During the shock-and-awe early months of the recession, Connecticut suffered an increase in business bankruptcies, but at a far lower rate than most of its Northeast neighbors ”“ another sign that the state fared comparatively well in the Great Recession.
For the fiscal year ending June 2009, some 430 businesses in Connecticut filed for bankruptcy protection from creditors, according to the most recent statistics available from the U.S. Bankruptcy Court, up 17 percent from fiscal 2008 on the eve of the recession.
By comparison in the southern district of New York which includes New York City and Westchester County, corporate bankruptcies nearly tripled, topped nationally only by the corporate haven of Delaware where business failures quintupled.
At the other end of the spectrum, only Vermont fared better than Connecticut in the Northeast on a year-over-year comparison basis; and both were in the top 10 nationally of some 100 bankruptcy court jurisdictions in the United States and its territories. In Massachusetts, business bankruptcies soared 85 percent; on Long Island, 60 percent; and in New Jersey and Rhode Island, 40 percent.
During the third quarter last year, another 115 Connecticut businesses declared bankruptcy, up 22 percent from the year-earlier period according to more recent data available from the American Bankruptcy Institute, in line with the rate of failures in New York City and Westchester.
On the plus side, the Federal Reserve Bank of New York reported this month that commercial and industrial loan delinquencies appear to be leveling off in the past two months throughout the district, which includes Fairfield County.
Lenders cautioned the credit conditions are still challenging businesses that need immediate access to loans to stay in business.
“The dynamics of the businesses that are closing in 2010 are different than the dynamics of the businesses that closed in 2009,” said Donna Wertenback, CEO of the Community Economic Development Fund. “The ones that actually survived this long are facing all sorts of new challenges and they need new kinds of resources and help in order to be able to get themselves through this. Yes, they need access to capital, but that access to capital has got to be flexible. It”™s got to be able to be adaptive. It has to be able to shift gears in midstream. It has to have flexible amortization schedules. It has to be able to move with their dynamics that are moving that they”™re adjusting to on a daily basis.”
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The U.S. Bankruptcy Court does not break out filings at the county level. Fairfield County accounts for more than a third of the economic activity in Connecticut, while Westchester represents a small sliver of the total businesses in its own district.
On a sequential basis, Chapter 11 bankruptcies nationally dropped during the third quarter for the first time since the start of 2006, when stiff new rules kicked in that limited the ability of entities to seek bankruptcy protection, rules that affect businesses and individuals alike.
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For the 24-month period ending June 2009, terminations of bankruptcy cases jumped 35 percent to nearly 8,400 cases total, including both business and individual filings well ahead of the pace in New York City and Westchester County; Long Island; and New Jersey, where bankruptcy terminations were up 23 percent on average.
In the case of new bankruptcy filings and pending cases, however, Connecticut enjoyed a lower year-over-year increase as of last June, the most recent calendar year for which statistics were available. That could be a possible sign that the recession may ultimately have a lower impact here.
In New York City and Westchester County, new bankruptcy filings were up 42 percent year-over-year as of last June, compared with 29 percent in Connecticut.
Connecticut also had a smaller rise in pending cases at 13 percent, compared with 20 percent in New York City and 25 percent on Long Island.
In the Northeast, upstate New York fared best across the board, with pending bankruptcies actually dropping on a year-over-year basis.
