Chartered Semiconductor (CHRT) No major news. Down to $.65 from 52-week high of $7.05.

Energy Conversion Devices (ENER) Solar energy company pulls its forecasts. Sells off to $12.85 from 52-week high of $83.33

Douglas A. McIntyre

Reuters reports that Wall St’s appetite to slim down perks will begin to face tests.

Reuters reports that a reports shows that troubled US banks more require more capital than is widely believed.

Reuters writes that Toyota (TM) will cut workers and hours in North America.

Reuters reports that Microsoft (MSFT) will open its own stores to compete against Apple (AAPL).

Reuters reports that Starbucks (SBUX) will come out with an instant coffee.

Reuters writes that Charter (CHTR) will go into Chapter 11.

The Wall Street Journal reports that several branches of government will have to staff up to handle overseeing the new stimulus capital.

The Wall Street Journal reports that Sirius (SIRI) and the head of EchoStar (DISH) are close to a deal for control of the satellite radio company.

The Wall Street Journal reports that fewer economists see a recovery in the second half.

The Wall Street Journal reports that a wave of bad debts are swamping some companies.

The Wall Street Journal reports that consumers are cutting spending on food.

The Wall Street Journal reports that a return to profit seems a long way off for many companies.

The Wall Street Journal reports that many shareholders are pushing to cut executive pay.

The Wall Street Journal reports that lending in China surged last month.

The Wall Street Journal reports that tech firms which influenced that spending package will benefit financially.

The Wall Street Journal reports that if the Treasury gets tough with banks, they may have to recognize losses more quickly.

The Wall Street Journal reports that Dow Chemical (DOW) cut its dividend by 64%.

The Wall Street Journal reports that Google (GOOG) left the radio ad business.

The New York Times reports that ailing banks may need more aid to stay solvent.

The New York Times report that gains in family wealth are now much smaller than earlier thought.

Bloomberg reports that China’s economy is showing signs of recovery.

Douglas A. McIntyre

In the current credit environment, many firms which would not have been on the list at the middle of last year would have to be considered now.  We are covering what we feel are the odds that the companies may need protection from creditors.

Sirius XM (SIRI) has nearly a 1-in-1 chance. It has negative operating income and huge debt due this year. The stock is at $0.11

Charter (CHTR) should technically be better than 1-to-1 odds.  Yep, seems better than a 100% chance. The company has modest operating income and $21 billion in debt. Recapitalization appears to be the ONLY alternative, but the company waited far too long. Stock is at $0.12.

GM (GM) has odds of 1-in-2.  Its restructuring may not work.  The UAW and creditors may not play ball. Revenue is falling and the automaker is almost 100% dependent on graces of federal government "assistance."

McClatchy (MNI)  has odds of 1-in-2. Newspaper revenue is in free fall. The stock is at $0.81, down more than 90% in last year.

Ford (F) odds are 1-in-4. The automaker is in better shape than GM but if Detroit goes down F has supplier trouble. Revenue is falling.

Level 3 (LVLT) has odds of 1-in-4. The company has a history of razor thin margins and flat revenue. Its long-term debt is roughly $6.5 billion.  There are recent credit downgrades and customers are believed to be cutting back.

Citigroup (C) is changing. If and when it happens, it may not look like bankruptcy, but feds will own the company.  What is left of it anyway?  Citi odds are now essentially 1-in-1 that it will look different than it does today regardless of "bankruptcy odds."

AMD (AMD) odds are 1-in-4. Results from peers Intel (INTC) and Nvidia (NVDA) are awful and only getting worse. The company has almost $5 billion in debt. Its only real relevance is that it keeps Intel from being a true monopoly.

Motorola (MOT) odds are  1-in-8, for now. More layoffs and cost cuts are looming. Its handset business dropped 50% last quarter. The company has big losses and its mountain of cash is the only positive here. If the trends continue, these odds likely go to 1-in-5 in a couple of quarters.

UAL (UAUA)  odds are 1-in-6. Fuel costs are down but traffic is falling off. Weak consumer spending is almost as large of a risk as  fuel price hikes.  AMR, DAL, CAL are likely in same situation.

NY Times (NYT) odds are 1-in-7.  The debt due this year is not a problem, unless net collapses, which it could. The industry free fall is huge risk of collateral damage. An investment by Carlos Slim may help, but only for a few months.

Bank of America (BAC) odds are 1-in-8. The company may be a a somewhat more healthy version of Citigroup.  It turns out it can’t afford the Countrywide and Merrill Lynch purchases on its own.  Its new need for government money brings concerns front and center.

