Moody's "Bottom Rung" List Of 283 Companies At Risk Of Default

On Tuesday, Moody's Investors Service published a new list called the Bottom Rung, which details which companies the ratings agency says are most likely to default on their debts. It estimates that about 45% of the companies on the list will default on debt over the next year. Defaulting on debt doesn't necessarily mean bankruptcy - it can also include missing a debt payment.

According to the Wall Street Journal:

With 283 companies, the list holds nearly every sector of the economy. The dominant industries on this at-risk list include much of the U.S. auto industry, the casino sector, and many retail chains, newspapers and broadcast-TV and radio-station networks. Energy firms, airlines and restaurant chains appear often.

The Moody's Corp. unit rates debt of 2,073 companies, sizing up each one's ability to pay what it owes. The Bottom Rung, which Moody's will update monthly, represents roughly the riskiest 15% of all companies it tracks.

Bloomberg says:

Eastman Kodak Co. and casino operator MGM Mirage are among 283 U.S. companies at the highest risk of default, according to Moody's Investors Service.

The number of speculative-grade issuers on the "Bottom Rung" list compiled by Moody's has almost doubled from 157 a year earlier, the New York-based ratings company said in report published today.

According to Minyanville, Tuesday's list was an attempt by Moody's to reclaim some of its former glory, which was lost when it failed to spot the banking collapse.

Moody's, along with fellow ratings agencies Standard and Poor's (MHP) and Fitch Ratings Services, played a major role in the recent financial market meltdown. Conflicts of interest with debt issuers, faulty models and lax internal controls all led to credit ratings that were unreliable at best, deceptive at worst.

Unfortunately for Moody's, gone are the days when investors valued haphazard assessments of credit risk. The Bottom Rung, while generating ample work for Moody's customer-complaints department, isn't likely to reclaim any of the company's lost glory.

According to 24/7 Wall Street, Chrysler and Rite Aid "are clearly beyond help," but others, including AMR, Level 3 and AMD have relatively strong balance sheets. Still, by Moody's publishing this list, it could hurt these companies' chances of surviving the downturn, the site said.

Bottom Rung March 09 - Get more Business Documents

Comments

[nodonjuan]

02:36 PM on 03/12/2009

Krispy Kreme? Arby's? MGM Mirage? Not Golden Nugget............

[jportnick]

10:06 AM on 03/11/2009

I really hope Eddie Bauer doesn't go under.

[Solja]

02:06 PM on 03/12/2009

And for God's sake, save Krispy Kreme! Go buy donuts! I can't live without them!

[Intelligentia]

08:08 AM on 03/11/2009

These companies are failing for one reason and one reason only: Hiring unqualified people to fill important positions based on race, sex, and religion! No accountability and no oversight, as long as they are covering for each others incompetence, fraud and abuse, they keep dumbing down the managerial pool. Each pool is less incompetent that the last pool, as they hire someone who look like them, less intelligent than they. Basically, one-eye men hired blind men or near-sighted one-eyed men. Guess who is the culprit? You guessed it! They disgust me everytime I see them on television, without a clue about how to extricate themselves from the mess they created. The worst part about it is we are handing billions to the same idiots who messed it up in the first place. They arrogantly call themselves experts. At what? I have no clue. Their front on television channels pump them up and give them nicknames such as gurus, experts, wunderkids, etc. The American public are distracted by the hype. Suddenly the bottom falls out and we think that handing them more money would fix it. No! The system is rotten to the core. It will take more than a miracle. As long as we keep perpetrating the fraud on the measure of intelligence, we will keep making the same mistakes over and over. They will just fake it with the money handed to them until the next round of mass fraud, waste and abuse. God help us!

[apingebrig]

02:49 PM on 03/11/2009

Blaming minorities for the reason why companies are failing...

... and the Republicans wonder why they're going extinct!

[armadillo]

06:10 PM on 03/11/2009

Put a paper bag to your mouth and breath in and out. Get some rest.

[shelsay]

12:15 AM on 03/11/2009

i'm curious as to why AIG isn't on the list. I understand they're entire business is not getting bailed out, but if the entire org is doing well enough to stay off of this list, why do they keep getting government money?

[notAMoron]

11:34 AM on 03/11/2009

I believe the list is based on who has Junk Bond status from Moody's. AIG is getting bailed out and keeps getting bailed out because they placed their bets in such a way that every time their credit rating drops, their required to pay out billions on their bets (which would lower their capital, lowering their credit rating further, requiring additional payments).

So yes they deserve to be on this list because they have bet their entire company on not going below AAA credit rating. They got slammed when their credit rating was droped to AA. So AIG being at AAA would be the same as one of these companies on the list being at Caa. AIG being at AA, which is where they are currently, would be the same as one of these companies defaulting.

[1differentdrummer]

08:33 PM on 03/10/2009

Dole? After what they have done to Hawaii, who deserves to crater any more than they do?

[Ares1]

08:32 PM on 03/10/2009

I hope AMR can still maintain a strong balance sheet after ordering nearly 100 Boeing 787-9 aircraft.

