Moody's Investment Services, in a bid to jump ahead of the curve on corporate bankruptcies, has published a list of speculative-grade companies with the greatest risk of defaulting. The Bottom Rung is Moody's answer to those that have criticized the ratings agencies for being too slow in missing the credit problems that have plagued U.S. companies and have been responsible for the global economic downturn. The list provides ample evidence of a severe default cycle with 283 speculative-grade issuers included, compared with 157 a year ago. Of the 283 companies listed, nearly half belong to the media, automotive, retail, manufacturing and gaming industries. Moody's said that more than 23% of all U.S. speculative-grade companies are on the Bottom Rung list, compared with 9% two years ago.
Among the media companies listed as probable defaults are Sirius XM ( SIRI), Charter Communications ( CHTR), Spanish Broadcasting System ( SBSA), Radio One ( ROIA) and Univision. It comes as no surprise that General Motors ( GM), Ford ( F) and Chrysler are featured on the list as well, in addition to several other auto-related companies including American Axle & Manufacturing ( AXL), Cooper Tire & Rubber ( CTB), Lear ( LEA) and Visteon ( VC). Retailers have been especially hit hard with the drop in consumer spending, with several names already closing shops amid bankruptcy, including Circuit City, Mervyn's and KB Toys. Moody's cites Bon-Ton Stores ( BONT), Blockbuster ( BBI), Rite Aid ( RAD), Michael's Stores, Duane Reade and Harry & David, among others, as those with a speculative grade rating in danger of defaulting.
Champion Enterprises ( CHB) was among those manufacturing stocks on Moody's the Bottom Rung, while MGM Mirage ( MGM) and Harrah's Entertainment were among the gaming industry companies on the list. Several other well-recognized names were included on Moody's list, including Palm ( PALM), Eastman Kodak ( EK), Advanced Micro Devices ( AMD), Hovnanian ( HOV) and Six Flags ( SIX). Also included are airliners AMR Corp. ( AMR), UAL Corp. ( UAUA) and JetBlue Airways ( JBLU). Some of the inclusions on Moody's list have done their best to argue that bankruptcy is not a looming possibility. After completing a $530 million loan infusion from Liberty Media on Friday, Sirius XM CEO Mel Karmazin said that the transactions "resolve all of the uncertainty surrounding the company's and its subsidiaries' debt maturing in 2009." Blockbuster spokeswoman Karen Raskopf told TheStreet.com last week that the world's largest movie-rental chain does "not intend to file for bankruptcy." Additionally, Eastman Kodak told the Wall Street Journal that any speculation about whether the company is less than financially sound is "irresponsible. Kodak is financially solid, and we are taking the right actions to ensure that we remain a strong and enduring competitor," spokesman David Lanzillo said to the Journal.