Corporate Bankruptcies Reach a 10-Year Low

Bankruptcy filings by U.S. public companies reached a 10-year low in 2004 as low interest rates and better access to financing helped troubled businesses amass cash and pay debts, according to a research report.

This year, 80 public companies filed for bankruptcy, the lowest since 1994 when 70 public companies sought court protection from creditors, according to a report this week by New Generation Research. A record 257 publicly traded corporations filed for Chapter 11 in 2001.

“The fact there is a very substantial amount of capital and credit available has allowed public companies to refinance outstanding debt and avoid default,” said Harvey R. Miller, vice chairman of New York-based investment bank Greenhill & Co.

Low financing costs helped U.S. companies pay down debt and amass a record $1.3-trillion cash stockpile at the end of the third quarter, according to Federal Reserve data. In November, the percentage of U.S. companies that defaulted on high-risk, high-yield debt in the preceding 12 months stood at 2.56%, the lowest since August 1998, according to Standard & Poor’s.

Whether the trend continues depends on interest rates and how the international community reacts to the U.S. current account deficit, Miller said.