[drymartini1]

09:28 PM on 03/10/2009

Most airline companies lease their aircrafts. They structure the leases on their planes with terms that make it appear as "operating lease" instead of "capital lease".

Since those leases are structured as operating leases, they bypass the balance sheet completely and just go to the footnotes. aka we have Off Balance sheet financing.

first thing you do to analyse an airline company especially (for any company for that matter), look in the footnotes to see their operating lease minimum lease payments. thats their debt which they purposefuly bypassed it around balance sheet.

that will give you the true picture of that company's debt structure.

[skymuffin]

10:37 PM on 03/10/2009

That's really interesting. Didn't know that.

[whoknew---]

07:27 PM on 03/10/2009

Interesting stuff...

Actually I didn't know that Reader's Digest was still around....

My mom used to subscribe years ago....

[spaghettidinner]

07:03 PM on 03/10/2009

I see Kodak listed there. Isn't it related to the fact that digital cameras took over and they simply sat on their hands. I think maybe its time for some businesses to evolve or go away. Survival of the fittest.

[gratonite]

07:36 PM on 03/10/2009

My cursed Culligan system is proprietary--who's gonna fix that thing for me when it chokes every 6 months now?

[anonimost]

09:29 PM on 03/10/2009

you funny gratonite

[SpaghettyIrish]

09:58 PM on 03/10/2009

It's not just that. They developed digital cameras, but digital images don't need contact paper or film, or developer. Kodak's business model was based on buggy whips, for all intents and purposes. Even if they kept up with the tech, their old profit centers were going to dry up anyway.

[Slapmewhenitsover]

06:12 PM on 03/10/2009

Most of the notable names on the list should have been gone long ago. Some are a surprise but actually should not be considering that we know the management of most large companies in the US loot the capital reserves on a regular basis as if it is some mine's bigger than yours childhood game.

If these companies fail, it is from their own GREED and nothing else.

Companies in other countries are surviving this mess because the owners have some INTEGRITY and do not throw their employees into the street the moment they see their stock price or profit drop.

Please do not argue this is not happening when a company like Microsoft has three individuals who hold $88 billion in personal wealth but have no problem laying off the workers who helped them gain that wealth.

With business models based solely upon greed, what else should we expect.

[vedder110]

09:59 PM on 03/10/2009

Just like to point out that those layoffs were the first large-scale layoffs in Microsoft's entire history.

[ccairnes]

02:59 PM on 03/12/2009

maybe so, but it was in the 90's that they cut back on really hiring people and put on a lot of temps they did give benefits to.

[Diana]

05:31 PM on 03/10/2009

Problem is, if Moody is right, it's only because it got lucky. I

It's important to keep in mind that the ratings services themselves have been completely corrupted by the same system that caused the financial crisis in the first place. You absolutely cannot trust them!

[dididangerlove]

08:07 PM on 03/10/2009

I agree. When I read the headline my immediate thought was, it's Moody's - who knows what's really going on...

[HamletsMill]

09:39 PM on 03/10/2009

Exactly. More to the point, is Moody's itself on the list?

[rchsod]

04:14 PM on 03/10/2009

arby`s? i just read where arby`s management is going to work on wendy`s image and menu to revive the brand because they turned around arby`s

[KillTheMessenger]

04:58 PM on 03/10/2009

You mean the food is now FDA approved?

[past-caring]

03:29 PM on 03/10/2009

"Tuesday's list was an attempt by Moody's to reclaim some of its former glory, which was lost when it failed to spot the banking collapse."

________________

Or the part Moody's played in giving high ratings to financial services firms that were, in fact, unwarranted and false as well as those directly related to the subprime mortgage nightmare.

[slaxx]

04:51 PM on 03/10/2009

yes yes.

[past-caring]

03:23 PM on 03/10/2009

To any and all trolls out there; I cannot wait to see how you can blame this on Obama.

[randman2009]

10:55 PM on 03/10/2009

So you're not happy about the Obama recession?

[past-caring]

11:43 PM on 03/10/2009

Ha! No ;}

[drymartini1]

03:15 PM on 03/10/2009

When i started investing, read a few good articles that basically said the following:

1) better stick to index funds.
2) If you are going to pick stocks, try following the profitable industries rather than some stellar company in a crappy industry.

aka. everyone should google and read up on Michael Porter's work. the famous "five forces that shape an industry" aka Porters "five forces". very helpful in picking out long term good industries and crappy industries.

3) You wont lose much if you avoid the following industry sectors.
Airlines
Auto
Steel
Retail
Restaurants

Sure there have been a few awesome companies in these crappy industries but you are swimming against the stream. btw, you would arrive at same conclusion following Porter's five factors there.

4) nothing is guaranteed. i still have lost a lot of money in current downturn. live and learn i guess.

[skymuffin]

10:41 PM on 03/10/2009

Listen to the Bogleheads and stick with index funds. More zen. Less stress.

[Laura Minnick]

03:12 PM on 03/10/2009

Crap. Half of my medical records are with Rite Aid.

[Solja]

02:12 PM on 03/12/2009

I told my mom over a month ago that Rite-Aid is going to go out of business because they keep on building new stores and none of them have any customers in them.