Credit agency names 283 US firms most likely to go bust

Elena Moya
guardian.co.uk, Tuesday 10 March 2009

US industrial companies such as Eastman Kodak, media firms such as Univision Communications and carmakers including Ford and General Motors have a 45% chance of going bust in the next 12 months, according to a report published today.

In a new "Bottom Rung" list, credit ratings agency Moody's names 283 American companies that it says may file for insolvency in the medium term.

"Tight credit markets and the global economic downturn are rapidly swelling the population of US companies with [a] high default risk and weak liquidity," Moody's said in its report.

The list, which will be updated quarterly, names the firms that are the most likely to have difficulties paying their debts. Just 157 companies would have made the list if it had been compiled last year, Moody's said.

"These companies have not defaulted, but their current ratings indicate elevated risk of default relative to other rated corporate issuers," the report said.

Media and car companies make up about a quarter of the list, as both sectors are suffering from the reduction in discretionary spending during the global credit crunch. With rising unemployment and banks closing the tap on consumer and corporate loans, car sales have plunged, and so has the number of advertisements in newspapers and broadcasting.

Media companies such as Reader's Digest Association, Regent Communications, Affinity Group, Citadel Broadcasting and MediaNews Group are on the list.

The group also includes the biggest carmakers, GM, Ford and Chrysler. GM has already warned it could become insolvent unless an aid plan is agreed soon.

Retailers and manufacturers face a similar fate, with a record number of chains already having gone bust. Video rental store Blockbuster and restaurant group El Pollo Loco made it to the list.

Casino operators such as Harrah's Entertainment and MGM Mirage may soon turn out the lights at their Las Vegas hotels if Moody's default prediction is right. Leisure brands such as Hollywood Theaters and Waterford Gaming are also considered likely to default, as are airlines such as UAL Corp (United Airlines), US Airways and JetBlue Airways.

Satellite developer Intelsat and the Krispy Kreme Doughnut Corporation are other well-known names on the list.

Sectors least represented in the Bottom Rung group include natural products, forest products, healthcare, metals and mining.

The global default rate among speculative-grade (lower-rated) companies is expected to soar to 14.8% by the end of this year, compared with 5.2% at the end of February, according to Moody's.

At present, most defaults are in the US, because the recession hit the country before Europe, following the collapse of the sub-prime mortgage market. Of the 17 defaults in February, 13 were in the US, two in Brazil and one each in Denmark and Ukraine.

In Europe, however, the recession is expected to lift the speculative-grade default rate to 22.5% by the end of this year, from 2.7% at the end of February.

http://www.guardian.co.uk/business/2009 ... vency-list