While Americans went bust in record numbers in the recession year of 2001, corporations were a bit luckier.

All told, new personal and corporate filings with bankruptcy courts surged 19 percent in 2001, up to an all-time high of 1.49 million. Personal bankruptcies -- and it doesn't get any more personal than declaring bankruptcy -- accounted for 1.44 million of the filings. While the 40,099 U.S. businesses filing for court protection was a three-year high, the number is sharply lower than in previous recessions. After the 1990-91 down years, for example, business bankruptcy filings peaked at 72,650 in 1992.

The bankruptcy figures came this week from the Administrative Office of the U.S. Courts, which leaves it to pundits to turn the raw numbers into each year's peculiar tale of woe. And in fact, the 2001 statistics do shed some light on trends in the U.S. economy. "The combination of record levels of consumer debt and an economic downturn beginning in 2000 caused more families to face financial stress than ever before," said Samuel Gerdano, executive director of the American Bankruptcy Institute (AIB) -- a group made up of attorneys, accountants, bankers, judges and the like.

Despite the relatively slow climb of corporate bankruptcies overall, filings by publicly traded companies continued riding a sharp upward curve that has prevailed since 1997.

The 257 public companies that filed for bankruptcy protection in 2001, in fact, represented a 46-percent increase over the 176 bankruptcies the prior year. Further, the amount of assets placed under court protection more than doubled, to nearly $260 billion. That's according to results the governmnet extrapolated last month and applied to all of 2001.

Of course, that number includes the collapse of Enron, the largest bust in U.S. corporate history, at $63 billion. Indeed, 33 percent of public-company assets covered by filings in the year were related to the energy sector, according to BankruptcyData.com. The telecommunications sector accounted for 12 percent. Still, old economy companies contributed to the numbers, with names like AMF Bowling, Burlington Industries, Converse, Polaroid, and Sunbeam on the rolls.

According to the Federal Deposit Insurance Corp., the concentration of business failures among larger companies mimics the dramatic and disproportionate fall in profits of the S&P 500 last year -- including a 49-percent drop in the third quarter. Overall corporate profits fell 22 percent in that period. What's more, the FDIC reports that the debt burden at large, nonfarm companies has risen faster in recent years than it has at small companies.

With the economy continuing to founder -- and with efforts to tighten up bankruptcy laws stalled -- expect large numbers of bankruptcy filings again in 2002.

Today in Enron
Maybe D&O means Duck Out.

It seems The Royal Insurance Co. of America and St. Paul Mercury Insurance Co. are seeking to walk away from policies they wrote for Enron's directors and officers. Their reasoning? The two say (in court filings) that Enron misled them. Of course, if the two indemnifiers are successful, the nine other insurance companies providing D&O policies to Enron will no doubt take the same tack. Reportedly, Enron management is carrying around $350 million in coverage.

In a related story, management at former Enron auditor Arthur Andersen is trying to cap its potential liability to Enron shareholders, former workers, and creditors, by making a settlement offer. Andersen upped its total offer from $600 million this week, and now is in a range somewhere between $700 and $800 million, The Wall Street Journal reports. Of that $600 million figure, $340 million was said to come from Andersen's insurers. Lawyers for claimants had rejected the initial offer as "premature." No word yet on whether claimants feel the $800 million is any more mature.

Meanwhile, Financial Executives International named a 10-member task force to study issues arising from Enron's accounting scandal. The panel will make recommendations to Congress and the SEC.

The task force roster reads like a Who's Who of corporate finance. The panel includes Phil Ameen, GE's controller; Fred Corrado, CFO of Great A&P Tea Co.; Colgate-Palmolve finance chief Stephen Patrick; Cisco Systems controller Dennis Powell; Dow Chemical CFO Pedro Reinhard; Harris Corp. finance chief Bryan Roub; Pfizer CFO David Shedlarz; J.P. Morgan Chase investment-bank CFO David Sidwell; and Marsh & McLennan Cos. senior advisor Frank Borelli.

At its first meeting, the panel settled on four areas of inquiry: ethical conduct in financial management; audit committee effectiveness; rebuilding confidence in the accounting industry; and modernizing the reporting system and reforming accounting standard-setting. Recommendations are expected with 60 days.

Will Bottom-Feeders Breathe Life into Software Mergers?
With stock valuations touching bottom, some M&A experts now expect an increase in the number of acquisitions of software companies -- though the deals are likely to involve smaller providers.

Ken Bender, president of M&A advisory firm Software Equity Group, sees "a wider variety of sellers and buyers looking to increase their M&A activity," according to story in The Deal.com. Bender says the last 30 days have offered more action than he's seen in the last several months.

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