August 5, 2002-- Home Textiles Today,
Bond defaults on the upswing
Weighed down by crushing debt, and hobbled by an economic slowdown, a total of 89 companies defaulted on $64 billion of bonds during the first half of the year, reported credit rating agency Moody's Investors Service.
And setting a troubling new record, during the second quarter 42 companies defaulted on a total of $42.6 billion, said Moody's.
The poor second-quarter performance prompted Moody's to revise its junk-bond default rate upward for all of this year, to a higher level of 8.8 percent from an originally forecast 7 percent, mostly due to defaults by telecommunications and non-U.S. companies.
The default rate in June hovered near 10.3 percent for the fourth month in a row after topping out at 10.7 percent in January. So far this year, the pace of corporate defaults, is running about 16 percent ahead of last year's record total of $110.2 billion in defaults.
Saks' rating confirmed after sale of PL accounts
Moody's Investors Service, a credit rating agency, has confirmed its ratings of Saks Inc., following the retailer's announcement that it will sell the majority of its private-label accounts and balances to Household International. The agreement with Household will net Saks about $300 million in cash at closing. The retailer said it will retain the account servicing and customer relations functions through a contract with Household but will no longer receive spread income on the sold receivables. Saks said it will use some of the proceeds for debt reduction and share repurchase.
The outlook for Saks remains stable, said Moody's, as it confirmed a senior implied rating of "B1" and a long-term issuer rating of "B2."
Moody's said, "The net impact of the sale will be to reduce operating income vs. expectations. Confirmation of the ratings reflects the potential for lower operating income, offset by increased financial and operating flexibility for Saks and the potential to reduce debt as a result of the portfolio sale."
The rating agency said, "Key rating factors going forward include Saks' use of the proceeds from the Household transaction, in addition to developments in its business strategies, financial strategies, financial position and operating performance."
Chief financial officers are beating chief execs out the door
In an economic moment marked by recession and corporate scandals, ceo's are looking at sharply reduced security and time on the job, but it's the cfo's who are really racing through through the revolving door, said Challenger, Gray & Christmas, an international outplacement company.
While the average ceo remains on the job about 5.25 years, cfo's are lasting only months, averaging about 1.44 years.
"Cfo's are also catching up to ceo's in terms of overall departures," said the company. There were 50 ceo exits in July and 42 cfo departures." That is the smallest gap this year."
Cfo departures increased by 16 percent in July to 42, up from 36 in the previous month. The July figure was 8 percent higher than the same month a year ago.
Through July, a total of 428 ceo's have left their jobs, while 238 cfo's have migrated out the door.
"With the extraordinary emphasis being placed on corporate accounting practices, it would not be surprising if monthly cfo departures outnumbered ceo departures at some point this year," said John Challenger, ceo,
Especially in this challenging environment, "Highly regarded cfo's will be in big demand," he said. "At the same time, they are under increased pressure to ensure that the company's financials are strong while meeting new government reporting requirements and investor scrutiny. These factors will likely combine to result in higher turnover."
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