Buyer Beware: 30 Biggest Bankruptcy Risks 73 comments
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The following companies are listed in order, based upon the credit-default swap spreads on five-year corporate bonds as of early April. The list is compiled from research provided publicly through MSN Money.
AbitibiBowater (declared bankruptcy on Friday) (ABH)
R. H Donnelly (RHDC.PK)
Visteon (VC)
General Motors (GM)
Six Flags (SIX)
Financial Guaranty Insurance
Hawker Beechcraft
Ineos Group
NXP Semiconductors
McClatchy (MNI)
Unisys (UIS)
CC Media
Beazer Homes USA (BZH)
YRC Worldwide (YRCW)
Hellas Telecommunications II
Lear (LEA)
Ono Finance
American Axle and Manufacturing (AXL)
Harrah's Entertainment
Truvo Subsidiary
Ford Motor (F)
Rite Aid (RAD)
MBIA (MBI)
Freescale Semiconductor
Univision Communications
ArvinMeritor (ARM)
Pioneer Electronics
Travelport
A very interesting, prioritized list of companies that may not be on any list one year hence.
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This article has 73 comments:
The government is picking winners and losers not the market.
It is the number of potential bankruptcies that bothers me when I search for a recovery.
How many companies, without a bailout, can survive without a return to growth matching the models they used to justify taking on the debt in the first place?
Thanks for the post.
Thank you for the info. I will check this with my colleagues first thing tomorrow morning
On Apr 19 11:14 AM John D wrote:
> More info we don't really need - like the movie said "If you have
> nothing nice to say ...don't say anything at all" - how about going
> back to the drawing board and find something POSITIVE + for the readers,
> I'm pretty sure that everyone has had enough of the bad news !!
The problem is that many of these companies have been abused by games from short sellers to ruin their CDS ratings to force their stock prices down. In some cases, this is justified, but in nearly all cases, foul play is afoot.
Unfortunately, the foul play may in fact bring down (some of) the companies even though it was unjustified.
In some of the cases, the companies have enough cash to make it for years and may do just fine if the economy recovers in relatively short order. Most of the companies that did not plan ahead have already gone under... With the exception of the large financial cos which received bailouts.
I'll bet 303820 watches a lot of Fox News Channel...
If you want nothing but good news why would you read this site? I like the (often excessive) contrarian articles here, as you rarely get if from the mainsteam news... but this isn't even that. It is a list of the biggest risks based on market based estimates of their risk...
It is good information whether you think they will go bankrupt or not.
Can anyone provide a link or lead me in the right direction?
what a JERK, this is nonsense and should not be tolerated.
This list is pretty good if 3 have gone under already!
Thank god i don't own any. How can i check the CDS spreads of my investments?
Some lawyers maybe looking for you now.
Not funny !!
Longer recession = more bankruptcies.
On Apr 20 10:57 AM Matt Miller wrote:
> I don't think based on my knowledge of the markets and industry,
> that Ford should be on this list. In fact, they are poised to outperform
> all in the auto sector.
Nobody, John, is forcing you to read this. I would suggest that you speak for yourself. Please don't hide behind statements like "for the readers …" and "I'm pretty sure that everyone has had enough of the bad news!!" You don't need to speak for me. I would guess that most of the readers here can stand up for themselves. Not sure.
Thanks for the info, Thomas. As far as I care, please keep on writing.
>On Apr 19 11:14 AM John D wrote:
> More info we don't really need - like the movie said "If you have
> nothing nice to say ...don't say anything at all" - how about going
> back to the drawing board and find something POSITIVE + for the readers,
> I'm pretty sure that everyone has had enough of the bad news !!
Unbelievable. I've seen some stupid comments on SA before, but those really have to be the worst.
If there is valid criticism about the motives or methology of an article, by all means, that's fair game to call them out. But to say "bad news should not be stated" is... unreal.
1. Major driver in traders decision to buy/sell CDS is a direction of its price. Not default probability.
2. CDS, unlike bonds, have other covenants that can trigger an event, such as restructuring, moratorium etc.. even downgrade (sometimes).. So CDS reflects more things other than default.
