We are always fascinated with the largest, fastest or most expensive of whatever subject that interests us. In the financial world, we want to know who is the richest or who has lost the most. When it comes to bankruptcies, the largest ever filed do pique our interest not only because their magnitude appear other-worldly but the consequences can affect us personally.
The following is a list of the 10 largest corporate bankruptcies of all time:
- Lehman Brothers on September 15, 2008. The fourth largest investment banking institution in the US, Lehman Brothers had about $639 Billion in assets but some $619 in liabilities, resulting in a mass exodus of clients and business and prompting it to file under Chapter 11. Its predicament was caused by the subprime mortgage fiasco, of which Lehman Brothers was a major player and victim, which roiled financial markets and helped cause the recession that lasted for years.
- Washington Mutual on September 26, 2008. Once the nation’s largest savings and loan association, MaMu was placed into receivership by the FDIC after a bank run saw $16.7 billion of its 327.9 billion in assets withdrawn by depositors in a 9-day period. WaMu held billions in subprime mortgages, home equity lines of credit and in credit card receivables. A credit downgrade primarily as a result of its subprime mortgage losses led to the bank run and its bankruptcy filing. Most of its assets were sold to JP Morgan Chase for $1.9 billion. Its bank branches have either been closed or rebranded to Chase. It emerged from Chapter 11 in February 2012.
- WorldCom on July 21, 2002. At the time, this was the largest corporate bankruptcy of all time, eclipsing Enron. Once the second largest telecommunication companies in the US, its CFO and CEO were accused of falsifying financial records that subsequently showed a $3.8 billion hole in its accounts. A number of officers, including CEO Bernard Ebbers, were convicted of securities fraud with Ebbers now serving 25 years. It merged with MCI Communications and was bought out by Verizon in 2006.
- General Motors on June 1, 2009. The iconic motor company faced huge losses during the economic downturn and despite considerable controversy was offered a government bailout to save thousands of jobs. Its assets at the time of filing Chapter 11 was $91 billion. The federal government has since sold its 500 million shares in the company but taxpayers reportedly lost over $10 billion despite GM profiting over $22 billion since filing.
- CIT Group on November 1, 2009. A major provider of financing and leasing capital to small and middle-sized company, CIT had $80.4 billion in assets when it filed. It qualified and received TARP funding in the amount of $2.3 billion and quickly emerged from bankruptcy only 38 days later. Its bailout funds were discharged in the bankruptcy and never paid back. It is on stable financial footing at present.
- Enron on December 2, 2001. The face of corporate corruption, Enron’s collapse wiped out billions in investments and retirement funds for employees and led to the conviction of its CEO, Jeff Skilling, due to be released from prison in 2017. Chairman, Kenneth Lay, a confidante of President Bush who quickly disavowed any close ties, died before serving time. Once the nation’s seventh largest company and an innovator in buying and selling energy futures, it was revealed to have created a number of entities where it could hide its substantial losses. Accounting fraud by the firm of Arthur Anderson, revelations of assistance from top government officials in the Bush administration and numerous instances of unethical activities and excesses have made the company a required study of blatant corrupt business practices in business schools. It had reported assets of $65.5 billion when it filed. It is no longer in existence.
- Conseco on December 17, 2002. Conseco had assets of $61.3 billion on the day it filed. It was a major insurer providing life, annuity and supplemental health insurance. The decision to acquire Green Tree Financial in 1998 proved to be its downfall when it became saddled by overwhelming debt from manufactured housing and mobile home loans that turned sour when the housing industry turned downward. It did emerge from Chapter 11 and is now called CNO Financial Group.
- MF Global Holdings on October 31, 2011. Despite the efforts of former New Jersey Governor Jeff Corzine, a one-time Goldman Sachs co-CEO, the company’s debt was downgraded to junk status shortly before it filed. It was once a major dealer in US treasury securities and a commodities brokerage firm. A rogue trader’s activities in 2008 resulted in a $141 million loss along with fines for its failing to monitor. Additional fines for supervision failures followed in 2009. After it was disclosed that the company had to repeatedly dip into customer accounts to pay its debts, it filed for Chapter 11, revealing assets of $40.5 billion. Unlike most cases, by 2014 all its customers who had not on their debt claims were repaid in full.
- Chrysler on April 30, 2009. Forced to file for bankruptcy protection as the recession hit the auto industry, Chrysler had assets of $39.3 billion. With a total of $8 billion in backing from the US government, it was bought out by a new Chrysler company with ownership interests of Fiat, the US and Canadian governments and the UAW retirement medical fund. It emerged from Chapter 11 on June 10, 2009.
- Thornburg Mortgage on May 1, 2009. A publicly traded REIT that was active in acquiring and maintaining jumbo and super jumbo adjustable rate mortgages, it had $36.5 billion in reported assets when it filed. Improper margin calls are cited as the reason for the company’s downfall. In 2014, the bankruptcy court approved a settlement with Barclays who would pay the trustee $23 million to settle creditors’ claims. It is no longer in operation. Other claims are pending against a number of other major banking firms that the trustee claims led to Thornburg’s collapse.