Many of these mostly small and mid-sized companies could soon be facing their day of reckoning, with due dates looming on hundreds of billions of dollars of loans.NEW YORK — They are called zombies, companies so laden with debt that they are just stumbling by on the brink of survival, barely able to pay even the interest on their loans and often just a bad business hit away from dying off for good.
Added Miami investor Mark Spitznagel, who famously bet against stocks before the last two crashes: “The clock is ticking.” As the number of zombies has grown, so too has the potential damage if they are forced to file for bankruptcy or close their doors permanently. Companies in the AP’s analysis employ at least 130 million people in a dozen countries.
For its part, Wall Street isn’t panicking. Investors have been buying stock of some zombies and their “junk bonds,” loans rating agencies deem most at risk of default. While that may help zombies raise cash in the short term, investors pouring money into these securities and pushing up their prices could eventually face heavy losses.
These so-called repurchases allow companies to “retire” shares, or take them off the market, a way to make up for new shares often created to boost the pay and retention packages for CEOs and other top executives. SmileDirectClub went from spending a little over $1 million a year on buying its own stock before the tax cut to spending $780 million as it boosted pay packages of top executives. One former CEO got $20 million in just four years. Stock in the heavily indebted teeth-straightening company plunged before it “I was like, ‘How did this ever happen?’” said George Pettigrew, who held a tech job at the company's Nashville, Tennessee, headquarters. ”I was shocked at the amount of the debt.
“They’ve papered over the cracks but we’ve been in decline for more than a decade,” fan lobbying group head Chris Rumfitt said after a recent downpour sent water cascading from the upper stands in what spectators dubbed “Trafford Falls.” “There have been zero investments in infrastructure.”at Manchester United who has promised to inject $300 million into the business. The stock is falling anyway, down 20% so far this year to $16.25, no higher than it was a decade ago.