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2012 Prediction - Potential Bankruptcies

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January 02, 2012 – Comments (17) | RELATED TICKERS: KODK , HOV , PEIX

Here are some companies to watch in 2012.  I predict at least 3 bankruptcies from this list as lender patience starts to wear thin after several years of "extend and pretend".  

1. YRC Worldwide (YRCW)
2. Eastman Kodak (EK)
3. Hovnanian (HOV)
4. Pacific Ethanol (PEIX)
5. KV Pharmaceutical (KV-A)
6. GreenHunter Energy (GRH)  
7. First Marblehead (FMD) 
8. MPG Office Trust (MPG)  

These are some of the severely distressed companies traded on major exchanges.  Of course there are also many joke companies like Global Karaoke Network (GKNI.OB), Bill My Parents (BMPI.OB), Virtual Piggy (VPIG.OB), and Save the World Air (ZERO.OB) that will also go bankrupt.

17 Comments – Post Your Own

#1) On January 02, 2012 at 6:24 PM, thecherryz (90.44) wrote:

YRC is the no brainer bk.  It's taken longer than i thought it would...

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#2) On January 04, 2012 at 4:23 PM, kdakota630 (29.48) wrote:

I should've agreed with you about EK when I first read the blog.  Looks like they're filing tomorrow.

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#3) On January 06, 2012 at 8:34 PM, ctsolomonmd (< 20) wrote:

i am not sure about PEIX. i don't know the company but i saw on the Daily Graphs (IBD service) they have high Relative strength and high volumes since mid OCT and continue.  Some people are buying something. Their Sept sales were up 490%. Any thoughts?

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#4) On January 08, 2012 at 11:40 PM, Mega (99.96) wrote:

PEIX was struggling with ethanol subsidies in place, so I think they will probably go bankrupt now that the subsidies have expired.

http://www.nytimes.com/2012/01/02/business/energy-environment/after-three-decades-federal-tax-credit-for-ethanol-expires.html

Relative strength and volume is irrelevant when a company is on the edge of bankruptcy.  The only thing that matters is cold hard cash. 

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#5) On January 20, 2012 at 12:39 PM, Mega (99.96) wrote:

1 down, 7 to go.

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#6) On February 14, 2012 at 12:10 PM, Mega (99.96) wrote:

Energy Conversion Devices (ENER) just filed for bankruptcy and is down 80% today.  I am short shares in real life but didn't think they were close enough to bankruptcy to put them on the list.  Just shows how a weak company can collapse at any time.

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#7) On February 15, 2012 at 4:01 PM, ajm101 (31.89) wrote:

What a phenomenal post.  I hate to make requests, but if you have a list of 'maybe' BK candidates, would you be willing to make a blog post on that (or should I just look at your CAPS calls)?

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#8) On February 15, 2012 at 8:13 PM, Mega (99.96) wrote:

Thanks ajm!  I'll expand on my reasoning behind some of these troubled companies. 

1. YRC Worldwide (YRCW)
YRC has been on the edge of bankruptcy for the past few years.  They recently a huge debt for equity swap which pulled them back from the brink.  However their debt burden is still huge and they are still hemorrhaging cash.  I look for trouble towards the end of this year.

2. Eastman Kodak (EK)
Bankrupt.

3. Hovnanian (HOV)
By far the most incompetent homebuilder. Creditors have renegotiated and hung on as cash has evaporated.  They will eventually realize they have a better alternative - bankruptcy and removal of management.

4. Pacific Ethanol (PEIX)
PEIX was struggling with ethanol subsidies in place, so I think they will probably go bankrupt now that the subsidies have expired.

5. KV Pharmaceutical (KV-A)
They have so many problems.  $450M in debt, burned through $35M in the last quarter, accounting misstatements, FDA approval problems, and sales problems.  So I don't think they will be able to raise equity as easily as other biotechs.

6. GreenHunter Energy (GRH)  
They gave up on their previous business model, so I expect to see a major asset writedown.  And the equity they are raising is mostly preferred stock, so that's negative for common stock holders since they're being jumped in the capital structure.

