The article said:
“Among companies with more than $1 billion in market capitalization, the study showed that No. 3 U.S. drugstore chain Rite Aid Corp was most at risk of bankruptcy in the next year. The study gave the company about a 10.5 percent chance of filing for bankruptcy in the next 12 months.
Despite a recent investment deal, satellite radio operator Sirius XM Radio Inc, was second on the study’s bankruptcy risk list, with about a 9 percent risk of filing for bankruptcy in the next year. Both Sirius and Rite Aid are struggling with heavy debt loads stemming from recent acquisitions. Sirius acquired XM Radio in 2007 while Rite Aid acquired the Brooks and Eckerd drugstore chains in the same year.”
Even other companies in the financial field such as Bank of America find themselves struggling after acquiring bankrupt companies that they mistakenly believed would become immediate “cash cows.” The major problem facing American businesses is their overleveraged position, weak sales and the lack of credit available for expansion or investments.
Many are married to expensive labor contracts and vendor agreements that are proving to be less than lucrative in the down market. Companies such as GM and Chrysler have already used Chapter 11 bankruptcy to free themselves from these agreements and reorganize their debt. As we have mentioned previously many companies which depend on discretionary spending are finding it difficult to avoid bankruptcy as consumers cutback on spending and/or switch to cheaper brands. For those companies that do use Chapter 11 bankruptcy to increase their chances of surviving this recession, bankruptcy could offer a unique opportunity to reshape and invigorate their business models.