Numbers don't lie. You can be optimistic, have a happy outlook, and do lots of other things that try to paint an upbeat picture. But, at the end of the day, if a company runs out of money, it has to file for bankruptcy protection.
A Chapter 11 filing, however, comes with some level of hope. Filing essentially staves off the death process and allows a company to negotiate with its creditors in order to see if they'll take equity instead of cash or even forgive some debt to keep a company afloat.
It's a risky process because it takes some control out of the company's hands and gives it to the bankruptcy court. In some cases, even when a deal with creditors has been negotiated, one debtor objecting to the deal can scuttle it.
Related: Another drugstore chain files for Chapter 11 bankruptcy
In addition, the bankruptcy court might be sympathetic to customers who had orders not filled or find another reason that pushes a company from reorganization to Chapter 7 bankruptcy liquidation.
As a company readies a Chapter 11 bankruptcy filing, it often keeps its cards close to the vest. That does not mean that there's no way to not what companies might be preparing to file.
Debtwire, a service of ION Analytics, has a formula, the LTD score, which "offers a precise outlook on stress, distress, or restructuring likelihood for corporate issuers," the company shared.
Developed by Debtwire’s team of data scientists, engineers, and writers, the LTD score algorithm leverages 20+ inputs from over 30 years of proprietary data. The LTD has a long history of predicting Chapter 11 filings, and it has bad news for three leading communications and media companies.
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Debtwire predicts Chapter 11 bankruptcy filings
"A company with a score of 99 is one that we expect to file or enter into an out-of-court restructuring imminently. The score doesn't predict the exact date or time before filing, but it's meant to show that we consider it only a matter of time," according to Sarah Foss, Debtwire's Global Head of Legal, Restructuring.
Five companies scored a 99 on the company's May report, and three of them are in the same sector.
"Three of the companies at the top of Debtwire’s Likely to Distress (LTD) rankings – CommScope Holdings (COMM) , Cumulus Media (CMLS) , and EchoStar Group (SATS) – are in the communications, media & entertainment sector, which has seen a spike in restructuring activity in the last year and a half," Foss shared.
Debtwire research shows that 19 companies in the media and telecommunications space sought bankruptcy protection in U.S. courts in 2023, while another five have filed for bankruptcy protection so far this year.
"The LTD Score provides a precise outlook on the likelihood of stress, distress, or restructuring for corporate issuers," Debtwire added.
A look at the impacted companies
Perhaps the best-known brand on the list, Cumulus Media operates radio stations and syndicated radio content.
"Cumulus Media is an audio-first media company delivering premium content to over a quarter billion people every month — wherever and whenever they want it. Cumulus Media engages listeners with high-quality local programming through 401 owned-and-operated radio stations across 85 markets," the company shared on its website.
It also offers syndicated programming to over 9,800 affiliated stations through Westwood One, the largest audio network in America, and Cumulus owns a large podcast network.
It derives much of its revenue from advertising, which has been weak of late. The stock closed May 2 at $2.75, down from as high as $15.67 in May 2022 and down 48.3% this year.
EchoStar offers satellite programming and now owns the Dish Network satellite television brand as well as Hughesnet satellite internet service. The company also operates the Boost Mobile phone service.
Shares have fallen from nearly $50 in 2017 to $17.44 as of May 3.
CommScope Holding, the least-known brand on this list, works in the background, so it's not a company that most people will know. Even its own description of itself does not make it all that clear what it does.
More bankruptcy:
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- Historic grocery chain files for Chapter 11 bankruptcy
"At CommScope we push the boundaries of communications technology to create the world’s most advanced networks. We design, manufacture, install, and support the hardware infrastructure and software intelligence that enable our digital society to interact and thrive. Working with customers, we advance broadband, enterprise, and wireless networks to power progress and create lasting connections," it posted on its website.
The business reported a huge loss in 2023 as sales fell 23.1%. The shares have fallen from $42 in 2017 to 99 cents as of May 3.
