15 companies that may not survive 2009

[Wolverines Fan]

Per Yahoo! Finance.

 

It's possible that none of the firms on this list will liquidate, or even declare Chapter 11. Some may come up with unexpected revenue or creative financing that helps avert bankruptcy, while others could be purchased in whole or in part by creditors or other investors. But one way or another, the following 15 firms will probably look a lot different a year from now than they do today:

 

1. Rite Aid (Ticker symbol: RAD; about 100,000 employees; 1-year stock-price decline: 92%). This drugstore chain tried to boost its performance by acquiring competitors Brooks and Eckerd in 2007. But there have been some nasty side effects, like a huge debt load that makes it the most leveraged drugstore chain in the U.S., according to Zacks Equity Research. That big retail investment came just as megadiscounter Wal-Mart was starting to sell prescription drugs, and consumers were starting to cut bank on spending. Management has twice lowered its outlook for 2009. Prognosis: Mounting losses, with no turnaround in sight.

 

2. Claire's Stores (Privately owned; about 18,000 employees.) Leon Black's once-renowned private-equity firm, the Apollo Group, paid $3.1 billion for this trendy teen-focused accessory store in 2007, when buyout funds were bulging. But cash flow has been negative for much of the past year and analysts believe Claire's is close to defaulting on its debt. A horrible retail outlook for 2009 offers no relief, suggesting Claire's could follow Linens 'n Things - another Apollo purchase - and declare Chapter 11, possibly shuttering all of its 3,000-plus stores.

 

3. Chrysler (Privately owned; about 55,000 employees). It's never a good sign when management insists the company is not going out of business, which is what CEO Bob Nardelli has been doing lately. Of the three Detroit automakers, Chrysler is the most endangered, with a product portfolio that's overreliant on gas-guzzling trucks and SUVs and almost totally devoid of compelling small cars. A recent deal with Fiat seems dubious, since the Italian automaker doesn't have to pony up any money, and Chrysler desperately needs cash. The company is quickly burning through $4 billion in government bailout money, and with car sales down 40 percent from recent peaks, Chrysler may be the weakling that can't cut it in tough times.

 

4. Dollar Thrifty Automotive Group (DTG; about 7,000 employees; stock down 95%). This car-rental company is a small player compared to Enterprise, Hertz, and Avis Budget. It's also more reliant on leisure travelers, and therefore more susceptible to a downturn as consumers cut spending. Dollar Thrifty is also closely tied to Chrysler, which supplies 80 percent of its fleet. Moody's predicts that if Chrysler declares Chapter 11, Dollar Thrifty would suffer deeply as well.

 

5. Realogy Corp (Privately owned; about 13,000 employees). It's the biggest real-estate brokerage firm in the country, but that's a bad thing when there are double-digit declines in both sales and prices, as there were in 2009. Realogy, which includes the Coldwell Banker, ERA, and Sotheby's franchises, also carries a high debt load, dating to its purchase by the Apollo Group in 2007 - the very moment when the housing market was starting to invert from a soaring ride into a sickening nosedive. Realogy has been trying to refinance much of its debt, prompting lawsuits. One deal was denied by a judge in December, reducing the firm's already tight wiggle room.

 

6. Station Casinos (Privately owned, about 14,000 employees). Las Vegas has already been creamed by a biblical real-estate bust, and now it may face the loss of its home-grown gambling joints, too. Station - which runs 15 casinos off the strip that cater to locals - recently failed to make a key interest payment, which is often one of the last steps before a Chapter 11 filing. For once, the house seems likely to lose.

 

7. Loehmann's Capital Corp (Privately owned; about 1,500 employees). This clothing chain has the right formula for lean times, offering women's clothing at discount prices. But the consumer pullback is hitting just about every retailer, and Loehmann's has a lot less cash to ride out a drought than competitors like Nordstrom Rack and TJ Maxx. If Loehmann's doesn't get additional financing in 2009 - a dicey proposition, given skyrocketing unemployment and plunging spending - the chain could run out of cash.

 

8. Sbarro (Privately owned; about 5,500 employees). It's not the pizza that's the problem. Many of this chain's 1,100 storefronts are in malls, which is a double whammy: Traffic is down, since consumers have put away their wallets. Sbarro can't really boost revenue by adding a breakfast or late-night menu, like other chains have done. And competitors like Domino's and Pizza Hut have less debt and stronger cash flow, which could intensify pressure on Sbarro as key debt payments come due in 2009.

