by Jeff Reeves | January 25, 2012 7:00 am
Eastman Kodak (PINK:EKDKQ) surprised few by declaring bankruptcy last week. And just a few months earlier AMR Corp. (PINK:AAMRQ), the parent of American Airlines, was the last of the “legacy carriers” to suffer bankruptcy reorganization, and the boneheaded antics of John Corzine and other ne’er-do-wells sunk one of the largest financial firms on Wall Street and drove MF Global to bankruptcy.
But how do these failures stack up in the pantheon of corporate failures? Well MF Global’s demise is the most dramatic of the group, with a total price tag north of $40 billion … but unfortunately, that’s not big enough to make the list.
Here’s a look at the seven largest corporate bankruptcies in history — so far, anyway — and a brief rundown of the causes. As should be no surprise, financial firms are well represented on this list:
Company value at time of bankruptcy: $61 billion
Insurer and financial firm Conseco was a little too aggressive with buyouts and acquisitions. Across the 1990s, it sucked up Colonial Penn and — most damningly — Green Tree Financial, a financier of mobile-home sales. It filed for bankruptcy in 2002 after the recession of the early aughts, with a total price tag of about $61 billion at the time it failed. The company re-emerged in 2003 and remains in operation as a privately held company. The holding company that is Conseco’s parent was renamed CNO Financial Group in 2010.
Company value at time of bankruptcy: $65 billion
It wasn’t bad deals that killed Enron, but a bunch of bad eggs in the accounting department of the energy giant. Enron now is synonymous with cooking the books, and resulted in a host of new regulations, including Sarbanes Oxley, to help prevent “creative accounting” among publicly traded corporations. The total “value” of the company, if that word can be used, was about $65 billion at the time it went under. Parts of Enron still exist under different names and owners, but largely were sold off to satisfy creditors.
Company value at time of bankruptcy: $80 billion
Commercial lender CIT Group (NYSE:CIT) was one of the first victims of the financial crisis. The commercial lender was up to its eyeballs in bad debts and foul mortgages, and became a bank holding company to qualify for a TARP bailout. The bailout didn’t help stave off the worst, however, and the company went under in November 2009 with a total price tag of $80 billion. Most miraculously, CIT maintains an unbroken history as a publicly traded stock — though it went near zero in 2009, but bounced back fast enough to avoid delisting. Of course, all previous shares — both common and preferred — were canceled, so don’t think that means folks hanging onto their shares got anything for their trouble.
Company value at time of bankruptcy: $91 billion
Iconic Detroit automaker General Motors (NYSE:GM) was running out of gas before the financial crisis, and in early 2009 relied on a government bailout to keep the factories from shutting down for good. The total price tag of the 2009 bankruptcy was a cool $91 billion, based on the company’s value at the time. (And in case you’re wondering, taxpayers will lose about $14 billion on the “investment” in this struggling company). GM emerged from bankruptcy in July of 2010 and soon after held the largest IPO in history, worth $20 billion, in November 2010. There was a cost, however, as the Pontiac and Saturn brands — along with the death of Mr. Goodwrench — were results of bankruptcy and restructuring at General Motors.
Company value at time of bankruptcy: $103 billion
Worse than Enron and just as motivating to regulators was the 2002 collapse of WorldCom amid accounting scandals. The total value of the company was more than $103 billion at the time of its 2002 Chapter 11 bankruptcy. CEO Bernie Ebbers went to jail for what was, at the time, the largest corporate fraud in U.S. history. WorldCom emerged from bankruptcy with a new name (MCI) in 2004, then was bought out by Verizon (NYSE:VZ) a year later.
Company value at time of bankruptcy: $330 billion
You might forget that, amid all the mayhem in 2008, Washington Mutual was one of the big dominoes to fall. It was, of course, precipitated by the Lehman Brothers failure and the surge of uncertainty on Wall Street that would characterize the mood for investors for the next year or so. But it wasn’t just investor uncertainty — as rumors of bankruptcy swirled around the nearly $330 billion company, customers enacted a textbook run on the bank and withdrew a staggering $16.7 billion in just 10 days. JPMorgan Chase (NYSE:JPM) sucked up WaMu at a fire-sale price as a result — a case study in a “too big to fail” bank getting even bigger by digesting a rival.
Company value at time of bankruptcy: $690 billion
For many investors and businessmen, the day Lehman Brothers collapsed is one of those days that forever will be etched in memory. In the wee hours of Sept. 15, 2008, after frantic meetings all weekend long, the storied financial firm filed for Chapter 11 bankruptcy protection despite its mammoth $690 billion value. The root cause of the Lehman bankruptcy is clear — kinky derivatives, mortgage-backed securities and leveraged debt that exposed the firm to mammoth losses. But what remains a big unknown is why, after bailing out Bear Stearns, the government made a controversial decision to let the giant investment bank crumble.
Jeff Reeves is the editor of InvestorPlace.com. Write him at editor@investorplace??.com, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook. Jeff Reeves holds a position in Alcoa, but no other publicly traded stocks.
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