High-profile Hexion Inc. has met bankruptcy after years of racking up debt while paying their bills on time to avoid backlash from creditors. We had been keeping a watchful eye on Hexion Inc. for some time now, and on Apr. 1, 2019, their long-suspected date with Chapter 11 finally arrived.
Their FRISK® score, 96% accurate in identifying bankruptcy risk in public companies within a 12-month window, had flatlined at a worst-possible "1" for more than two years' time:
This Bankruptcy Case Study will chronicle what happened to sink this Ohio-based employer of 5,000-plus. Hexion Inc.'s total debt-to-assets ratio was already high at about 130% in 2013. It continued to move higher, hitting 180% in Sept. 2018, the last time it reported earnings before it declared bankruptcy. Meanwhile, the company reported persistent net losses for several years and free cash flow was consistently weak as well. Tangible net worth was deeply negative and steadily deteriorated over the last year.
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Our FRISK® score model incorporates four powerful risk inputs:
- “Merton”-type model of stock market capitalization and volatility
- Financial ratios, including those used in the Altman Z”-Score Model
- Agency ratings
- Website click pattern data from CreditRiskMonitor® subscribers, representing key credit decision-makers at nearly 40% of current Fortune 1000 companies plus thousands of other large companies worldwide
Since the start of 2017, the FRISK® score’s rate of success in capturing public company bankruptcy is 96%. In any given year, you can count on one hand the times we miss – and in those outlier cases, the circumstances deal with unusual, unforeseen events such as natural disasters and CEO fraud.
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About Bankruptcy Case Studies
CreditRiskMonitor® Bankruptcy Case Studies provide post-filing analyses of public company bankruptcies. Our case studies educate subscribers about methods they can apply to assess bankruptcy risk using our proprietary FRISK® score, robust financial database, and timely news alerts.
In nearly every case, a low FRISK® score gave our subscribers early warning of financial distress within a one-year time horizon. Our proprietary FRISK® score predicts bankruptcy risk at public companies with 96% accuracy. The score is formulated by a number of indicators including stock market capitalization and volatility, financial ratios, agency ratings, and crowdsourced behavioral data from a subscriber group that includes nearly 40% of the Fortune 1000 and thousands more worldwide.
Whether you are new to credit analysis or have decades of experience under your belt, CreditRiskMonitor® Bankruptcy Case Studies offer unique insights into the business and financial decline that precedes bankruptcy.