 

9. Six Flags (SIX; about 30,000 employees; stock down 84%). This theme-park operator has been losing money for several years, and selling off properties to try to pay down debt and get back into the black. But the ride may end prematurely. Moody's expects cash flow to be negative in 2009, and if consumers aren't spending during the peak summer season, that could imperil the company's ability to pay debts coming due later this year and in 2010.

 

10. Blockbuster (BBI; about 60,000 employees; stock down 57%). The video-rental chain has burned cash while trying to figure out how to maximize fees without alienating customers. Its operating income has started to improve just as consumers are cutting back, even on movies. Video stores in general are under pressure as they compete with cable and Internet operators offering the same titles. A key test of Blockbuster's viability will come when two credit lines expire in August. One possible outcome, according to Valueline, is that investors take the company private and then go public again when market conditions are better.

 

11. Krispy Kreme (KKD; about 4,000 employees; stock down 50%). The donuts might be good, but Krispy Kreme overestimated Americans' appetite - and that's saying something. This chain overexpanded during the donut heyday of the 1990s - taking on a lot of debt - and now requires high volumes to meet expenses and interest payments. The company has cut costs and closed underperforming stores, but still hasn't earned an operating profit in three years. And now that consumers are cutting back on everything, such improvements may fail to offset top-line declines, leading Krispy Kreme to seek some kind of relief from lenders over the next year.

 

12. Landry's Restaurants (LNY; about 17,000 employees; stock down 66%). This restaurant chain, which operates Chart House, Rainforest Café, and other eateries, needs $400 million in new financing to finalize a buyout deal dating to last June. If lenders come through, the company should have enough cash to ride out the recession. But at least two banks have already balked, leading to downgrades of the company's debt and the prospect of a cash-flow crunch.

 

13. Sirius Satellite Radio (SIRI - parent company; about 1,000 employees; stock down 96%). The music rocks, but satellite radio has yet to be profitable, and huge contracts for performers like Howard Stern are looking unsustainable. Sirius is one of two satellite-radio services owned by parent company Sirius XM, which was formed when Sirius and XM merged last year. So far, the merger hasn't generated the savings needed to make the company profitable, and Moody's thinks there's a "high likelihood" that Sirius will fail to repay or refinance its debt in 2009. One outcome could be a takeover, at distressed prices, by other firms active in the satellite business.

 

14. Trump Entertainment Resorts Holdings (TRMP; about 9,500 employees; stock down 94%). The casino company made famous by The Donald has received several extensions on interest payments, while it tries to sell at least one of its Atlantic City properties and pay down a stack of debt. But with casino buyers scarce, competition circling, and gamblers nursing their losses from the recession, Trump Entertainment may face long odds of skirting bankruptcy.

 

15. BearingPoint (BGPT; about 16,000 employees; stock down 21%). This Virginia-based consulting firm, spun out of KPMG in 2001, is struggling to solve its own operating problems. The firm has consistently lost money, revenue has been falling, and management stopped issuing earnings guidance in 2008. Stable government contracts generate about 30 percent of the firm's business, but the firm may sell other divisions to help pay off debt. With a key interest payment due in April, management needs to hustle - or devise its own exit strategy.

[wirehairman]

13. Sirius Satellite Radio

 

 

It must have been a plot by f'ing Sirius to take XM down with it all along . . .

[geeteebee]

While I agree that all of these companies are in trouble, I believe most will "survive" 2009. The equity (what is left of it) will be lost but the companies should be able to reorganize in ch. 11 and come back out. Claire's, Loehmann's and a couple of others may indeed be liquidated.

[darin3]

1. Rite Aid - Definitely see this happening. Walgreen's and CVS's models are obviously working, while Rite-Aid's is not.

 

2. Claire's Stores - Well, the mall is just about done as it is, so the specialized shops like this will be the first to go.

 

8. Sbarro - Another mall victim, although they may be able to reposition, IMO.

 

9. Six Flags - That'd be a bit of a shock.

 

10. Blockbuster - No shock here.

 

11. Krispy Kreme - I worked for/with KK back about 10 years ago. I'd be surprised if they fell off.

 

13. Sirius Satellite Radio - No way.

[Perchoutofwater]

1. Rite Aid - no big loss here, there is a pharmacy on every corner just like banks. Seems to be way more supply than demand.

