OKLAHOMA CITY – Recent high-dollar business bankruptcies in Oklahoma, such as Shepherd Mall and Boom Drilling, have been Chapter 11 reorganization cases, but more companies are opting for straight bankruptcy, records show.
The SemGroup LP case, which involves a Tulsa-based company, was filed in Delaware.
More Oklahoma businesses are filing Chapter 7 this year than over the past couple of years, and business bankruptcies in general are trending upward in the state, according to data from the American Bankruptcy Institute.
Attorney Clif Gooding said that Oklahoman companies are experiencing financial struggles like those of insurance giant AIG, Fannie Mae, Lehman Brothers and other major national firms. “The crunch that’s happening to those companies, I think, is exacerbated with small businesses,” he said. “I think you’re going to see, in the next year to 24 months, the rise of business bankruptcies.”
Over the first half of 2008, ABI statistics indicate, 208 Oklahoma businesses filed for bankruptcy, including 173 Chapter 7s. Over the same period last year, there were 170 filings, of which 138 were straight Chapter 7 bankruptcies. In 2006 there were only 95 business bankruptcy filings in Oklahoma, of which 74 were Chapter 7s.
Oklahoma businesses filed a total of 352 bankruptcies in 2007, up from 237 the previous year, ABI information indicates.
Automated Access to Court Electronic Records, an Oklahoma City-based bankruptcy data and management company, breaks down bankruptcy filings as non-commercial and commercial.
Commercial cases are filings with a tax ID, plus those with a Social Security number that have an organizational expression in the debtor’s name.
Using those criteria, AACER reported 352 Oklahoma commercial bankruptcy filings through August of this year, with 473 during all of 2007 and 342 in 2006.
Nationally, AACER determined there were 40,054 commercial bankruptcy filings through August, compared with 42,843 for 2007, and 30,003 in 2006.
Gooding thinks the drying up of credit will play a key factor in squeezing more companies into bankruptcy.
He said some clients he has counseled just in the last few weeks have encountered hesitancy from lenders that have done traditional floor-planning financial work for businesses.
“Their business model may be changing, where they’re not going to go with such smaller, mom-and pop type businesses or smaller car dealerships,” Gooding said. “They don’t want to finance anymore, because they’re concerned about losses.”
Gooding said some lenders may shy away from or try to get rid of smaller marginal businesses.
“The ability to find sources of credit for those people is going to be difficult,” he said. “I think that’s going to continue to force people out of business.”
Gooding said he has seen more clients with business issues this year than in the past, with a definite increase in Chapter 7 filings.
“I haven’t filed one Chapter 11 this year,” said Gooding, who usually files two-to-four reorganizations each year.
He pointed out that trying to save a business through Chapter 11 can be a costly matter.
“It’s an expensive process,” Gooding said.
Rather than go through an institutional lender, he said, some people finance their businesses with credit cards, a situation that can turn sour quickly.
“They don’t have a source of capital other than credit cards,” Gooding said.
Once card interest rates begin to spike due to late payments or other issues, he said, that source of business financing is cut off.
“Those people are suddenly without the ability to continue operations,” Gooding said. “It’s just a vicious cycle that I think is happening out there in the market right now.”
Oklahoma City bankruptcy attorney Christopher Stein said the economy is in an unstable state at the moment, affected by issues keyed to spikes in fuel prices and other economic factors.
“There are a number of businesses out there that are on the edge,” Stein said. “It doesn’t take much to push them over.”
He said any stumble in the stock market is going to reflect what businesses are able to do to survive, he added.
Stein said he has experienced an increase in business filings just over the last couple of weeks in his practice.
“I’ve noticed an increase in business liquidations, where they’re just wanting to walk away,” he said. We’re not even trying to reorganize them in a Chapter 11. We’re just putting the individuals into a Chapter 7 and liquidating them completely.”
Stein said he filed two business Chapter 7s last week and will file two more this week.
He said recent filings have involved a variety of companies, from rental firms to trucking companies.
“It doesn’t necessarily seem to be one industry that’s affected,” Stein said. “It does seem that a
number of these businesses are affected by what the market’s doing.”
