View Full Version : Would you work for this company?
03-19-2002, 01:24 PM
Would you work for a company who is just above investment grade? Just above say BB++?
03-19-2002, 01:52 PM
For the right price, in the right town, sure. I wouldn't move to work there and I would have to be well paid for the risk of working at a place that could fail any minute.
03-19-2002, 05:53 PM
Absolutely I would work there! A lot of companies that have lower ratings may have had profitability concerns in the past, but you'll have to judge that for yourself. On the other hand, the company may just use it's capital more aggressively (and perhaps make more money for more risk).
Usually, very highly rated companies tend to be more conservative (read: boring) but this is certainly not always the case.
Wile E. Coyote
03-19-2002, 06:02 PM
Sure. If it's an insurance / financial company it will be having a heck of a time staying a float as junk, but if it's in another industry it's not something that will materially hurt the business (it won't help, but a quick scan of current company's that are classified as junk reveals a lot of decent names, that have either had a minor blip or are just building up a credit rating).
A quick search on the net will find you a rating migration matrix which will give you a good idea of the typical movements for a BB+ company over the next 1-15 years. It's pretty interesting.
Here's the rows for BBB and BB credits. (From S&P)
Average cumulative default rates (%)
Term 1 2 3 4 5 ... 7 ... 10 ... 15
BBB 0.18 0.44 0.72 1.27 1.78 ... 2.99 ... 4.34 ... 4.70
BB 1.06 3.48 6.12 8.68 10.97 .. 14.46 ... 17.73 ... 19.91
(Sorry about the formatting!)
<font size=-1>[ This Message was edited by: Len Bias on 2002-03-19 18:03 ]</font>
Dr T Non-Fan
03-19-2002, 10:47 PM
No. Well, if a lot of the money is upfront, then maybe. You'll want to get the bonus money upfront or guaranteed. Some kind of assurance should the company fail. You know the top guys got parachutes.
Check for liquidity issues.
Ratings are usually better than the reality. And late in coming. You should make sure the company is doing what it can to get back on track.
You should also check the reasons for the rating.
You also have to wonder what's up with the actuaries at a company of this grade. Are they well-respected, or are they just as maverick-y as the senior management?
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