7. First Marblehead (FMD) 
On second thought they will probably hold on through 2012. The balance sheet looks a lot better now that they deconsolidated their structured assets.  But the cash burn picture is still the same.

8. MPG Office Trust (MPG)  
Actually, I think this company has minimal value but may not be headed towards bankruptcy.  Most of their debt is in non-recourse mortgages.

And add 9. Friendfinder (FFN) to the list
An absurd (and allegedly fraudulent) IPO which actually seems designed to go bankrupt within a year of going public.  The audacity of this IPO reminds me of The Brainy Brands (TBBC.OB) which went public less than a year ago at $1.25 a share and now trades at $.03.

Some others on my radar over the longer term:

Rite Aid (RAD)
Morgans Hotel Group (MHGC) (haven't looked up whether they have corporate debt or just mortgage debt)
Parkervision (PRKR)
Liz Claiborne (LIZ)
Barnes & Noble (BKS)

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#9) On February 15, 2012 at 8:30 PM, EnigmaDude (93.18) wrote:

I'm surprised that you don't have Sears (SHLD) or Radio Shack (RSH) on your list - or maybe they will make it to 2013...

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#10) On February 15, 2012 at 10:09 PM, Mega (99.96) wrote:

I'd guess Sears has 5 years left and Radio Shack has 10+.

Companies going bankrupt usually (although not always) have negative tangible book value and negative free cash flow.

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#11) On February 16, 2012 at 4:25 PM, ajm101 (31.89) wrote:

Thanks!  I'm general happy to pick through cigar butts, so I'm not surprised to see BKS and RAD (particularly RAD), but LIZ was interesting to see.  Glad to see a few things not included there (MMR, PTRY, CQB, CQP/LNG) ... though I will not take their absence as an endorsement :)

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#12) On April 19, 2012 at 7:06 PM, Mega (99.96) wrote:

Update:

YRCW stated that although they are currently in compliance with their loan covenants, they are in danger of violating them over the next few quarters, raising the possibility of default.

HOV has been around $4 most of the last 3 years, briefly above $7.  But they were too stupid to raise capital at attractive prices, instead waiting for $2 a share. They raised $50M, which should be enough to keep the lights on for a few more months.  Late 2012 bankruptcy is still possible.

PEIX reported poor quarterly results and filed a shelf statement for issuing more shares.  If they do a large issuance, bankruptcy may be off the table in 2012.

KV-A settled with the US and state governments, paying them $29 for making false claims about unapproved drugs.

FFN reported another horrible quarter. Bankruptcy is likely in the near term.

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#13) On August 08, 2012 at 10:58 AM, Mega (99.96) wrote:

Looks like KV-A has gone bankrupt, now KVPHQ.PK .

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#14) On August 08, 2012 at 12:28 PM, Mega (99.96) wrote:

http://www.reuters.com/article/2012/08/04/us-kvpharmaceutical-bankruptcy-idUSBRE8730KM20120804

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#15) On August 09, 2012 at 7:08 PM, Mega (99.96) wrote:

http://www.kvph.com/RESTRUCTURING/PDFs/KV_Shareholder_FAQ.pdf

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#16) On August 13, 2012 at 1:22 PM, Mega (99.96) wrote:

ATPG next to fall?

http://www.smartmoney.com/news/on/?story=on-20120810-000510&cid=1244&source=TheMotleyFool

TC is certainly in much better financial position, but I still think management are complete idiots in regards to their recent bond issue. In this interest rate environment, there's no way 12.5% bonds the best option among equity, preferred shares, streaming, partnerships, etc.

http://www.leveragedloan.com/thompson-creek-bonds-price-at-par-to-yield-12-5-terms/

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#17) On August 18, 2012 at 2:43 PM, Mega (99.96) wrote:

ATPG down for the count.

http://phx.corporate-ir.net/phoenix.zhtml?c=123846&p=irol-newsArticle&ID=1726749&highlight=

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