.Make a Bet on Company `Death'
Commentary. David Wilson is a columnist for Bloomberg News. The opinions expressed are his own.
By David Wilson
Princeton, New Jersey, Jan. 14 (Bloomberg) -- First there was the ``celebrity deadpool,'' a game in which players select famous people that they expect to die soon and earn points when they do.
Then came the ``dot-com deadpool,'' whose rules require the participants to identify companies rather than individuals. A Web site with an obscene name best left to the imagination brought us that variation.
So why not have a ``company deadpool'' that goes beyond the dot-coms? One that would require contestants to submit a list of companies likely to file for bankruptcy -- not quite the same as death, but close enough -- during 2002?
Well, here it is. To ensure a fair competition, there are some rules to follow:
-- Lists must consist of five companies based in the U.S. and publicly traded. No more than two can be part of the information- technology industry, such as makers of computers, software and semiconductors and providers of phone and networking equipment.
-- Each company must have a market capitalization, or market value, of more than $100 million and a share price above $2 as of last week's close.
Starting With Cs
As a starting point for drafting a lineup, have a look at these 10 companies, listed in alphabetical order. For some, the possibility of a bankruptcy filing has already been raised. For others, it's only hypothetical. Either way, don't consider their appearance in this column to be a signal that they will file in the future. With that disclaimer in mind, let's proceed.
CMGI Inc. ($2.05-a-share close, $803.8 million market value at the end of last week): The Internet venture company, based in Andover, Massachusetts, has recorded more than $7 billion in net losses since fiscal 2000. Writeoffs tied to the collapse of dot- com companies are largely responsible.
Conseco Inc. ($3.32, $1.14 billion): Losses on consumer loans have hurt the life-insurance and finance company, based in Carmel, Indiana. Last week, the company said it fell short of its 72-cent- a-share target for 2001 profit. The week before, Bruce Crittenden resigned as president of the Conseco Finance unit.
Crown Cork & Seal Co. ($4.31, $541.6 million): Debt payments and asbestos claims are the main issues for the Philadelphia-based company, the biggest U.S. maker of food cans. Crown Cork has about $5.8 billion of debt, including $400 million due Feb. 4 and $350 million due Sept. 1. During the first nine months of 2001, the company paid $88 million to resolve asbestos cases.
Sales Suffering
Gateway Inc. ($6.69, $2.17 billion): Sales are falling at the second-largest direct seller of personal computers, which withdrew from Europe and Asia last year. During the fourth quarter, they dropped 15 percent rather than rising as the Poway, California- based company had forecast. Moody's Investors Service lowered Gateway's debt to junk-bond status last week.
Halliburton Co. ($10.95, $4.7 billion): The Dallas-based company, a defendant in more than 146,000 asbestos cases, denied speculation earlier this month that it had filed for bankruptcy. During the fourth quarter, juries ordered the biggest oilfield- services company to pay $155.7 million in four lawsuits tied to asbestos, a mineral that can cause cancer and lung disease.
Kmart Corp. ($3.30, $1.64 billion): Sales at stores open at least one year have fallen since September at the No. 2 discount retailer, based in Troy, Michigan. Last week, the company said it was talking with lenders about providing additional funds. Wayne Hood, an analyst at Prudential Securities, said in a report this month that a bankruptcy filing wouldn't be a surprise.
Providian Financial Corp. ($4.33, $1.23 billion): Credit-card losses at the San Francisco-based company, catering to people with less-than-perfect credit, rose above a 12 percent annual rate last year. Further losses may force Providian to repay bonds backed by card loans in advance and limit its ability to do more borrowing.
Dealing With Banks
Rite Aid Corp. ($3.01, $1.48 billion): The third-largest U.S. drugstore chain has reported losses for 15 straight quarters. Last week, the Camp Hill, Pennsylvania-based company said its loss for the quarter ended Dec. 1 widened by 6.7 percent to $112.8 million. Rite Aid refinanced $3 billion of debt last May under an agreement giving the company three more years to pay off creditors.
U.S. Industries Inc. ($2.46, $182.8 million): The Iselin, New Jersey-based maker of products including Jacuzzi whirlpools headed off a possible bankruptcy filing in July, when its banks extended a debt-repayment deadline by 16 months to Nov. 30. The company reported a $524.6 million loss for the fiscal year ended in September, rather than the profit analysts had expected.
Xerox Corp. ($9.67, $6.96 billion): The largest maker of copiers has posted five quarterly losses, totaling $951 million, during the past two years. Declining sales played a part in last year's losses at the Stamford, Connecticut-based company, which has a $7 billion bank loan coming due on Oct. 22.
Undoubtedly, there are more companies besides these 10 who might deserve a place on a ``deadpool'' list. Feel free to select any of them that meet all the criteria, rather than sticking with this lineup.
Scoring and Submitting
Each company that files for bankruptcy will be worth 1 point to 4 points, depending on the percentage of contestants that have the company on their lists.
The highest point total will go to companies that fewer than 25 percent of the participants have on their list. Companies named by 25 percent to 50 percent will be worth 3 points; those named by 50 percent to 75 percent will be worth 2 points.
The deadline for submitting lists is noon New York time on Jan. 21. Send them to dwilson@bloomberg.net and include your full name, occupation, location, e-mail address and phone number along with a brief explanation of your picks. Employees of Bloomberg LP, the parent company of Bloomberg News, aren't eligible.
There will be some kind of prize, yet to be determined, for the first-place winner or winners. Because this is a first-time pool, the number of entries will influence the selection of an appropriate award.
Look for a future column to review the overall results, including the percentage of contestants that picked those 10 companies. Until then, good luck.
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