Board-Ansicht
Mix-Ansicht- How Do You Repossess 'Intangibles'! - Cosa, 26.08.2002, 11:30
How Do You Repossess 'Intangibles'!
-->Hier wieder eine Kolumne von P. Kasriel.....
<font size="4"> How Do You Repossess"Intangibles"!</font>
Today it is being reported in The Wall Street Journal that AOL Time Warner may have to write-off
some of its $80.1 billion of goodwill. Earlier in the year, AOL wrote off $54.2 billion of goodwill. If it
were not for goodwill and $45.1 billion of other"intangible" assets, AOL would have a negative
book value of $27.5 billion, according to figures presented in The Journal article. I'm not
suggesting that AOL is in danger of defaulting on its debt. Like Jeffrey Skilling, I'm not an
accountant. But for other intangible-rich corporations that have or will go under, how does a
creditor repossess intangible assets? Perhaps more to the point, what does a creditor recover when
a corporation, long on intangibles and short on tangibles, defaults?
Much to its creditors' detriment, Enron sought to limit its tangible assets on its balance sheet.
Enron was a model"new economy" corporation. And because Enron was held up to be a model
(and, as it turns out, Enron held up stockholders, creditors, and employees), it would be
reasonable to assume that others tried to copy Enron's strategy in this corporate"best practices"
world. Chart 1 shows nonfinancial corporate credit market debt outstanding as a percent of assets
- combined tangible and financial. As this ratio started moving up in the late 1990s toward its
postwar record high set in 1991, we were told to curb our anxieties about default and
principal-recovery issues because, in this"new economy," more of a corporation's value was
embodied in its intangible assets than"old economy" bricks, mortar, and drill presses. It's all
about knowledge and information, man! Also, we were told that there would be no credit problems
because, as shown in Chart 2, debt-service ratios for nonfinancial corporations, although rising,
were still way below their early 1990s record highs.
Chart 1
Well, now that the number and value of corporate bond defaults have left those of the dark
days of 1990 and 1991 in the dust, perhaps we were correct to worry about all of the debt that
was fueling the biggest stock market bubble in the history of this country. And, perhaps we
were correct to worry about the lack of collateral for creditors to repossess if something did
go wrong. In a February 2002 study,"Default & Recovery Rates of Corporate Bond Issuers,"
Moody's calculates that the average recovery rate of principal in 2001 on defaulted
speculative-grade bonds was 21 cents on the dollar - a record low for the period 1982-2001.
The previous low was 27 cents in 1990. The average recovery rate for the period was 42
cents on the dollar. Maybe, just maybe, this new low recovery rate has something to do with
the lack of tangible collateral to repossess.
Just as we were told not to worry about high corporate debt-to-asset ratios of the late 1990s,
we are being told to chill out about high household debt-to-asset ratios and high household
debt-service burdens, as shown in Chart 3. If the unemployment rate starts rising again, as I
expect it will in the coming months, then household income is going to weaken. My bet is
household defaults will skyrocket just as corporate defaults have. Although households do
have a fair amount of tangible assets in the form of houses and SUVs, they don't have much
equity in them. When all of the creditors go sell off these assets at the same time, they will
find that their collateral, tangible that it is, is not as valuable as they hoped.
Chart 3
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Quelle: Northerntrust
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