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The blind leading the blind.

The Zero Hedge Contributor Guide
July 2009

Textron private-jet competitor Hawker Beechcraft was the latest casualty of S&P's ongoing foray into subjective default proclamations, when the rating agency decided to monkeyhammer the company from a B- to a CC rating as a result of Hawker's recent tender offer for its own debt at distressed prices.

Egan Jones calling it like it is:

Some useful legal background from Sidley Austin to prepare readers for the key issues once the insurance dominoes start falling.

According to a research report by Jim Reid of Deutsche Bank, the 5 year cumulative default rate for US High Yield names will hit 53% assuming 0 recovery rates, and 69% assuming average recoveries. In Europe things are even worse: 65% and 81% respectively.

A little noticed document Moody's released on March 24 entitled "Moody's Approach to Evaluating Distressed Exchanges", could mean accelerated defaults for troubled companies pursuing debt buybacks in the open market, and the end of this practice, as companies will have no idea if Moody's will decide they merit the unenviable designation of "Limited Default."

Even as the company scrambles to arrange a forbearance before its 5pm deadline tomorrow, rumors swirled earlier today that BoNY, the trustee on GGP's 3.625% 2009 which were supposed to mature this Monday, has served the company with a default notice. According to the notice, the company is obligated to pay past due amounts, and makes a full blown bankruptcy that much more likely.

Not really news, but at least reflects that the rating agency has a pulse and still tracks companies. The reasons for the D rating (from C) is none other than yesterday's bond default by GGP and cross-default provisions which that event triggered.

A report by Fitch just out, spreading some more doom and gloom, after the earlier news of a forbearance being sought by the mall operator which is bankrupt in all but name.

GGP RUNNING ON FUMES ON FORBEARANCES; IDR DOWNGRADED TO "RD"

General Motors, which today received a going concern opinion from its auditors who had somehow missed putting that language into the doomed company's 10-K over the past several years, was much closer to bankruptcy than the general media will have you believe. As a result of the going concern statement, the company was in dire need of an amendment to its credit facility which would prevent this from translating into a full blown event of default as per the old language.

Karl Otto Poehl is pouring some major cold water on all the optimistic talking heads saying eurozone defaults can be avoided. According to the former Bundesbank president, a default of smaller member of the euro region is only a matter of time.

Company reported Core Funds From Operations of $0.72 versus consensus of $0.86.

In an 8-K filing sneaked late on Friday after close, the highly leveraged mall operator General Growth Proprties announced that as a result a termination on February 12 of several forbearance agreements with lenders, and being unable to enter into forbearance agreements for some other loans it is in default under several of its loans. As noted in the 8-K:

After seemingly endless years of wrangling back and forth, Einhorn has finally been vindicated: Allied Capital announced in an 8K today that it was notified by its lenders of a default in its credit fa