 

2. Claire's Stores - my girls have dropped a fortune on the trash in that store.

 

3. Chrysler - This company should have gone out of business a long time ago.

 

9. Six Flags - It used to be fun, when it was affordable. So many place like this kept adding and kept adding to make their parks better, but in order to do so they kept raising their ticket prices to where the average Joe can't afford to go on a regular enough basis.

 

10. Blockbuster - one word Netflix

 

11. Krispy Kreme - ok product, but expanded too much to fast and has too high of an overhead to compete with the local Vietnamese immigrants that have opened up shops with a product just as good.

 

12. Landry's Restaurants - The kids love the Rain Forest Cafe. I hate waiting for a table. I'm not a big fan of chain restaurants anyway.

 

The only one on the list that really bothers me is Sirius, and that is because they have the NFL network.

[Cunning Runt]

1. Rite Aid - Definitely see this happening. Walgreen's and CVS's models are obviously working, while Rite-Aid's is not.

 

My company has our eye on one this closely. They generally have good real estate and occupy the same size space as we do. And if they were to go down, we can probably make advantageous deals with their suddenly tenant-less landlords.

 

2. Claire's Stores - Well, the mall is just about done as it is, so the specialized shops like this will be the first to go.

 

8. Sbarro - Another mall victim, although they may be able to reposition, IMO.

 

9. Six Flags - That'd be a bit of a shock.

 

10. Blockbuster - No shock here.

 

11. Krispy Kreme - I worked for/with KK back about 10 years ago. I'd be surprised if they fell off.

 

13. Sirius Satellite Radio - No way.

[Double Agent]

Would really suck if Sirius went under. I just installed it in my Jeep and paid for a lifetime subscription.

[i_am_the_swammi]

9. Six Flags - That'd be a bit of a shock.

 

hmmm...blue-collar America makes up about 75% of their revenue. At this point, I doubt there is a lot of discretionary dollars in this segment of the market.

 

Add on the notion that Six Flags likly refinanced a lot of their real estate over the last several years (at the top of the market, no less), and I imagine they will have a tough time meeting their debt...unless someone drops in with a parachute to help.

[darin3]

9. Six Flags - That'd be a bit of a shock.

 

hmmm...blue-collar America makes up about 75% of their revenue. At this point, I doubt there is a lot of discretionary dollars in this segment of the market.

 

Add on the notion that Six Flags likly refinanced a lot of their real estate over the last several years (at the top of the market, no less), and I imagine they will have a tough time meeting their debt...unless someone drops in with a parachute to help.

I figured that even in a crappy economy, people will still be taking vacations that involve going to theme parks. And, if I recall correctly, the Six Flags parks are so much more affordable than the Disney parks, etc.

 

But yeah, sounds like they're in some serious poo-poo.

[budlitebrad]

13. Sirius Satellite Radio

 

Sirius XM Prepares Bankruptcy Filing

 

By ZACHERY KOUWE

Published: February 10, 2009

 

Sirius XM Satellite Radio has been working with advisers to prepare for a possible bankruptcy filing in a move that could put pressure on the satellite company EchoStar, which owns a substantial amount of the company’s debt.

 

Sirius has been working with the restructuring expert Joseph A. Bondi of Alvarez & Marsal and the bankruptcy lawyer Mark Thompson of Simpson, Thatcher & Bartlett to help prepare a Chapter 11 filing, people close to the company said. The documents and analysis are close to being completed and a filing could come within days, according to a person familiar with the matter.

 

Sirius, whose radio stars include the popular shock jock Howard Stern, has also been working with the investment bank Evercore Partners. Charles Ergen, who controls a satellite-television empire including the Dish Network Corporation and EchoStar, recently acquired the majority of a $300 million tranche of Sirius debt that matures next Tuesday.

[JoJoTheWebToedBoy]

11. Krispy Kreme - Went belly up in Arizona already....

 

Hate to see Sirius go, local stations are crap here.

[muck]

While I agree that all of these companies are in trouble, I believe most will "survive" 2009. The equity (what is left of it) will be lost but the companies should be able to reorganize in ch. 11 and come back out.

 

I own some Rite Aid bonds with an eye to receiving equity of a restructured company coming out of bankruptcy.

[westvirginia]

I own some Rite Aid bonds with an eye to receiving equity of a restructured company coming out of bankruptcy.

