Most of the business news for the last 4 or 5 months has been pretty grim. Every day brings more bad news. Several major companies have filed for Chapter 11, and in a recent article in US News and World Report you can find predictions for several more that are likely to follow.
What are the common characteristics of these not-likely-to-make-it-through-2009 companies? In short they are all short of cash, they are all seriously burdened with debt, and they are all in sectors hard-hit by the economic meltdown. That all means they are unlikely to be able to refinance their way out of their problems.
The credit crunch will see to that. Who wants to lend money to companies that appear to be going nowhere but down? And in most cases if they can’t get their hands on cash, interest payments will go unpaid, and payrolls won’t be met. Their final option may be Chapter 11.
The 15 companies USNWR predicts may not survive 2009 include Rite-Aid, a major drug store chain with 100,000 employees, Claire’s Stores with 13,000 employees, Chrysler (yes, that Chrysler) with 55,000 employees and not very good prospects for the immediate future, and Dollar Thrifty Automotive Group, the car rental company. Station Casions a Las Vegas casino operator is also on the list, as is Trump Entertainment Resorts, and Realogy the largest real estate broker in the US.
In the food and entertainment industries major companies include some familiar names: theme park operator Six Flags, video rental outfit Blockbuster, Krispy Kreme donuts, Landry’s Restaurants, Sbarro pizza, and Sirius Satellite Radio.
All of these companies have serious debt and cash flow problems and have essentially been victims of the economic double-whammy – a lack of consumer demand for their products and the difficulty of refinancing bad-looking debt.
When you’re finally ready to buy stock and you’re eager to turn the economic woes of the planet to your benefit, you’re best advised to pay close attention to the advice of respected stock market analysts. But be careful to look for objective investing information you can trust.
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