In this article we are going to list the 15 biggest companies that went bankrupt.
Look, while we all hate the ultra-rich and curse them for hoarding more wealth than they could spend in a hundred lifetimes, the truth is, it is not so easy to be an entrepreneur and start your own business. This is exactly why many of us are ready to spend their entire lives working for corporations, in order to obtain a risk free salary, and at least have the security that your hard work will be rewarded, if only at a percentage of its total worth. For starting a business, not only do you need capital, which might not be the easiest of tasks, you will also be taking major risks, and there is no certainty of a reward. Certainly, for the first few years, you will most likely be making losses or even if you do make a profit, more often than not it will be average. And even then, the odds of a business failing are huge.
After all, even in the United States, which is the capitalistic capital of the world, according to the US Bureau of Labor Statistics, a fifth of all business, or 20% of all businesses, simply collapse within the first two years of being established. And this doesn’t get better after two years. 45% of businesses, or nearly half of all businesses, collapse within the first five years, while 65% don’t make it past 10 years. Only 15% of businesses make it past 15 years, which makes you wonder if all the effort and everything is really worth it or not. And if you’re a business owned by Donald Trump, the former President of the United States of America, then it’s a good bet that the business will declare bankruptcy sooner or later, while making Trump even richer.
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Yes, it’s true that business fail and fail often. However, once a business becomes firmly established and entrenched, the odds of this happening fall significantly with time. And once you become a major corporation, then it’s almost impossible to fail. In fact, for major banks around the world, there is a term known as ‘too big to fail’, which was used after the 2008 financial crisis and the role of the banks in perpetuating the crisis while getting bailed out.
The Financial Crisis of 2008 came about because of the collapse of the housing bubble, but it was actually the excessive risk taking by banks, including providing loans without proper background checks and selling CDOs and mortgage bounds which they knew were not of the quality they were purporting to be. And yet, despite the biggest banks in not just the US but other countries being involved as well, only one person from the US was actually jailed for his part in the crisis, while the banks, who were hemorrhaging money were provided bailouts by the federal government worth hundreds of billions of dollars. And while some major institutions did collapse, most went on paying their executives hefty salary and bonuses and went on as if nothing really ever happened.
The world we currently live in is not a normal word. People may talk about the new normal or the new ways or living, but the truth is, nothing makes sense right now. It is a precarious world right now, and that is especially true for businesses. I am of course, talking about the coronavirus pandemic. The Covid-19 pandemic has seen more than 107 million cases across the world which resulted in the deaths of at least 2.34 million people. The most horrifying fact is that these figures are likely to be really underreported and we will only have a proper idea of the devastation caused by the pandemic later on. To battle the spread of the virus, most countries across the world chose to enter lockdowns, which resulted in the closure of any non-essential businesses, the suspension of travel and basically resulted in the economy of most countries contracting. Due to these impacts, many businesses across the world had to permanently shut down, while major businesses incurred tens of billions of dollars in losses and had to fire tens of thousands of people, which resulted in around 40 million people losing jobs in just the United States alone.
Many of the businesses which had to close down permanently during the pandemic were already not doing well and making a lot of losses, with liabilities exceeding their assets. Or even if they weren’t making losses, the profits weren’t a lot in number as well. And the pandemic just happened to be the straw that broke the camel’s back. However, if you want to look at the biggest companies that went bankrupt, then that didn’t just happen in 2020 or 2021, it has been happening for at least a century. Some of these companies shocked the world when they finally announced bankruptcy.
You may all remember that one of the most beloved company, Toy “R” Us, filed for bankruptcy back in 2017. It was seen as a huge deal since it was a major company and ended up becoming one of the biggest retail bankruptcies in history. And yet, it doesn’t feature on our list. Our list is comprised of billion dollar companies, which had assets worth tens of billions of dollars, if not hundreds of billions. So let’s take a look at the biggest companies which failed to seize their advantage and had to end up declaring bankruptcy, starting with number 15:
15. Refco
Total assets at the time of bankruptcy (in billions of dollars): 33.33
Date of bankruptcy: October 17, 2005
Refco was a financial services company in New York, and unlike most financial institutions in our list, wasn’t a result of the 2008 financial crisis. The company ended up declaring bankruptcy due to its CEO hiding 430 million in bad debts.
Copyright: kritchanut / 123RF Stock Photo
14. America Savings and Loan
Total assets at the time of bankruptcy (in billions of dollars): 33.86
Date of bankruptcy: September 9, 1988
The savings and loan crisis in the US took place in the 1980s and the 1990s, with America Savings and Loan resulting in the biggest cost to the government.
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13. Texaco
Total assets at the time of bankruptcy (in billions of dollars): 34.9
Date of bankruptcy: December 4, 1987
A subsidiary of Chevron (NYSE:CVX), Texaco filed for bankruptcy back in 1987 and was the biggest bankruptcy for a long while in US history.
Ken Wolter / Shutterstock.com
12. Pacific Gas and Electric Co. (NYSE:PCG)
Total assets at the time of bankruptcy (in billions of dollars): 36.1
Date of bankruptcy: June 4, 2001
PCG is one of the biggest investor owned utility companies in America. The bankruptcy came about because while California had set the rates at which PCG could sell, its own cost of purchase increased due to droughts resulting in massive losses and declaration of bankruptcy.