 

You guys that can do this truly amaze me. All my investments are mutual funds because as far as individual stocks go, I just don't have a clue. I understand what you do (ID a difference between what the herd is doing with its money and what you know to be true), I just don't understand the HOW.

 

The only one of these I've tumbled too was a while back, during the tech bubble, the market cap for Amazon was larger than that of Southern Co (big energy supplier down here in the southeast). That's when I knew we were headed for a doozy of a correction - when folks think a website and some leased drop-ship warehouses are worth more than the entirety of the assets of all of those power companies. But I still didn't have a clue as to whether SoCo was under/over/correctly valued, I just knew that it's relationship to Amazon was WAY overvalued. So I moved out of the tech fund I was in and got into more "blue chip" type stuff (indexed).

 

How do you spot this stuff, muck?

[darin3]

How do you spot this stuff, muck?

My guess...

[SheikYerbuti]

I'm shocked RiteAid is still in business at all. Worst customer service ever. I once had to wait for the cashier to stop fighting with her boyfriend over her cell phone before she'd ring me up. I was too to even complain, but I've never gone back inside one since. Duane Read or Walgreens only for me.

[geeteebee]

I own some Rite Aid bonds with an eye to receiving equity of a restructured company coming out of bankruptcy.

 

 

That's a great play on a lot of these companies. A lot of the debt is trading at steep discounts and if you are senior enough in the cap structure you stand a great chance of getting a real nice return.

[AtomicCEO]

1. Rite Aid

8. Sbarro

10. Blockbuster

 

What are three companies that my employer is trying to close big deals with right now

[darin3]

I'm shocked RiteAid is still in business at all. Worst customer service ever. I once had to wait for the cashier to stop fighting with her boyfriend over her cell phone before she'd ring me up. I was too to even complain, but I've never gone back inside one since. Duane Read or Walgreens only for me.

Yeah, my wife hates Rite-Aid.

 

I, for one, will miss their ice cream (at least in California, a holdover from when they were Thriftys back there). I will have my parents literally buy every half-gallon of Chocolate Malted Crunch if they go under.

[Ursa Majoris]

Hate to see Sirius go, local stations are crap here.

Whichever way you slice it, it's still just radio. The iPod and Innerwebs have conspired to put that medium on life support (except Rush). Who can stomach listening to the same 25 records every day (and the same rant from Rush)?

[Chargerz]

What?!?! No Radio Shack on that list?!?!

 

 

Unbelievable!!!!

[tazinib1]

I'm shocked RiteAid is still in business at all. Worst customer service ever. I once had to wait for the cashier to stop fighting with her boyfriend over her cell phone before she'd ring me up. I was too to even complain, but I've never gone back inside one since. Duane Read or Walgreens only for me.

 

CVS just bought up all the Longs Drug stores here so this doesn't surprise me at all.

[H8tank]

Whichever way you slice it, it's still just radio.

 

 

You know very, very little about sat radio.

 

Curious, how many Sat radios have you owned?

[wiegie]

3. Chrysler (Privately owned; about 55,000 employees). It's never a good sign when management insists the company is not going out of business, which is what CEO Bob Nardelli has been doing lately. Of the three Detroit automakers, Chrysler is the most endangered, with a product portfolio that's overreliant on gas-guzzling trucks and SUVs and almost totally devoid of compelling small cars. A recent deal with Fiat seems dubious, since the Italian automaker doesn't have to pony up any money, and Chrysler desperately needs cash. The company is quickly burning through $4 billion in government bailout money, and with car sales down 40 percent from recent peaks, Chrysler may be the weakling that can't cut it in tough times.

I just got finished participating in a panel discussion about the economy. We brought in an expert analyst on the automobile industry and he starkly said that Chrysler would not exist in one year. (He also said that GM would very very likely go through Chapter 11.)

[keggerz]

CVS just bought up all the Longs Drug stores here so this doesn't surprise me at all.

Rite Aide not to long ago bought out Eckerds...that didnt work out so well

[dmarc117]

I just got finished participating in a panel discussion about the economy. We brought in an expert analyst on the automobile industry and he starkly said that Chrysler would not exist in one year. (He also said that GM would very very likely go through Chapter 11.)

 

did you see nardelli, among other ceos, deeded his 3.4mil house to his wife

Edited February 12, 2009 by dmarc117