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Strategies & Market Trends : Value Investing

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To: Madharry who wrote (13749)	1/24/2002 3:27:40 PM
From: Bob Rudd	Read Replies (1) of 78485

<<lessons to be learned from the kmart bankruptcy? seems like enron to have snowballed very quickly from a bad quarter to bankruptcy.>>Look for ratings triggers &/or a debt or operating structure that is highly exposed or vulnerable to a minor change in conditions. Kmart had exposure to surety bond market and supplier confidence. This article discusses these risks: standardandpoors.com Look for all ratings agencies to focus more attention on ratings triggers hidden in credit terms so they don't face criticism from having gone from investment grade to near default in the blink of an eye. BTW: Bankruptcy will help Kmart buy time but I'd rate it's ultimate survival doubtful. Basically bankrupty works best when a sound business model is encumbered with too much debt. With Kmart, the problem IS the business model. Squeezed between low cost producer Walmart and more upscale Target & Kohls...they haven't nailed a defensible niche. The guy running the show now may shepherd them thru BK, but don't look for him to reinvent the business model.

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