From time to time, the editors at 24/7 Wall St. will look at which companies may file for Chapter 11 bankruptcy protection over the next year. The analysis involves looking at SEC filings with a focus on balance sheet, cash flow, and risk factors. Also taken into account are stock price, earnings forecasts, and the ability of a company to raise cash.
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
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