Douglas A. McIntyre

As these firms quickly ate through the cash on their balance sheets and continued to have poor sales prospects, the term "burn rate" was coined. If was defined as the amount of cash a company had on its balance sheet divided by the firm’s monthly expenses less any revenue. An operation with $12 million in cash less short-term debt and a $1 million a month "burn rate" was expected to be out of business in a year.

At this point, GM (GM) and Chrysler would make any burn rate risk lists as would a number of retailers who had awful holiday seasons and are facing repayment of debt or revolving credit facilities. That is why Pier 1 (PIR) is trading at $.40 and shares of Dillard’s (DDS) are off 80% over the last year.

The use of the term has almost disappeared but it is likely to re-emerge now and refer to companies which are more mature and part of the mainstream economy. With credit nearly impossible to come by, operations with high debt and negative operating income are going to be defined by how long the capital they have access to will last.

Sirius XM (SIRI) is the most well-known company with a burn rate problem. It has about $1 billion in debt due this year, and has been running an operating deficit which is shrinking but may not go positive before the company becomes insolvent. At the end of its September quarter, it had $360 million in cash. The modest cash position and high debt accounts for a $.13 stock price.

Another company which is almost certainly to be taken under by its burn rate is Charter Communications (CHTR). With $21 billion in debt and interest coverage that is overwhelming its operating income, Charter may not make it until the end of the quarter.

The newspaper industry is being crippled by the burn rate problem. Big chains Journal Register and Gatehouse are already at the edge of insolvency. McClatchy (MNI), the country’s third largest newspaper company may well have debt service problems this year. Even The New York Times (NYT) is facing a $400 million debt payment later this year and does not have the cash on hand to cover it.

Unless the credit markets unlock at a furious pace, there will be a lot of well-known companies going into bankruptcy this year.

Douglas A. McIntyre

Reuters reports that GMAC eased lending rules after the government provided it with $6 billion.

Reuters reports that the Madoff probe now extends to offshore funds.

Reuters writes that more economic pain is seen in 2009.

Reuters reports that the SEC discovered a $29 million Ponzi scheme.

Reuters reports that Paulson said the US lacks the necessary tools to cope with a financial crisis.

Reuters reports that the Fed plans to buy $500 billion in mortgage-backed securities by the middle of next year.

Reuters writes that Dell (DELL) will make a number of management changes.

Reuters reports that chemical company LyondellBasell may filed for bankruptcy.

Reuters writes that media analysts are focused on the next media companies that might fail, starting with Charter Communications (CHTR).

The Wall Street Journal reports that real estate in New York and Boston has much further to fall.

The Wall Street Journal writes that famous economist Henry Kaufman was hurt by Madoff investments.

The Wall Street Journal reports that for REITs, 2009 will be a year of survival.

The Wall Street Journal reports that discounts failed to save retailers.

The Wall Street Journal reports that buyout firms are looked a firms distressed by the economy and debt.

The Wall Street Journal reports that AIG (AIG) wants changes to the terms of its loans.

The Wall Street Journal reports that Lehman is seeking more time to pay creditors.

The Wall Street Journal writes that "Novartis is pulling out all the stops to avoid a potential nosedive in sales after the patent of its blood-pressure pill, Diovan, expires in four years."

The Wall Street Journal reports that if markets recover next year, financial stocks may lead the way.

The Wall Street Journal reports that the ability of judges to rewrite mortgages in increasing.

The New York Times says that the 2009 economy will depend on unlocking credit.

The New York Times reports that the new Ford (F) hybrid will focus on fuel economy.

The FT reports that that S&P 500 had its worst run since The Great Depression.

The FT reports that money is flowing out of hedge funds at a record rate.

The FT reports that large marketers like Pepi (PEP) and Ford (F) are using Twitter to get out messages about products.

Bloomberg reports that the dollar is headed toward the biggest drop against the yen since 1987.

Douglas A. McIntyre

Martha Stewart Living (MSO) No special news. Media stocks just keep falling. Drops to $2.55 from 52-week high of $9.99.

Charter Communications (CHTR) Citigroup analyst is concerned about chance of bankruptcy. Plunges to $.085 from 52-week high of $1.68.

Douglas A. McIntyre

Honeywell (HON) was downgraded to "hold" at Argus.

American Eagle (AEO) was startes as "buy" by Pali.

Marriott (MAR) earnings lowed by Argus.

Sources: Briefing.com and wire services.

