucks in 34 countries, recently employed 244,500 people around the world, and sells and services vehicles in some 140 countries.
GM filed for Chapter 11 Bankruptcy protection in the Manhattan New York federal bankruptcy court on June 1, 2009 at approximately 8:00 am EST. June 1, 2009 was the deadline to supply an acceptable viability plan to the U.S. Treasury. The petition is the largest bankruptcy filing of a U.S. industrial company. The filing reported US$82.29 billion in assets and US$172.81 billion in debt.
05. CIT Bankruptcy
· Bankruptcy Date: 11/01/2009
· Assets: $71 billion
CIT Group, Inc. is a large American commercial and consumer finance company, founded in 1908. The company filed for Chapter 11 bankruptcy in 2009. The company is included in the Fortune 500 and is a leading participant in vendor financing, factoring, equipment and transportation financing, Small Business Administration loans, and asset-based lending. The company does business with more than 80% of the Fortune 1000, and lends to a million small and medium businesses. Like many other financial institutions, the New York-based small business lender spent years on a debt-fueled growth binge. But when Lehman Brothers’ failure drained the Wall Street liquidity pool, CIT was left high and dry.
The firm hastily won approval to become a bank holding company and took TARP funds, but regulators kept CIT Bank on a short leash. Starved of cash, the firm sought a second federal bailout in July but was rejected — forcing it to take a $3 billion loan, later expanded to $4.5 billion, from big bondholders.
CIT later dropped its CEO and tried a big debt swap, but it was no use. The century-old company was sunk the day the easy money dried up.
06. Enron Bankruptcy
· Bankruptcy Date: 12/02/2001
· Assets: $65.5 billion
Enron Corporation (former NYSE ticker symbol ENE) was an American energy company based in Houston, Texas. Before its bankruptcy in late 2001, Enron employed approximately 22,000 and was one of the world’s leading electricity, natural gas, pulp and paper, and communications companies, with claimed revenues of nearly $101 billion in 2000. Fortune named Enron “America’s Most Innovative Company” for six consecutive years. At the end of 2001 it was revealed that its reported financial condition was sustained substantially by institutionalized, systematic, and creatively planned accounting fraud, known as the “Enron scandal”.
The Enron scandal, revealed in October 2001, eventually led to the bankruptcy of the Enron Corporation, the dissolution of Arthur Andersen, which was one of the five largest audit and accountancy partnerships in the world. In addition to being the largest bankruptcy reorganization in American history at that time, Enron undoubtedly is the biggest audit failure.
Enron was estimated to have about $23 billion in liabilities, both debt outstanding and guaranteed loans. Citigroup and JP Morgan Chase in particular appeared to have significant amounts to lose with Enron’s fall. Additionally, many of Enron’s major assets were pledged to lenders in order to secure loans, throwing into doubt what if anything unsecured creditors and eventually stockholders might receive in bankruptcy proceedings.
07. Conseco Bankruptcy
· Bankruptcy Date: 12/17/2002
· Assets: $61 billion
Conseco, Inc. is a publicly traded holding company headquartered in Carmel, Indiana. Conseco, Inc. is not an insurance company. Conseco, Inc. is engaged in insurance and consumer finance operations through a number of subsidiary companies. As a holding company, Conseco, Inc. is a separate legal entity that is distinct and apart from its subsidiary insurance companies. On December 17, 2002, Conseco, Inc., (Conseco) along with several subsidiaries, including CIHC, Inc. and Conseco Finance Corp., filed for permission to reorganize under Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court in Chicago. The company collapsed under a huge debt load resulting from a rash of acquisitions in the 1990s, including the $6 billion purchase of Green Tree, the nation’s largest lender to mobile-home buyers.
Under the terms of a tentative bankruptcy agreement, Conseco Finance Corp. will be sold to CFN Investment Holdings LLC. Conseco Finance became insolvent after it failed to make a $4.7 million payment that was due Dec. 4.
08. Chrysler LLC Bankruptcy
· Bankruptcy Date: 04/30/2009
· Assets: $39 billion
Chrysler Group LLC is a U.S. automobile manufacturer headquartered in the Detroit suburb of Auburn Hills, Michigan. Chrysler was first organized as the Chrysler Corporation in 1925. From 1998 to 2007, Chrysler and its subsidiaries were part of the German based DaimlerChrysler AG (now Daimler AG).
On April 30, 2009, President Obama forced Chrysler into federal bankruptcy protection and company announced a plan for a partnership with Italian automaker Fiat. On June 1, Chrysler LLC stated they were selling some assets and operations to the newly formed company Chrysler Group LLC. Fiat will hold a 20% stake in the new company, with an option to increase this to 35%, and eventually to 51% if it meets financial and developmental goals for the company.
09. Thornburg Mortgage Bankruptcy
· Bankruptcy Date: 05/01/2009
· Assets: $36.5 billion
Thornburg Mortgage Inc. was an American publicly traded corporation headquartered in Santa Fe, New Mexico. Founded in 1993, the company is a real estate investment trust (REIT) that originates, acquires & manages mortgages, with a specific focus on jumbo and super jumbo adjustable rate mortgages.
During the Financial crisis of 2007–2010 the company experienced financial difficulties related to the ongoing subprime mortgage crisis, and on April 1, 2009 Thornburg Mortgage, Inc. and four of its affiliates (collectively, the “Debtors”) filed petitions in the United States Bankruptcy Court for the District of Maryland seeking relief under chapter 11 of the United States Bankruptcy Code. After the sale of all remaining assets, it would no longer exist as a going concern.
10. Pacific Gas and Electric Co. Bankruptcy
· Bankruptcy Date: 04/06/2001
· Assets: $36.1 billion
This company, with its headquarters in San Francisco, was founded in 1905 and supplies natural gas and electricity to most areas of Northern California. This company did well initially and had gas power, several hydroelectric and steam plants. Under the electricity market deregulation, the company sold off its natural gas power plants and retained the hydroelectric plants. But with the selling of the gas power plants, the generating capacity went down and it had to buy power from other energy generators. The company had to buy at fluctuating prices and sell at fixed prices, which led to losses and eventually bankruptcy. In 2004, the company emerged from bankruptcy and established itself extremely well and was named one of the most profitable companies for 2005 on the Fortune 500 list.
Bankruptcy cases are always filed in the United States Bankruptcy Court and are governed by federal law. State laws are also applied when it comes to property rights. There have been several other notable bankruptcies in American history, such as Texaco, Inc. and Financial Corp. of America. While some companies survived a bankruptcy and came out strong, others faded into oblivion.
PG&E was one of the most profitable companies on the Fortune 500 list for 2005 with $4.5 billion in profits out of $11 billion in revenue.
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