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Bankruptcy Avalanche Is Not Over Yet
-- March 28, 2003
The threat of large-scale bankruptcies of U.S. companies is still a ticking time bomb for the economy. The number of bankruptcies may have shrunk in the first quarter, but we've identified several companies that are set to explode in the coming months. Plus, the size of the failing companies, more than the quantity, is what will rock the economy to its core.
American Airlines and HealthSouth are just two of the large companies we expect may file for Chapter 11 bankruptcy protection over the next few months. At present, we have about a dozen others on "bankruptcy watch." Here are just a few:
Then, there's Gateway, CKE Restaurants, Earthlink, Nortel Networks, Primedia, and Silicon Graphics. These companies are drowning under massive debts ... experiencing catastrophic earnings losses ... suffering from dwindling or nonexistent cash flow ... or a combination of these problems. Each one of them is a candidate for bankruptcy, in our view.
- Sprint PCS has $4 BILLION in debt coming due within a year and less than one-tenth of that -- or just $400 million -- in cash to cover it.
- Rite Aide, which is drowning under $3.8 billion of debt, has only $237 million in cash on hand.
- Lucent, with $3.4 billion in debt and annual interest expenses of more than $378 million, doesn't even generate any cash.
All of them are very large companies, and their failures will hit the economy like a ton of bricks.
Company Bankruptcies Down in 1st Quarter