3. CDS prices are driven by equity vol. You dont need to be a genius to know that these guys listed were most volatile. CDS traders usually follow ten of CDSs, do you think they have time to research them. I ALWAYS thought CDS trading was about momentum, not deep research. Also, for many names CDS could be very illiquid. Another thing: CDS levels that traders see on their screens are often not traded levels, but levels suggested by CDS models.
4. If you short equity, you max gain 100%. You buy CDS (similar to shorting a stock) your gain is unlimited. So CDS prices is a great speculative tool on the downside. You dont think hedgies abuse it?
In short, in today's environment, take CDS levels with a huge grain of slat.
Also, another comment. Technical issues sometimes amplify things. Look at MBI which is on the list. It sells insurance, and thus poses counterparty risk. So many folks who buy insurance from them, are forced to buy protection on MBI (buy CDS), which is fairly illiquid. They still buy it and drive CDS level up. So how much of liquidity premium is built into MBI CDS spread? Trust me, nobody knows.
Did you forget Chrysler by any chance?
Teutonic
Next up, American Dumpling will take the chinese market by storm.
On Apr 21 06:59 AM Daniel Herkes wrote:
> But the auto sector is shot.
What company is "Arvin Motors"? ARM? I've never heard of this company.
Does the author mean "Arvin Meritor"?
Did anyone check this article? If you are going to be talking about a company possibly going into bankruptcy and PUBLISHING it on the web, have some sense and check your work.
On Apr 21 10:21 PM DTEJD1997 wrote:
> Where are the editors on this article?
>
> What company is "Arvin Motors"? ARM? I've never heard of this company.
>
>
> Does the author mean "Arvin Meritor"?
>
> Did anyone check this article? If you are going to be talking about
> a company possibly going into bankruptcy and PUBLISHING it on the
> web, have some sense and check your work.
>
cxa.marketwatch.com/fi...
any comments welcomed.
it's also a little misleading to say that "CDS is driven by equity vol." in merton-based valuation models (to which you are clearly referring) there is definitely a fundamental hypothesis made linking the two, as it pertains to firm value and prob of default, etc. the problem, however, is that there are many limitations to that valuation method (such as the assumptions on time, dividends, the fact that equity vol is not the same as asset vol, etc..), which you surely are aware of. so, in practice, people can use equity vol as a model input, but the *market* drives CDS, and that's it. after all, according to the model you can make just as good of an argument that CDS levels drive equity volatility, can you not? fundamentally all we know is how they should be related to one another, but it doesn't fully provide causality.
but otherwise good points.
On Apr 21 11:38 AM Gtarras wrote:
> I have spent plenty of time modeling CDS prices and working with
> CDS traders. While CDS prices do reflect probability of defaults,
> there are many things that I picked up along the way regarding pricing
> of these things:
>
> 1. Major driver in traders decision to buy/sell CDS is a direction
> of its price. Not default probability.
>
> 2. CDS, unlike bonds, have other covenants that can trigger an event,
> such as restructuring, moratorium etc.. even downgrade (sometimes)..
> So CDS reflects more things other than default.
>
> 3. CDS prices are driven by equity vol. You dont need to be a genius
> to know that these guys listed were most volatile. CDS traders usually
> follow ten of CDSs, do you think they have time to research them.
> I ALWAYS thought CDS trading was about momentum, not deep research.
> Also, for many names CDS could be very illiquid. Another thing: CDS
> levels that traders see on their screens are often not traded levels,
> but levels suggested by CDS models.
>
> 4. If you short equity, you max gain 100%. You buy CDS (similar to
> shorting a stock) your gain is unlimited. So CDS prices is a great
> speculative tool on the downside. You dont think hedgies abuse it?
>
>
> In short, in today's environment, take CDS levels with a huge grain
> of slat.
much to the chagrin of sell-side CDS traders, this is all likely to change at some point in the probably not-so-distant future.
On Apr 20 03:25 PM Egg wrote:
> I've looked and looked on MSN Money site but I cannot locate on there
> where the CDS quotes are publicly listed. I've always wanted to see
> the quotes for the various companies.
>
> Can anyone provide a link or lead me in the right direction?
On Apr 22 05:44 PM Stocks007 wrote:
> well, mostly true. except that buying CDS does not offer unlimted
> gains. your best case scenario is the company defaults immediately
> and has zero recovery, in which cas your contract will be worth 100
> points. it cannot go higher than that. if you paid 100bp upfront
> then you would make a 100-fold return, which is great, but it's not
> unlimited.
