Zombie Companies’ Growth and Expansion: Should This Be a Surprise?

On June 7, 2024, Bernard Condon, an Associated Press reporter, authored the article, “Zombies: Ranks of world’s most debt-hobbled companies are soaring, and not all will survive.”

Condon’s article details zombie companies (Zs) so laden with debt that they are on the brink of collapse, barely able to pay even the interest on their loans. They are, essentially, just one bad day away from going out of business. But should these recent events come as a surprise?

According to the dictionary, a zombie is a dead person brought back to life. That is the definition of a good restructuring. It is looking into the abyss, developing and executing a plan, and hoping never to be on the brink again.

For most Zs, what was once proper planning, vision and execution, gave way to failure. Look no farther than Rite Aid, Smile Direct Club, Toys “R” Us, and others. Also disturbing are the recent events involving Prospect Medical Holdings and Steward Health Care System, which are discussed below.

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This article was co-authored by Robert D. Katz, a Managing Director in EisnerAmper LLP’s Financial Advisory Services Group.

Copyright 2024 ABL Advisor

Originally published by ABL Advisor on July 25, 2024.

Source: abladvisor.com