The chart below looks at the default rate for corporate bonds from '05 through mid '08, in addition to the projected default rate through 2010.
Graphic courtesy of the WSJ
Looking at this data it's fairly clear that the problems within the corporate debt market are just beginning, and are probably where consumer credit problems where in mid to late '07. In other words the corporate debt phase of the credit crunch won't get fully rolling until later on this year.
Add it all up and it appears as if the problems in the financial sector could easily extend into 2011 if not 2012; consider that the efforts by the government (and others) to combat the foreclosure problems are probably delaying the inevitable and things look even more dire.
The graphic comes from a FT article discussing the challenges facing companies entering bankruptcy, in addition to examining how a typical corporate bankruptcy proceeding is handled. The article goes into such detail that I didn't think it made sense to excerpt it so I'd suggest that you just read it here. The overall gist is that the credit crunch is presenting some challenges for companies facing bankruptcy and/or a debt restructuring, which will in turn make it harder for struggling companies to survive and/or emerge bankruptcy successfully.
This is not to say that there aren't plenty of viable options for companies in this predicament, just that things are significantly more difficult than they used to be.
Disclosure: at the time of publishing the author didn't own a position in any of the companies mentioned in this article; the ideas expressed are solely the opinions of the author and shouldn't be viewed as financial or investment advice.