Douglas A. McIntyre

24/7 Wall St. looked at some of the largest and most well-known companies, reviewed their SEC filings if they are public, analyst reports, and media observations about their businesses and picked ten that probably won’t be around at the end of next year. That does not mean that their brands will disappear, but these companies will have been dissolved as the world knows them now or working though the court system in the hopes of getting Chapter 11 protection and a chance at survival.

1) Chrysler already says it will be out of business by early next year. But, what does that mean. It is unlikely that its largest shareholder, hedge fund Cerberus, is going to throw good money after bad in an economy where US car sales are dropping 30% compared with 2007 figures. But, the Chrysler brand could be around. So could the brand of its Jeep division. Foreign car companies like VW and Honda (HMC) would love to get well-known operations without the baggage of debt, UAW contracts, and dealer networks. Chrysler still has some popular models including it 300 series cars and it created the minivan. Jeep is regarded as the grandfather of four-wheel drive. Watch Chrysler Motors LLC go away and some of its products move into other hands.

2) Sirius XM (SIRI) has traded under $.10 down from a 52-week high of $3.89. Reuters has reported that "Sirius XM faces some $1.1 billion in debt in 2009. Of that, about $300 million comes due in February." In the current credit environment, that probably won’t happen. There is a theory that falling car sales will undermine the sale of Sirius subscriptions. The company says that it does no better than break-even in the first year it gets a new customer though GM. But, a shrinking subscriber based is not good news for the satellite radio company’s future. Sirius will be out of business, perhaps before mid-year. Who picks up the pieces? The logical choices are a healthy car company like Toyota or a satellite firm like DirecTV.

3) AIG (AIG) may be the biggest mess of all the financial firms that the federal government has bailed out. Uncle Sam has given AIG $153 billion in loans. The theory is that the money gets paid back by the huge insurance company selling assets. Investors don’t seem very sanguine about that. AIG shares trade at $1.60, down from a 52-week high of $60.04. Congress seems less and less enamored of having a lot of money sitting in troubled companies. Watch for the new administration to get frustrated quickly and appoint its own people to auction off AIG divisions. Better to get something back than keep writing AIG checks.

4) Fannie Mae (FNM) and Freddie Mac (FRE) is two for one. They are both penny stocks, reflecting the fact that the Treasury has essentially taken them over, putting them into a conservatorship and pledging up to $200 billion to back their assets. With mortgage defaults rising, and home prices falling, that is not the end of the amount of money that the government will have to sink into the firms. Within a few months, the value of the common shares in the firms will be gone. The new administration may even decide that it does not need both companies. They can be replaced with some of their role going to the FDIC and the rest to one consolidated entity controlled by The Treasury Department which is already funding them.

5) Rite Aid (RAD) trades at $.35 down from at 52-week high of $4.16. The pharmacy company has over 5,000 stores and Wall St. does not expect it to be profitable in the foreseeable future. The chain is a roll-up of the original company and Brooks and Eckerd stores which it acquired. With a debt load of over $6 billion, the firm is likely to falter. Competitors CVS Caremark (CVS) and Walgreen (WAG) would be happy to pick up the pieces. Rite Aid recently announced poor quarterly numbers and cut forecasts.

6) The New York Times (NYT) has to repay $400 million in debt in the first half of 2009. It does not have the money. It plans to mortgage its headquarters, but it is uncertain what that will bring in an uncertain real estate market. The firm’s Boston Globe and regional newspaper operations lose money, so they will be hard to sell. NYT is controlled by the Sulzberger family which has super-majority voting shares. That won’t matter much when the company runs out of money. Another big media operation, perhaps News Corp (NWS) which owns The Wall Street Journal and The New York Post, will come in and auction off what it can and keep the flagship New York Times newspaper and NYTimes.com website.

7) Nortel (NT), the huge telecom equipment company, has already been mentioned as a firm which could file for bankruptcy. That may be a game to get creditors to cut down their demands. It could be that  a huge contraction in the industry which is also undermining the fortunes of competitor Alcatel-Lucent (ALU) is pulling Nortel under. Nortel keeps losing money and has cut about as many people as it can and still stay in business. With the need for its products and services falling as the recession grows. Nortel has a pension obligation which may approach $3 billion. Selling divisions in a poor credit market will be hard. A bankruptcy filing would let a court run an auction.

Pier 1 (PIR) trades down at $.32 from a 52-week high of $8.25. This holiday season will determine its fate. UBS recently made the comment that "We are increasingly concerned that a weakening macro environment will continue to weigh significantly upon sales at Pier 1 Imports and further undermine turnaround efforts at the chain.”  The retailer recently said that its same-store sales could fall as much as 18% during the current quarter. Long-term debt is $184 million. More losses mean debt service becomes a huge issue. No other retailer is likely to want the stores, so this is probably liquidation. The retailer’s latest earnings showed a widening loss and the company said it could be delisted.

