My Fortune is junk
S&P said there are 75 potential "fallen angels" globally with rated debt of USD 174.47 billion – equivalent to the GDP of the Philippines.
The monthly fallen-angel average last year was 47, with the number increasing steadily since the second quarter of 2007, reports S&P.
The biggest number of companies poised to have their shares rated as “junk” are in the non-water utility and consumer-products industries. Close behind are financials and media-and-entertainment companies.
The latest companies on the verge of falling into speculative-grade territory include Hyundai Motor Co. and Fortune Brands, the maker of Jim Beam and Maker’s Mark bourbons.
Fortune Brands is putting on a brave face and issuing bullish statements, saying it feels "comfortable" about its liquidity position, despite the pressures of a slowing housing and consumer market.
The consumer goods company is hit full-frontal by the current economic crisis in the U.S., as Americans prove reluctant to spend money on doing-up their kitchens or changing to a new set of golf clubs.
Fortune Brands which partnered with France’s Pernod Ricard in 2005 to take over spirits company Allied Domecq for USD 14.2 billion, is heavily in debt.
Investors are worried that they might not receive a dividend pay-out as promised given Fortune Brands’ relatively high debt leverage.
Fortunately, Fortune Brands’ spirits division seems not to be suffering too much from the recession. Hence the company thinks that its cash from operations and with the stability of earnings it gets from its spirits business will allow it to pay out a dividend.
At the end of 2008, Fortune Brands had USD 1.2 billion available in its revolving credit facility, and no fixed-rate debt maturing before 2011.
But "as we look at how things lay out this year, candidly, things could be beyond our control", Fortune Brands’ Chief Financial Officer Craig Omtvedt was quoted as saying.
Like most companies today, Fortune Brands is hoping for the best and planning for the worst, as the company is not counting on an economic recovery in 2009.
