Large Increase in Number of Companies At Risk of Defaulting On Their Debt

The August 19, 2008 issue of The American Bankruptcy Institute Update reviewed comments from credit rating agencies which indicates that the number of companies most at risk of defaulting on their debt has soared this summer due to a decrease in consumer spending and the on-going credit crisis.

• In a recent report, Moody's Investors Service stated that 63 companies had the weakest liquidity rating and were in danger of defaulting on their debt. This is an increase of almost 19% in just one month.
• Recently, Standard & Poors listed 156 companies as most at risk of default...its highest total since May 2003. S&P went on to state that these companies are at risk of defaulting of $352 billion which is three times the last month's total.
• S&P also reported that as of August 11th, 52 companies have defaulted on debt worth $41 billion.

The financial community expects the current credit crisis to continue for some period of time. It is expected that the number of companies which will actually default on debt to increase substantially in the coming months as they struggle with low liquidity. It should be noted that many of these companies are not using one of their best assets, their accounts receivable, as a source of working capital as they face default. Many companies could reduce the risk of defaulting on their debt by selling their accounts receivables.

Healthcare companies can also benefit from a specialized form of A/R funding called MAR Funding. MAR Funding enables healthcare companies to sell their third party claims and receive cash right away instead of waiting 30, 60 or 90 days for reimbursement.