The Ripple Effect

This month marks the tenth anniversary of what is viewed by many as the beginning of the 2008 financial crisis — the bankruptcy of Lehman Brothers. Over the past decade, the ripple effects from the Lehman Brothers bankruptcy spread to countries throughout the world, and to businesses here in Milwaukee, raising awareness that one bankruptcy can lead to many.

The year before it collapsed, Fortune magazine named Lehman Brothers the No. 1 “most admired securities firm” in the country. Today it is the poster child for risky investments and bad decision-making. The company simply held too many subprime mortgages, and when the housing bubble popped, there was no way for it to recover.

Once Lehman fell it was as if everyone was finally able to see that the emperor had no clothes. The federal government pumped over $700 billion into the financial sector to stave off a complete collapse, but still an estimated 6 million jobs were lost, unemployment rose 10%, the Dow Jones Industrial Average dropped an astounding 5,000 points, and bankruptcy filings skyrocketed.

We see a miniature version of this chain of events play out nearly every day. Whenever a business is in financial trouble, all the connected businesses and people are also put at risk. If one goes down, it is likely that others in its supply chain will follow. We work with many Wisconsin business owners who have been negatively impacted by the bankruptcy of a major customer or supplier, who must now act quickly to craft a financial workout and prevent their own downfall.

We regularly help businesses broker forbearance agreements with secured lenders, renegotiate equipment and real estate leases, and negotiate discounts with creditors. Over the years, we have developed strong relationships with the lenders and attorneys whose cooperation and patience are a necessary component of any successful workout. Our tenure in the field has also led to our credibility with the commercial lenders, whose yes or no vote on a workout proposal typically means the difference between an opportunity to recover and a bankruptcy filing.

If your business is teetering on the brink, or you are getting worried because a link in your supply chain has failed, don’t hesitate to reach out. As we are all too aware, recovery from the Great Recession was and is slow and painful. In the Milwaukee area, we just this year dropped to pre-recession levels of bankruptcy filings. In this sort of market, you need advisors you can depend on, and that’s why you can depend on Hanson & Payne.