>
> it's also a little misleading to say that "CDS is driven by equity
> vol." in merton-based valuation models (to which you are clearly
> referring) there is definitely a fundamental hypothesis made linking
> the two, as it pertains to firm value and prob of default, etc. the
> problem, however, is that there are many limitations to that valuation
> method (such as the assumptions on time, dividends, the fact that
> equity vol is not the same as asset vol, etc..), which you surely
> are aware of. so, in practice, people can use equity vol as a model
> input, but the *market* drives CDS, and that's it. after all, according
> to the model you can make just as good of an argument that CDS levels
> drive equity volatility, can you not? fundamentally all we know is
> how they should be related to one another, but it doesn't fully provide
> causality.
>
> but otherwise good points.
>
The CFO's comments today indicate a very high probability that existing equity will be wiped out to some degree in one of two ways:
1) they do a debt/equity swap, which i assure you will be at disadvantageous terms to existing equity, or
2) they file bk and equity drops to the typical 40-50 cent option value range.
On Apr 22 04:34 PM Charles Colaco wrote:
> I have been holding MY GM short for almost 2 weeks and it seems more
> and more that uncle Sam will bail them out. I feel the chance of
> Bankruptcy is getting slim.
>
> any comments welcomed.
On Apr 19 11:14 AM John D wrote:
> More info we don't really need - like the movie said "If you have
> nothing nice to say ...don't say anything at all" - how about going
> back to the drawing board and find something POSITIVE + for the readers,
> I'm pretty sure that everyone has had enough of the bad news !!
Certainly not pleasant news, but news that investors definitely need.
Investors have to face reality, and this is it at its harshest.
Thank you for your work and for putting these together.
Although I hope neither has to go through it, I do think Ford can avoid bankruptcy, but in my opinion GM will be in bankruptcy or the government will be trying to run the company by Fall.
Sad!
P.S. If you don't like bad news...don't read it!
On Apr 19 01:39 PM Bagsnatcher wrote:
> Travelport? Ouch... that's where I work FFS..
> Thank you for the info. I will check this with my colleagues first
> thing tomorrow morning
It's a shame about AXL but GM was there major customer. It's still a shock to me to hear this of GM even though it's not new news but it just seemed like Chevy was going to be around forever. How times change.
Also check MGM who might restructure its short term debt also yielding 30% and more.... and TXU bonds which W. Buffet bought at par I believe a year ago now are trading below 40 pts and yielding 27%.
You're obviously confused. The Democrats are in power now. I'm sure you meant MSNBC or NBC.
On Apr 19 11:11 PM Brian in Wilmington wrote:
> "Another brainless expert shooting his brain off and saying nothing...negative
> news is not what this country needs! "
>
> I'll bet 303820 watches a lot of Fox News Channel...
On Apr 19 11:14 AM John D wrote:
> More info we don't really need - like the movie said "If you have
> nothing nice to say ...don't say anything at all" - how about going
> back to the drawing board and find something POSITIVE + for the readers,
> I'm pretty sure that everyone has had enough of the bad news !!
F stock gap-up on Fridays's open, and constant buying at those levels for MILLIONS of shares only tells me that someone knows much more that you do. F mgmt is doing their best to cut expenses, & frivolity. They are well heeled with cash, and will likely beat (again) all estimates for the coming years. Stock price will be in the 50's in 2 years. You heard it here first!!!
On Apr 25 06:34 AM BlackBear wrote:
> To whom it may concern picking companies that you say will likely
> file for bankruptcy. You made a bad pick when you chose F to (possibly)
> go bankrupt.
> F stock gap-up on Fridays's open, and constant buying at those levels
> for MILLIONS of shares only tells me that someone knows much more
> that you do. F mgmt is doing their best to cut expenses, & frivolity.
> They are well heeled with cash, and will likely beat (again) all
> estimates for the coming years. Stock price will be in the 50's in
> 2 years. You heard it here first!!!
But, probabaly the majority of those complaining of negativity have short memories or are suffering from selective remembrance. In the early 80's the Hunt brothers, Saudi Arabian princes and Bache & Co tried to corner the silver market and federla intervention was the only reason a financial meltdown did not occur. In the latter 90's (1997-98) Longterm Capital Management created another "crisis". Again federal intervention was required. Now, we are experiencing the effects of the real estate debacle. Massive federal iontervention.
