No More Lifelines for Struggling Companies?

Declining bankruptcies and Chapter 11 cases might sound like a good thing, but after taking a closer look, NYU Stern Professor Ed Altman notes otherwise. Altman was quoted in Bloomberg News, stating that salvaging questionable companies can lead to fragile markets. Altman discredits the current trend of offering lifelines to such companies.

“Extend and pretend — both in the leveraged loan market and the high yield bond market — is bailing out just about anybody,” Edward Altman, a finance professor at New York University’s Stern School of Business, who created the Z-Score measure for bankruptcy risk, told TMA. “We shouldn’t have this situation where money is so easy, and have cheap rates for questionable companies.”

Read more from Bloomberg News: Troubled Companies Winning Lifelines in ‘Fragile’ Market

Ed Altman is the Max L. Heine Professor of Finance at the Stern School of Business, New York University and taught Bankruptcy and Reorganization to the current MSRM class of 2013.

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