Posted on 05/17/2010 10:12:55 PM PDT by bruinbirdman
Weeks after downgrading Greece to junk, S&P lists 65 borrowers that could be next.
For cash-rich companies and select countries, the credit crunch is long over. For other borrowers still struggling under their debts, however, it’s a long slog. In a recent report, the rating agency Standard & Poor’s counted 65 borrowers -- mostly U.S. firms -- at risk of following Greece by dropping from investment-grade into the junk bin.
Among U.S. companies S&P says could be the next “fallen angels” are student loan originator SLM, formerly called Sallie Mae, and International Lease Finance Corp., the aircraft leasing arm of beleaguered insurer AIG.
Even though many big corporations have had little trouble selling bonds, and the world’s largest debtor, the United States, is still able to pile on debt at historically low rates, the financial crisis lingers. S&P has pulled its investment-grade rating from nine issuers so far this year, turning $386 billion of bonds and loans into junk. Five of those downgrades came on April 27, when S&P grabbed headlines by lowering its ratings on Greece and four Greek banks.
Greek issuers account for six of this year’s nine “fallen angels.” Now, at least half of the 65 at-risk issuers are U.S. companies. The banking sector is especially vulnerable, S&P says, as many banks carry troubled loans tied to commercial real estate and residential construction. Among those on the list: Marshall & Ilsley, Regions Financial and Zions BanCorp.
Rating agencies have been under fire for blessing risky real-estate investments with high marks during the credit bubble, but their ratings still hold weight. A junk rating can make borrowing prohibitively expensive, because creditors demand a higher interest rate in exchange for their cash. A downgrade to junk can also have a snowball effect,
(Excerpt) Read more at forbes.com ...
erg.
Sounds more like a gigajoule to me ...
At the rate DC is spending, we will be there pretty soon. I am saving up for a National Forest.
13% inflation and 22% inflation will save you.
P
Equities that can keep pace with inflation are a hedge.
In the early 80s, Sempra (Calif. natural gas utility) was supposed to be that. Fooled ya. Calif. utility commission thought 10% - 12% interest on construction bonds or rate profit was usuary. This while inflation was running that much. How do you sell bonds that Uncle Sam pays 10% on when utility commission holds you to less?
So Sempra diversified into businesses it had no expertise (Big 5 Sporting Goods, Thrifty Drug Stores). They almost went broke and even stopped paying dividends.
This was the kind of stuff, socialist state regulators denying profit to shareholders, that led to Enron.
Anyway, now the bet is on the limited partnerships that deliver the utilities' natural resources. I like natural gas pipelines. Buffett likes railroads.
yitbos
If they sit around, dominoes will fall in all direction. If they bail these entities, more debts will be piled on U.S. gov. and Fed. Power-that-be’s are being squeezed. Their time is running out soon.
I was a Sempra employee during the era you speak of. The diversification strategy was sound but they bought the wrong horse (insider shenanigans, I’m told). Had the corporation purchased newer retail technology like Costco or Home Depot they would have been champs. Thriftys and Big Five were tired old-tech retail with oodles of debt and terrible management. Even a retail wizard would have lost big with those turkeys! Tragically, we lost around $600 million holding retail properties during what was a boom-time in consumerism! Since then Sempra has (until the recent unpleasantness) done alright by sticking to their strong suit, Energy.
But all those energy utilities suffered from the whacko Public Utilities Commission. Still do.
Thank you Sempra Emergy for buying solar energy from the very expensive sun farmland my little town leases to you so you can make electricity out of sun light and ship it from Nevada to California.
yitbos
Standard and Poor's executives should be in jail, not offer any more ratings. The company should have been put out of business.
This is the perfect time for conservatives in the GOP to go for dramatically shrinking the size and scope of government to end the deficit and debt. I hope they have a plan and I hope they plan to fight Obammy’s “bi-partisan” committee recommendations as not going far enough and not going in the right direction. For example, there are far better cuts to make in government that won’t hurt the people - like ending the Department of Education which is supposed to be local in the US and the Department of Energy which is nothing more than a coporporate welfare program...
In buying Thrifty, Pacific Enterprises had decided to trade short-term profits for long-term growth. The purchase left Pacific Enterprises short of funds, while its retail operations suffered from price wars, shoplifting, increased competition from supermarkets, and changing economics. The company also failed to find any large oil or gas deposits, and its core business suffered. To pay its stock dividends, Pacific Enterprises borrowed money and raised it by issuing stock--a move which worried some Wall Street analysts. To deal with the situation, Ukropina restructured management and temporarily cut back on oil and gas drilling. Revenue for 1990 was $6.92 billion, though the firm suffered a net loss of $43 million due to write-offs incurred by both its retail and gas and oil exploring operations.
It depends on the circumstances. A market crash is possible. Buy seeds, and plant a liberty garden.Get out that food preservation gear stored in the attic, and get it operational.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.