You need to see the signs and responsibility must be assumed by the general population by educating themselves in elementary economics, restraining their impulses to own something when the price is out of line and learn investment and saving principals.
It appears that too many take what is said on CNBC as gospel when in reality the guests have their own self-serving agenda. Does it really seem so far fetched that a stock salesperson, working on commission will tell the truth, i.e say something negative? Or if you prefer analyze the recommendations of Jim Cramer of "Mad Money", you will get the same results flipping a coin. Many years ago Forbes magazine ran a cover of a chimpanzee in a suit and tie titled, "Anyone can be a Certified Financial Planner", they should rerun it titled "Any monkey can imitate Jim Cramer.
If you do your own research you will come out ahead.
Agree with you.
Some people can write anything they want without any thoughts.
This is the problem of Freedom of Speech.
When someone say something bad about a company without proof, that is irresponsible and should be liable for any damages caused.
Not nice at all.
1.) April 2009: 15-20 billion dollars of Option ARMS coming due with an estimated 50 - 60% default rate.
2.) Same holds true for May and June 2009.
3.) Bam-Bams so called help or reaching out to the general public in all reality will equal 5-10% of all families that need assistance with mortgages. They must be Fannie or Freddie Mac loans period!
4.) As of late Wells Fargo could not pay back the US Gov loan but they could only pay the 324 million dollars in Interest payment. I would call that program an Option Arm funded by the People.
5.) The fundamentals regarding a stock market rise is just not there. All of you have your own way of research and due diligence. At least there is a method to our madness.THere is at the same time as of the memo a flight by investors away fromUSA Bonds and Treasuries.And guess what will happen, then the USA Treasury will have to print more money or the USA Government will have to rise the Interest rates on their bonds and tresuries. Remember 10 - 15% T-Bills for 3 months? Remember Old Court Savings in Baltimore MD advertizing 19% CD's? Probably not. Then the flight of investors back to the equity markets will be SLAMED by the Financial Set back #2. I am predicting the market will the go lower to about 4000 to 4500 before the blood letting will subside. Foreclosures? Well they'll be on every street corner. Financial institutions will buy one another out only because there will be no more Tarps and Sub Tarps or whatever. There will be a new subprime mortgage lender in town as well. Why, who will be available to buy a home at 12 to 15% 30 year fixed rates? Families who were hard hit loss of job, dual income gone, the motor home, boat 3rd car the second home gone! You will see more Mall Operators collaspe.Some of the biggest probably in the next 6 to 8 months. So what do you think will hold this country together. Yes a good leader of course. But Morality, Honesty, Integrity, trust! Read on please.
6.) We need to remember where this Globalization started. I do realize that all of us have an opinion and I respect you all. But, in the last 200 years we need to refocus on how the industrial revolution jumped from Europe then to the US... it stagnated here until WWII with full industrialization took place. Innovative means to at production / sourcing of raw goods to man whoops women power as it emerged in the work force while all good men went to war. Now I do understand I may in fact generalized the evolution but look quickly forward after the war, what did we do, we, our great nation rebuilt europe and then we rebuilt Japan. As the industrial revolution evolved we, USA Mangers became just that. We managed other people because we too evolved into a sort of managment consulting country. We were tired of getting our hands dirty as our fore fathers. None of us wanted to work in the mines or lumbering or steel mills, but we did for a while retain the most profitable industries in this country. The US did realize early after the WWII that we were in fact a World Power. WE should be!! We won on the European Front with out the help of Jack Kennedy, and we won on the Asian Front when no country stood up to assist us except for China. Yes we did assist China to repell the Japanese. But we had no idea that Mao would turn so vicously against Shec' right after the war. We as a great nation helped China manay times over without once trying to invade her. The point here is that the industrial revolution evolved into a tidal wave generated from the European Nations juimped over to the USA, the with our help jumped again to Japan. Don't you remember when the first Japanese consumer products were introduced in the USA it was junk??! But who sent them equipment, materials and most imp;ortantyly management expertise? During this same time we were already shutting down manufactuiring facilities in the USA... back in the 50's and 60's. Don't remember? Don't remember when in the early 70's trade embargo's were placed on foriegn steel becasue Beth Steel already couldn't compete? There were no bail out programs just traiffs. But we were the villians to blame in the first place because we asisted Japan with the newest and brightess managers and ideas to generate steel cheaper in japan who as a nation was lacking mostly all the fundamental resources to buil;d steel in the first place! Then where did it go, South Korea and the same venue took