Who's at risk of default?

By Conor Clarke

Moody's has a list of 283 speculative-grade companies with weak liquidity and a high risk of default. There were 157 such companies a year ago. (23% of all spec-grade companies make the new list, compared with 9% two years ago.) The report on the Moody's site is here (registration required) and the Huffington Post has the pages here. I'll also stick the file at the end of this post.

So, who makes the list? 

Ranked by industry, media is the big champion: I count 46 media companies on the list. (And this is without the help of companies like Tribune and Young Broadcasting, who don't make the list ... because they've already defaulted.) And who says newspapers have a monopoly on media woes? New additions to the list include T.V. companies Univision, Newport Television, and Allbritton Communications (which also owns Politico).

There is a close race for second between the automotive and retail industries, and, it seems to me, a surprisingly high number of fast food restaurants -- like Arby's, Sbarro, Krispy Kreme (and El Pollo Loco). Others that might be of interest include Blockbuster, Duane Reade, Eastman Kodak, Eddie Bauer, Rite Aid, Reader's Digest and Six Flags. Here's the breakdown:

default risk by industry.jpg

The worry with any such list, however, is that it tars all its members with the same brush. A list of 283 contains huge variation in default risk, and risk can be self-fulfilling: the knowledge that a particular company is having liquidity trouble makes its liquidity trouble worse. If I were in charge at Allbritton, I wouldn't be happy about sitting on the same list as General Motors.

Full Moody's report:
bottom rung report.pdf 

This article available online at:

http://www.theatlantic.com/politics/archive/2009/03/whos-at-risk-of-default/1393/