9) Charter Communications (CHTR) has over $20 billion in debt. The cable business usually drives reasonable cash flow, but Charter has to upgrade its system to better compete with telecom companies. It does not have that money. Debt service is overwhelming operating income. Billionaire Paul Allen controls that company. The stock is down to $.15. Eighteen month ago, it was close to $5. Allen will get out while he can and sell to one of the other large cable companies. Charter recently said it is "exploring financial alternatives."

10) Hovnanian (HOV) shares are down by 70% over the last year. Recently, the shares have been as low as $1.70, putting the company’s market cap at $171 million. The housing downturn may actually get worse as unemployment and foreclosures rise. The costs of credit default swaps on the homebuilder are way. JMP Securities recently commented that HOV is a “bankruptcy risk” due to debt and exposure in the hardest hit real estate markets. A liquidation with Hovnanian would probably be an auction of land and unsold homes.

Douglas A. McIntyre

We ran a screen for NASDAQ stocks with active trading volume, share prices under $1.00, and those which have traded over $1.00 in the last 52-weeks.  Some of the most usual suspects here are as follows:

Name        Symbol                        Price    Mkt Cap   Avg Vol       52-wk Range
Autobytel Inc. (ABTL)                    $0.40    18.09M    255,678        0.31 – 3.30
Beacon Power Corporation (BCON) $0.62    61.40M    973,758       0.50 – 2.18
BankUnited Financial (BKUNA)       $0.24    8.61M    612,080         0.24 – 8.00
Charter Communications (CHTR)    $0.13    53.58M    5,062,670     0.11 – 1.68
Candela Corporation (CLZR)           $0.53    12.12M    195,383        0.31 – 5.93
Cosi, Inc. (COSI)                           $0.25    10.19M    197,683        0.25 – 3.24
Eddie Bauer Holdings (EBHI)          $0.51    15.72M    288,632        0.30 – 8.72
8×8 Inc (EGHT)                              $0.47    29.30M    157,789        0.40 – 1.30
Emmis Communications (EMMS)    $0.41    14.91M    202,774        0.25 – 4.27
Finisar Corporation (FNSR)             $0.40    171.83M   3,241,740     0.29 – 1.96
Glu Mobile Inc. (GLUU)                   $0.44    13.02M    92,946.2       0.22 – 5.77
Globalstar, Inc. (GSAT)                   $0.22    26.35M    634,428        0.17 – 9.50
ChipMOS TECHNOLOGIES (IMOS) $0.19    15.95M    538,883        0.18 – 4.39
Jones Soda Co. (JSDA)                  $0.38    10.02M    154,182        0.31 – 8.20
Jupitermedia Corporation (JUPM)     $0.44    15.83M    112,874        0.20 – 4.03
SourceForge, Inc. (LNUX)                $0.96    61.58M    345,160        0.32 – 2.59
Level 3 Communications (LVLT)       $0.70    1.13B    25,960,200      0.60 – 4.48
MRV Communications (MRVC)        $0.80    125.74M    522,931      0.21 – 2.57
Openwave Systems Inc (OPWV)      $0.64    52.99M    400,640        0.45 – 2.89
Pacific Ethanol, Inc. (PEIX)              $0.72    41.59M    591,114        0.50 – 9.88
Powerwave Technologies (PWAV)    $0.48    64.25M    2,752,260     0.35 – 5.30
RF Micro Devices, Inc. (RFMD)        $0.94    247.34M    5,364,060    0.70 – 6.00
Sanmina-SCI Corporation (SANM)    $0.52    279.31M    5,529,640    0.27 – 2.66
Sirius XM Radio Inc. (SIRI)               $0.14    491.88M    55,366,100  0.08 – 3.89
Spansion Inc. (SPSN)                      $0.22    35.81M    1,428,130     0.20 – 4.29
NextWave Wireless Inc (WAVE)       $0.10    9.90M       577,515       0.07 – 7.59
Xinhua Finance Media (XFML)           $0.61    43.60M    333,146        0.31 – 6.71

If you think about this, there is also a financial incentive.  Ifhundreds of stocks magically get sent to the minor leagues of theOTC-BB or the Pink Sheets, then NASDAQ would lose a substantial amountof revenue.  It would also lose a significant amount of daily exchangevolume.

Jon C. Ogg
December 19, 2008

The firm said, while growth has remained at the top end of the cable industry, the weight of its $21 bn of debt (9.1x leverage) is becoming too much for the company to bear.

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