place. Japan's economy was now rolling we did a great job!! And during that same time thailand, Malaysia, Indonesia were experimenting with labor intenseive products. I said experimenting since they were smart enough to realize that as a country they wanted to skip the labor intensive stuff and moved right into high tech arena like Japan. You may think I have gotten off the subject matter at hand but you must first understand who or what has taken this great nation who was considered the Greatest in the world to whatever we are considered now. We have created our own dimise. Not being an alarmest or being tough on my own country but again just want to set the picture in a better light. Some of yopui may disagree, some may agree then some will stick their head into the sand. We must understand that the USA has been working very closely with the major so called super powers for 50, 60 70 80 years. Believe it or not there is a reason behind this seemingly crazied maddeness. Gentlemen, I would rather have China hold our Bonds then any other country. You must do your own research on the history on Sino-USA relations. The Chinese only want to be recognized as a major player in the world markets. It wants to be congratulated in its progress in democratization in their own country. And don't tlak to me about human rights! We have our own challenges right here in our own country! If I need to exp[lain to this intelligent gorup then this memo was for not!
Will the industrial revolution come back to the USA ? Well look around you. The companies that will pull this country through this financial bull shit will be the small to medium size companies. The companies that will not get Tarp or what ever its called money. Ones that don't discriminate because of age or sex. But are in search for the brightest talent in the market place. The giants of the present will become the dinosuars of the future. Again who built the Japanese industrial and the Koreans and the Chinese? We did!! And we are going into the next biggest leap in technology that will be used in all industries. I believe that there will be a re-surgence in basic labour intensive manufacturing and work in general. WE as a country are slowly and I mean slowluy recognizing that not all people should go to college but are very well suited for Trades. Now don't get upset but there is an under current taking place right here in our country. That current is very strong it contains the very essence of why the USA is so Great in the past, present and into the future. That current is crying out to be heard, no one is listening! But it has been crying for many years. Remember when someone during a conversation would say that you or I or themselves could not see trees for the forrest? It's right in your own neighborhood. Right next door to you. Just look around you.
Morality, Integrity, Trust, Honesty, Do I need to say more?!
Don't you remember seeing the news reels at the movie theaters accross the country during WWII as GI's were helping woman, children Men? When there was a code of honor when you agreed on a contract with a hand shake? Integrity. A very powerful word that has been tarnished over time. THese four words are being cried out by the people of this great nation. The values that have held this country so tightly woven throughout the entire nation had been ripped wide open little over 9 years ago. Remember? You can figure it out.
Why do you think that the imagration by other people from all over the world come to the USA? It is because the Freedoms that we hold so dearly that "had" Trust, Integrity, Honesty,Morality interwoven through the very fabric of this great nation. Do not think that I have staryed from the main topic of discussion. Because I haven't! It has everything to do with the present financial stress we are living through right now. The very fabric that has held this great nation is slowly tearing. And the last ingredient to our complex financiaL mess is the family structure. THis is where it all begins.
Its 3:05 AM coupled with the fact that I am a retired "contractor" who believes that we will work through this mess and while working through it all, there will be bodies floating down the river of people and families who didn't believe in the structure that has held this nation together, we the people do solemnly swear... remember... Now putting all the personal agenda's aside, forgotten about, discarded to be refreshed with the very essence of spirit that has made us so great we shall come together in the board rooms, stock rooms, every where to generate the ideas, the new innovative , fresh ideas test and test till its just right then place it into the market place. Freedom of choice, freedom to let the markets rule. If GM can't re-evolve re-invent itself then let the markets rule. But we as the people who elect our officials let it be known that we need to assist those displaced by the inadequatices of management of GM, Chase, Wells Fargo and the like to be re-trained for the new re-industrialization of this country. Understand gentleman there will be alot of pain but we can and will stand together to help one another so the very basic idea of FREEDOM will remain as the very dream as it was for our fore fathers... alive and well. Management of every major financial institution had been run by "emotion!" Would you not agree that Greed is emotion. Gentlemen Thank-you for allowing me to vent my thoughts in this forum. Spell Check must be a luxuary to have on this site. Respectfully, Col. JJFF Sr. Retired.
