The Decade's 10 Biggest Bankruptcies

On the last day of December 1999, the S&P 500 index closed at 1,469.25. Today, the same index is at 1,126.42. Obviously, the stock market is a little worse for the wear over the past 10 years.

The 23% drop on the S&P came with quite a few major business casualties. Many of them toppled over the past few years, as financial crisis swept the country. The 10 biggest failures made headlines, shook the markets, and gave investors plenty of sleepless nights.

And who are these 10 infamous flops?

Company

Date of Bankruptcy Filing

Assets

Lehman Brothers

Sept. 15, 2008

$691 billion

Washington Mutual

Sept. 26, 2008

$328 billion

WorldCom

July 21, 2002

$104 billion

General Motors

June 2009

$91 billion

CIT Group

Nov. 1, 2009

$71 billion

Enron

Dec. 2, 2001

$66 billion

Conseco

Dec. 17, 2002

$61 billion

Chrysler

April 30, 2009

$39 billion

Thornburg Mortgage

May 1, 2009

$37 billion

Pacific Gas & Electric

April 6, 2001

$36 billion

Source: Fortune.

In some cases, these bankruptcies stem from a single factor. And many of these companies clung to life for a long time, until poor economic conditions finally pushed them over the brink. However, there are three situations that stick out as the primary contributors to these massive bankruptcy bombs.

1. Financial shenanigans
When management has the company's and the shareholders' best interests in mind, companies can achieve spectacular results. However, when management's main concern is padding its own pockets, disaster often ensues.

The failures at WorldCom and Enron are prime examples of what happens when a shady management team puts its own personal agendas ahead of everything else -- including obedience to U.S. accounting and security laws.

2. Overexpansion and debt
Everyone likes to see strong growth from the companies in which they invest, but it's important to derive that growth from sustainable sources. Unfortunately, some companies chase growth by making massive acquisitions and taking on huge debt loads. Conseco's $6 billion acquisition of Green Tree -- then the country's largest lender to mobile-home buyers -- shows just how much hot water a company can get into when it tries to get too big for its britches.

However, overexpansion isn't always required to bring about death by debt. Both General Motors and Chrysler found themselves swimming in debt just as the economy took a turn for the worse, forcing both companies to seek government assistance -- and eventually slink into bankruptcy protection.

3. Poor risk management
When you deal in highly complex financial products, as Lehman Brothers did, keeping a handle on exactly what you have on your books, and exactly how disastrous a wrong turn could be, is imperative.

Lehman -- along with AIG (NYSE: AIG  ) , Morgan Stanley (NYSE: MS  ) , and Citigroup (NYSE: C  ) , among others -- was far from prepared when the financial crisis hit. Unfortunately for Lehman, the company became the guinea pig for what would happen if a major financial firm were allowed to fail.

Who's next?
As we launch headlong into a new year and a new decade, many companies are precariously balancing in the gray area between life and death. One question fills many investors' minds: Who will be next?

While there are plenty of options, I've compiled a list of some of the most likely suspects. Now, if you're an investor in one of these companies, don't get all jumpy; I'm not saying that they will go bankrupt. But thanks to questionable balance sheets, they all raise major red flags:

Company

Assets

Total debt

Total equity

Citigroup

$1.9 trillion

$622.4 billion

$140.8 billion

Fannie Mae (NYSE: FNM  )

$890.3 billion

$803.1 billion

($15.1 billion)

Ford (NYSE: F  )

$203.1 billion

$132.0 billion

($8.7 billion)

Delta Air Lines (NYSE: DAL  )

$44.9 billion

$17.7 billion

$900 million

MGM Mirage (NYSE: MGM  )

$21.7 billion

$12.9 billion

$4.3 billion

Source: Capital IQ, a Standard & Poor's company.

What do you think? Could one or more of these companies end up on the list of largest bankruptcies over the next 10 years? Are there companies that I haven't listed here that you expect to go belly up? Scroll down to the comments section, and share your take on which businesses could become the next decade's largest bankruptcies.

Ford is a Motley Fool Stock Advisor recommendation. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool. The Fool's disclosure policy has never once been caught with its pants down. Of course, it doesn't actually wear pants...


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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 31, 2009, at 2:38 PM, mighelinger wrote:

    What about the prospects for

    Blockbuster(BBI)?

  • Report this Comment On January 01, 2010, at 6:30 PM, rd80 wrote:

    Fannie's brother Freddie and AIG.

    If your list can include companies that aren't public, GMAC. GM and Chrysler could double dip and make both lists.

    Expanding outside the world of businesses, California, New York and a few other states are strong contenders for your list.

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