1st quarter sees rapid rate of Md. business failures

April 27, 1991|By Kim Clark | Kim Clark,The Dun & Bradstreet Corp.

Because of continuing real estate and bank troubles, the number and size of Maryland business failures are rising sharply, bankruptcy attorneys and financial experts say.

A survey by the Dun & Bradstreet Corp. found that the number of Maryland business failures has doubled in the first three months of 1991, and the size of the failures has rocketed more than tenfold.

Howard Rubenstein, a Baltimore attorney who has been handling bankruptcies for 36 years, said he's never seen so many, or such large, business failures as he's seen so far this year.

When the current recession started, smaller, cash-poor firms were quickly pushed to the edge, he said. "But you no longer see only the small companies," he said. He is working on the reorganizations of several property managers and developers who have debts ranging from $15 million to $30 million.

Attributing the bankruptcy boom to overbuilding and overborrowing, Mr. Rubenstein said he sees no quick let up in the growing stream of business failures.

In fact, the New York-based financial information company's survey of businesses that have shut down or reorganized showed that Maryland's business failure rate was increasing faster than the nation's.

Across the United States, business failures rose nearly 54 percent and caused nearly $30 billion worth of losses to creditors. If the losses continue at that pace, business losses will eat up almost 1 percent of the nation's gross national product by the end of the year, according to Dun & Bradstreet.

In Maryland, the number of problem businesses that caused losses to creditors jumped to 284, more than double the number of the year-ago period and 17 percent ahead of the number in the last three months of 1990.

The amount of money lost on these businesses soared to $823.1 million in the first three months of this year, up from only $61.6 million for the same period last year.

Some New England states fared far worse than Maryland,

though. The number of business failures in Connecticut more than quintupled, and Rhode Island's rate tripled, for example.

But seven states, mostly in the Midwest, saw a decline in business failures.

Joel Sher, a Baltimore attorney who handles many bankruptcies, said that besides the financial problems, the boom in business bankruptcies is also causing widespread emotional trauma.

When someone has to admit the business they've built can't pay its bills, "it is very depressing . . . it is very emotionally damaging," Mr. Sher said. His clients usually go through an initial phase of shock and denial, then anger, and eventually resignation, he said.

"They have to realize they are not alone, there are many people like them. And they are going to get through it," he said.

Doug Handler, an economist with Dun & Bradstreet, said the survey results seem to indicate that the nation is suffering a "bicoastal" recession.

"The heartland is pretty strong," he said.

But, he added, he sees no quick end to the rise of bankruptcies on the East and West coasts. As more businesses fail and leave bad debts, more creditors are pushed to the edge of insolvency, he said.

Business failures

* Total business failures in first quarter of 1991:

U.S.: 20,881

Maryland: 284

* Total failures in first quarter of 1990:

U.S.: 13,577

Maryland: 127

* Total liabilities in affected firms, first quarter 1991:

U.S.: $29,557,662,085

& Maryland: $823,096,898

* Total liabilities first quarter of 1990:

U.S.: $16,995,134,297

% Maryland: $61,556,818

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