Bankruptcy king: more defaults coming (Reuters/CNNMoney.com)

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Wilbur Ross expects bankruptcies in Europe, United States to surge in '07 due to rising debt levels.
November 29 2006: 2:29 PM EST

LONDON (Reuters) -- Billionaire turnaround specialist Wilbur L. Ross predicted that bankruptcies in Europe and the United States would increase sharply next year because of soaring corporate debt levels.

Ross, dubbed the 'King of Bankruptcy' by Fortune magazine in 1998, said at a conference in London on Wednesday that defaults would rise to about 7 percent of all companies by the end of next year - one of the most bearish predictions in the industry - from about 1 percent now.

"The number of defaults will rise even in the absence of an economic downturn or interest rate increases," said the chairman of WL Ross & Co. LLC in a videoconference from his office in New York. "There will be some tragedies. When you pay higher multiples, you have less margin of error."

The value paid by the average European leverage lender has risen to 8.2 times a company's earnings before interest, taxes, depreciation and amortization (EBITDA) from 5.2 times five years ago, Ross said.
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Companies issued more high-yield bonds between January and November than during any whole year before, Ross said. Some of these bond sales have been for "non-productive" reasons such as dividend payments or refinancing, instead of specific projects or working capital, Ross said.
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more: http://money.cnn.com/2006/11/29/news/international/bankruptcy.reut/index.htm?postversion=2006112914