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PATON: Weak economy drives more into bankruptcy

By James Paton, Rocky Mountain News (Contact)

Published November 12, 2008 at 12:05 a.m.

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In a sign of the tough times, more than three Colorado companies a day, on average, are declaring bankruptcy.

It's a diverse group of businesses, some bigger than others, showing up at the courthouse in Denver. The U.S. units of oil and gas producer Storm Cat Energy, home builder Village Homes, the owner of the Vail Plaza Hotel & Club, luxury office project Courtyards at Lone Tree and Irish pub Celtic Crossing are among them.

Weaker demand and an inability to secure financing are cited by many seeking protection from creditors. A deep recession and increase in unemployment could push more weak businesses over the edge in the coming months.

Colorado has fared better than the rest of the nation, at least by some measures, but as the stories surfacing in bankruptcy court suggest, the state is hardly immune to the broader problems threatening the economy.

In September, Colorado recorded 96 business bankruptcy cases. That's the most since late 2005, before a new law took effect making it harder to file. If you ignore the anomalies of September and October 2005, the September 2008 figure would be a record.

The trend likely continued in October and November.

The number of individual bankruptcy filings also is rising steadily, but business cases are climbing faster, up more than 40 percent in 2008. It's not a dramatic surge yet, experts say, but business filings now account for 4.3 percent of the load, the highest percentage in the past decade.

Bankruptcy can give companies time to renegotiate debt and allow them to survive. But some will find it hard to get the financing they need to restructure.

One recent case was Accent Windows, a family-owned business started in 1982 and endorsed by former Denver Broncos star Karl Mecklenburg. Managers of the company said 2007 was their best year ever. But sales tumbled in 2008 as customers reined in their spending, driving the business into bankruptcy, they said.

On Monday, Storm Cat Energy said falling commodity prices and the financial crisis derailed plans to sell assets and pay down debt. InnoVision Health Media in Boulder and ServiceSelect in Denver filed the same day.

James Paton and David Milstead take turns writing Up and Down 17th Street.