71 public companies file bankruptcy in first quarter

Seventy-one publicly traded companies' filed for bankruptcy in the first quarter of 2002 due primarily to excessively high levels of debt, according to Weiss Ratings Inc., an independent provider of ratings and analyses of financial services companies, mutual funds, and stocks.

"The handwriting was on the wall in big bold letters, months in advance at every one of these companies, especially the giants like Kmart and Global Crossing," said Martin D. Weiss, PhD, chairman of Weiss Ratings. "And yet, major Wall Street firms continued to maintain buy' or hold' ratings for most of their shares, often until the bitter end."

If bankruptcy filings continue at the pace set in the first quarter, the number of public companies seeking protection under Chapter 11 or liquidating under Chapter 7 will remain high through the remainder of 2002.

Of the 71 companies that declared bankruptcy in the first quarter of the year, 62 had publicly traded common stock. Weiss rated 36 of the 62 companies at least three months before the bankruptcy filing, assigning a "weak" or "very weak" Weiss Investment Rating to 94 percent of them. Moreover, Weiss identified 100 percent of these stocks as having a high level of risk at least three months before the filing.

Looking ahead, Weiss finds that the sectors most vulnerable to continuing bankruptcies are steel, auto parts and equipment, and wireless telecommunications.

Companies with local ties within these sectors that received a poor overall Weiss Investment Rating based on March 31, 2002, data include Alamosa Holdings Inc., a wireless telecommunications provider, which received a weak' rating; Nextel Communications and Nextel Partners, both wireless telecom provid-ers, which received weak' ratings.

"Investors holding shares in companies that go bankrupt usually suffer a total or near-total loss, even if the company subsequently re-emerges from Chapter 11," said Weiss. "Investing in today's uncertain times without an independent evaluation of the company's prospects is like playing Russian Roulette."

The Weiss Investment Rating is a composite evaluation of risk and performance. By applying its conservative approach to ratings and factoring in risk, Weiss captures the risk/reward trade-off of investments. Weiss reviews more than 9,000 stocks, including those traded on the New York Stock Exchange, the American Stock Exchange, and NASDAQ.