Just a few months ago, the credit market was exceptionally
tight. In spite of (or perhaps because of) Uncle Sam's help,
almost no company that actually needed a loan was able to get
one from a private lender at decent rates.
In fact, those that could get money at all were forced to
pay outrageous interest for the privilege.
General Electric , for instance, is paying
Berkshire Hathaway 10% on its preferred
shares, and GE had to sweeten the pot with warrants to get
its rate that low.
And GE is a profitable industrial titan -- once the
world's largest company -- which, even after its recent
downgrade, still sports an impressive AA+ debt rating. When a
company like that needed to dilute its shares to get a loan
at double-digit rates, you know the credit market was tight.
Although it was difficult and expensive, GE could borrow the
cash it needed to operate. But not everyone is so lucky.
Who's the most at risk?
The credit market remains tricky. And in a tricky
credit environment, companies that can't either roll over
their debt, or pay their debt and operate with what they
have, are in danger of going under.
But with the possible exception of law firms that handle
bankruptcies, nearly every company is feeling the pain of
this economic downturn. So how can you tell whether a company
is struggling just like everyone else -- or about to
fail?
These three signs should make you sit up and take
notice:
When you put all three of those high-risk signs together,
you get companies like these:
Company
Tangible Book Value
(in Millions)
TTM Net Income
(in Millions)
Total Debt
(in Millions)
Ford (NYSE: F)
($10,978)
($5,211)
$133,066
Ingersoll-Rand (NYSE: IR)
($5,013)
($2,967)
$4,722
Marriott International (NYSE:
MAR)
($624)
($462)
$2,666
Crown Castle International (NYSE:
CCI)
($1,538)
($197)
$6,273
Brocade Communication
Systems (Nasdaq: BRCD)
($488)
($75)
$1,139 Continued... |