Sharper Image, Lillian Vernon seek bankruptcy protection

— -- Ionic Breeze air purifiers and jelly bean jars Wednesday became the latest victims in what's looking like a coming avalanche of corporate bankruptcies.

With lenders increasingly reluctant to bankroll less-than-stable companies, financial experts are braced for more companies to teeter toward bankruptcy.

"What you've seen so far is nothing in terms of what is coming," says Martin Zohn, bankruptcy expert at law firm Proskauer Rose.

Already this year, 13 publicly traded companies with assets of $7.7 billion have filed for bankruptcy protection, says Kerry Mastroianni of BankruptcyData.com. That's the largest dollar value of bankruptcies since the record $64.9 billion at this point in 2002, Mastroianni says.

Bankruptcies are on the rise, and are expected to pick up pace this year because shakier companies face:

•Disruption in the bond market. Companies that need cash are having a tough time borrowing, says Stephen Carter, a credit analyst at Thomson Financial.

Speculative companies that tap the so-called junk-bond market have raised just $1.6 billion in six offerings in the first quarter, Thomson says. At this time last year, riskier companies had easily raised $38.5 billion from 84 offerings.

•Rising cost for borrowed money. Concern riskier companies will struggle to pay debts has driven the average interest rate paid by speculative companies to 11%, says Diane Vazza, bond analyst at Standard & Poor's. That's up from 7.8% a year ago and about 7 percentage points higher than the rate on 10-year Treasury notes. That can be a big problem when companies must refinance cheaper debt that has come due.

Investors have good reason to be nervous. S&P is now expecting 4.6% of speculative companies to default on their debts, Vazza says, vs. a 1.1% default rate last year and a long-term average of 4.4%.