KRITSANA NOISAKUL/Shutterstock.com
11. Thornburg Mortgage
Total assets at the time of bankruptcy (in billions of dollars): 36.5
Date of bankruptcy: January 5, 2009
The real estate investment trust was one of the casualties of the 2008 financial crisis, and made a loss of $1.5 billion in income in 2007, after which its bankruptcy was more or less inevitable.
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10. Chrysler
Total assets at the time of bankruptcy (in billions of dollars): 39.3
Date of bankruptcy: April 30, 2009
Chrysler is one of the most famous automobile brands in the US, and is nearly a century old, having been founded in 1920. Its parent company now is Stellantis. However, despite its fame, when the 2008 financial crisis struck, it deeply impacted the automotive industry as well, which is why Chrysler had to declare bankruptcy.
2019 Chrysler 300C
9. MF Global
Total assets at the time of bankruptcy (in billions of dollars): 41
Date of bankruptcy: August 11, 2011
The financial derivatives broker was one of the biggest companies in the industry, though liquidity issues, fines and penalties started to affect the profits as well as reputation of the company, resulting in its bankruptcy in 2011.
Copyright: stokkete / 123RF Stock Photo
8. Conseco Inc. (NYSE:CNO)
Total assets at the time of bankruptcy (in billions of dollars): 61.3
Date of bankruptcy: December 17, 2002
It was the third biggest bankruptcy at the time, and the company’s fall in fortunes came from its purchase in 1998 of Green Tree Financial Corp, which was a mobile-home financing company.
7. Enron Corp
Total assets at the time of bankruptcy (in billions of dollars): 65.5
Date of bankruptcy: December 2, 2001
One of the biggest accounting scandals in history saw the demise of two companies, Enron, which engaged in the scandal and Arthur Anderson, the audit firm which failed to catch the deception. Enron used widespread fraudulent accounting methods to deceive investors and failed to show correct accounting records, and when this was publicized, the company declared bankruptcy.
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6. CIT Group (NYSE:CIT)
Total assets at the time of bankruptcy (in billions of dollars): 71
Date of bankruptcy: January 11, 2009
In 2009, CIT filed for bankruptcy under Chapter 11, resulting in the company being reorganized and new debt and shares were issued, with 7 new independent directors announced as well.
5. General Motors (NYSE:GM)
Total assets at the time of bankruptcy (in billions of dollars): 82.3
Date of bankruptcy: June 1, 2009
It may be going strong once again, but GM faced tough times in 2009, where it basically required a bailout worth nearly $40 billion from the US government, resulting in the entire reorganization of the company itself.
Linda Parton / Shutterstock.com
4. Pacific Electric and Gas
The only company to make our list twice is Pacific Electric and Gas, which had to pay out billions to victims of wildfires in California. This added to losses of billions in 2019 and resulted in the company declaring bankruptcy though it has started to move out of the bankruptcy phase.
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3. Worldcom
Total assets at the time of bankruptcy (in billions of dollars): 103.9
Date of bankruptcy: July 21, 2002
In its heyday, Worldcom was the second biggest telecom company in the US, after AT&T (NYSE:T). However, it was embroiled in a major accounting scandal in 2002, where fraudulent methods were used to hide the loss of earnings of the company. The subsequent furor and attention surrounding the company saw the company declare bankruptcy.
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2. Washington Mutual
Total assets at the time of bankruptcy (in billions of dollars): 327.9
Date of bankruptcy: September 26, 2008
Washington Mutual was a savings bank holding company, and was also the owner of the biggest savings and loan association in the entire United States. Just like our number one entry, the company’s downfall came as a result of its involvement in the subprime mortgage crisis, which led to a major loss in value of the stock of the company, as well as the termination of thousands of employees. When customers lost confidence in the bank, they withdrew nearly $17 billion in cash, which led to the Federal Deposit Insurance Corporation to come in, seize assets of the company and eventually, sold it to JP Morgan Chase (NYSE:JPM).
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1. Lehman Brothers
Total assets at the time of bankruptcy (in billions of dollars): 691.1
Date of bankruptcy: September 15, 2008
With more than twice the assets of Washington Mutual, Lehman Brothers easily tops the list of the 15 biggest companies that went bankrupt. Lehman Brothers was the most high profile casualty of the 2008 financial crisis. It was the fourth biggest investment bank in the United States at the time of its demise, and had been in existence for 158 years before finally filing for bankruptcy. It also had 25,000 employees, who were suddenly terminated and videos of the employees arriving at the office to clean out their desks were quite famous, as the enormity of the situation was felt by everyone.
The reason behind the bankruptcy was simple, if multi-fold; Lehman’s involvement in the sub-prime mortgage crisis (which was the bases for the 2008 recession), downgrading of assets by credit rating agencies, loss of confidence and major loss of value of stock. Due to these reasons, the company lost out on most of its clients, who moved to different banks and hence, had no choice but to declare bankruptcy. Even now, 12 years later, it is easily one of the most famous bankruptcies in the world, and definitely the biggest. Its North American assets were later purchased by Barclays (NYSE:BCS).
See also: 6 Easiest Good Credit Cards To Get Approved For After Bankruptcy and 11 largest municipal bankruptcies in US history
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Disclosure: No position. 15 biggest companies that went bankrupt is originally published at Insider Monkey.