Idaho bank is fourth closed in a single day
By John Letzing
Last update: 8:16 p.m. EDT April 24, 2009
SAN FRANCISCO (MarketWatch) -- Ketchum, Idaho-based First Bank of Idaho became the fourth bank closed by regulators Friday, as the credit crisis continued claiming victims. The Federal Deposit Insurance Corp. said Minneapolis-based U.S. Bank (USB:US Bancorp
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USB 18.97, +0.60, +3.3%) has assumed the failed bank's deposits. First Bank of Idaho had $374 million in deposits as of Dec. 31, the FDIC said. The bank's closure follows that of other banks in Georgia, Michigan and California on Friday.
It is clear that human nature is always searching for and beleiving in the "silver lining". And, I would suppose that somewhere's down the line there is one.
If anyone has not as yet read James H. Kunstlers The Long Emergency, I would suggest the read. Our problems transcend the purely financial, we have incipient crisis just about everywhere you look. Energy, water, infrastructure and agriculture top the list, and now the prospect of rogue states with DELIVERABLE atomic weapons. As to the financial crisis has anyone assessed the collateral damage? The bailout money might do some good but then you know for sure that government money will always distort the economy; misallocation. Greenspan pointed out just a few years ago that the economy was fine tuned and couldn't take more than a few percentage points of disruption. I don't remember his exact phraseology, but the take on this statement is obvious. Too much debt across the board and everything in commerce is dependent on everything else. A Just In Time economic miracle. Doomed to self destruct. It has, and now everyone thinks it is just a matter of picking up peices....nooo, Humpty is not repairable, at least not in conventional methodology and even then it is going to be a long row of stumps to hoe. Regards.
jay
newyorkcitycheap.com
jay
newyorkcitycheap.com
What do I do now????
I am looking at select bankruptcy candidates differently: I cherry pick and factor in the implicit guarantee provided courtesy of the US taxpayer as a buying opportunity, over the last 6 months or so. I am talking of obligations of various types.
Who needs Treasury notes, TIP s if you can get Goldman Sachs, GE Capital, GMAC – some newly minted banks with the 5 star ratings from the US Government, the Fed? And with the de facto assurance to keep you whole, most certainly at the price level their bonds and notes could be picked up recently.
I also bought some GM notes. I am quite content to wait and be reimbursed, eventually, with shares in a possible NUGEM company.
Salve to the socialist world we live in – if you can t beat them, join them. In a schizophrenic, perverse way I am sad to say so: Thank you, America.
Have a good day
Note: For those who are interested, below are some of the listings. To boot, these obligations are in Euros and Swiss Francs which also helps to diversify the currency risk. (I did not check and am not sure but t is possible they also carry restrictions to be sold to US residents).
anleihen.onvista.de/sn...
anleihen.onvista.de/sn...
anleihen.onvista.de/sn...
anleihen.onvista.de/sn...
But hey, my Ford preferreds have tripled since I bought them 8 weeks ago, so maybe my glasses are a little rose-colored at the moment.
Now, with the acquisition of the company by Onex and Goldman Sachs and renaming the company Hawker Beechcraft (another slap in the face of lifelong Beechcrafters and the Wichita Community which has grown and prospered with Beechcraft for nearly 65 years - Raytheon arrogance and Onex/Goldman "Pretty Boys know best" changed the worldwide accepted name of Beech Aircraft Corporation), new management has been brought in, many from the auto industry, who know nothing about building aircraft and maintaining records and data required by the Federal Aviation Administration. They have spent millions of dollars on consultants over the past three years with virtually no cost improvement to show for it. Now they appear to be targeting people with 20 and 30 years experience, many just before they turn 55 years of age, effectively reducing those persons retirement benefits by at least 15%. All of the remaining employees see this, and consequently morale is in the tank, people don't trust any of the new management, and many more experienced employees are looking for other employment because this is no longer the company to bet your future on. Olive Ann Beech made the Raytheon and Onex/Goldman regimes appear to be mental midgets when it comes to running an airplane company!