bankrupcies have only just begunThe wave of defaults on subprime...

bankrupcies have only just begun

The wave of defaults on subprime mortgages, loans made to the least creditworthy home buyers, is spilling into the lower tiers of corporate credit, said Anders Maxwell, managing director of New York-based investment bank Peter J. Solomon Co., speaking at a Feb. 28 conference on distressed investing in New York.

``Subprime was just a paradigm for the credit markets overall,'' Maxwell said. ``Now in the corporate market, the shoe is just beginning to fall, and we're poised for a major correction that has been coming for at least a decade.''

Bankruptcy filings have just begun to increase. According to court records compiled by Jupiter eSources LLC, Chapter 11 business bankruptcies, including small, nonpublic companies, increased 16 percent in the first quarter of 2008. Under Chapter 11 of U.S. bankruptcy law, a company seeks court protection from creditor lawsuits while working out a reorganization.

``I think this is the beginning,'' said Brett Barragate, a bankruptcy lawyer at Jones Day in New York. ``You have rising defaults into a market where it's virtually impossible to get refinanced.''

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