A wave of filings is expected in 2009, putting in venture the value of equity shares and giving investors one more thing to worry about

By Ben Steverman

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When it comes to corporate bankruptcies, finally year was ominously quiet outside the financial sector. Get skilful on account of the storm.

In the first couple weeks of 2009, chemical company LyondellBasell on Jan. 6 filed with respect to bankruptcy reorganization, followed by another chemical maker, Tronox, on Jan. 11. Telecom equipment provider Nortel Networks (NRTLQ) also sought protection from its creditors with a bankruptcy filing on Jan. 15.

Some bankrupt companies are being forced to take the next step as the funding needed to reorganize their businesses proves difficult, if not that cannot be, to come by. Circuit City (CCTYQ) filed for bankruptcy last year, otherwise than that on Jan. 16 the electronics retailer said it would liquidate all 567 of its U.S. supplies.

The largest bankruptcy of 2008 was the exhaustion of investment bank Lehman Brothers and its almost $700 billion in possessions. But other than Lehman, 2008 was relatively quiet in favor of bankruptcies.

According to BankruptcyData.com, 136 public companies filed for bankruptcy in 2008. That’s more than in modern years, if it exist not that—despite more than a year of a U.S. recession and worldwide credit crisis—the agree is only the sixth worst in the exceeding decade.

Edward Altman, a leading ready on bankruptcy who is a professor at the New York University Stern School of Business, estimates the 2008 default rate—a measure that includes the two bankruptcies and other credit troubles at corporations—was 4.5%, just single point higher than the historic average.

By contrast, Altman expects the default rate to hop to the double digits in 2009 and 2010.

Other bankruptcy experts pledge one’s word that bankruptcy filings are set to skyrocket. Bankruptcies repeatedly have a delayed reaction to economic and financial difficulties.

Many troubled firms continue to subsist on easy credit terms obtained in the presence of the credit crisis began. "There have been a hap of companies death by the halter on by their nails," says Greg Segall of Versa Capital Management, a special equity firm specializing in distressed investing.

Now, says Michael Shinnick, a portfolio manager at Wasatch-1st Source Long/Short Fund (FMLSX), "We’ve seen a actual abrupt pendulum shift from abundant liquidity to tight [liquidity]." Some firms can’cheek by jowl find lenders, while other must pay exalted interest rates to get financing.

Segall likens the credit crisis to an earthquake. The height may end and the ground may stop jolting. But, he says, "All the damage that was done by the earthquake is going to be discovered for months and years to come."

The prospect of a ear in corporate bankruptcies should worry investors. In a corporate bankruptcy, impartiality shareholders are last in line to get their money back. Even if a business does survive, most rectitude stakes are completely wiped audibly.

Thus the heightened bankruptcy threat is changing investors’ computative method, Altman says. "Usually stock [investors] are much more interested in the upside," he says. "Now, I think you need to be much more concerned on the eve the downside."