Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, April 11, 1991 TAG: 9104120167
SECTION: NEIGHBORS PAGE: S-8 EDITION: METRO
SOURCE: GEORGE KEGLEY/ STAFF WRITER
DATELINE: LENGTH: Medium
In the first quarter of the year, 142 Roanoke-area companies filed for protection of the bankruptcy court, an increase of almost 40 percent from a year ago. The pace slowed slightly in March after a steep 80 percent jump in the first two months.
Last year, 102 business petitions were filed in January-March; 98 were reported for the first quarter of 1989.
The first-quarter surge came on quickly. The number of businesses filing for bankruptcy last year in both the Roanoke Division of the Court and in Western Virginia was slightly less than in 1989.
"When people stop buying things, it filters down" to many other companies, said Tom Kennedy, U.S. trustee for Bankruptcy Court in Roanoke. "I haven't seen an increase like this in a long time."
The reasons companies get in financial trouble are a lot more complex than for individuals or couples, he said. Many consumer bankruptcies are blamed on overuse of credit cards, Kennedy said, but "you can't put your finger on any one cause for companies to file."
All the business cases pass through his office, "and they have so many different personalities," he said.
Some of the Roanoke Valley companies working their way through the procedures of the Bankruptcy Court in the last six months were Jack L. Hartman & Co., Blain Supply Co., Jennings-Shepherd, Sidney's Inc. and Allred Chevrolet.
Other Western Virginia companies that have been in bankruptcy are: Lane Furniture's parent, Interco; Franklin County Speedway; Craddock-Terry Co., Lynchburg; Doyle Lumber Co., Martinsville; Nautilus Inc. of Independence; JPS Textile Group, owner of the Angle plant in Rocky Mount; Mitchener Corp., a Narrows auto dealer; and the owner of the Charley's restaurant at Christiansburg.
National companies whose bankruptcy petitions affect Roanoke Valley operations include 7-Eleven's parent, Southland Corp.; Best Products; Hills Department Stores; Greyhound; and Eastern Airlines.
Debtors often say, "the bank shut down my credit" when they report at creditors' meetings, Kennedy said.
A good part of the business petitions are related to the recession, said Jim Cosby, an analyst who conducts the creditors' meetings for the trustee's office.
The collapse of larger companies "may bring some fallout among the small guys. The whole house of cards may come down," said Richard Maxwell, a lawyer who works in corporate bankruptcy.
Buyouts of large companies in recent years have created huge debts that may hurt smaller supply and service firms.
If the real-estate market were better, more foreclosures might be occurring, Maxwell said. Banks are less aggressive because "they have all the property they want to deal with," he added. "If there's any possible way to cut a deal, [the banks] will find it. . . . As long as the borrowers are honest and forthcoming, the banks would much rather work with them."
It's one thing to have property and have it sell, he said, but it isn't. Maxwell said the commercial and industrial real-estate market "is terrible."
Ross Hart, another lawyer who works on bankruptcy cases, said he represents some small truckers who "would like to run down Saddam Hussein with a truck" because of what the invasion of Kuwait did to gasoline prices.
Hart has a client in transportation financing who reported that six different trucking companies are in trouble because of their fuel bills. "The cost of fuel has trickled down to a lot of individual truckers," he said.
If a manufacturer files for reorganization, Hart said, the company can't pay a broker and the broker can't pay his creditors. "Debtors are not getting their money in" and that causes a domino effect, he added.
When business improves, "we'll come out of it, the banks will loosen credit and the whole cycle will start over," Kennedy predicted.
by CNB