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Three Industries to Watch for Potential Company Delinquency, Defaults, Filings

The United States is NOT in a recession…by definition, that is. Try telling that to the thousands of domestic business owners who are trying to hang on for dear life financially as the long-predicted economic recovery analysts had promised continues to sputter.

As such, the possibility, if not sheer probability, that many more businesses will go under as the economy stagnates seems on the rise once again, with or without talk of a technical recession or expansion. Keeping tabs on which businesses are in trouble can, in part, be aided by keeping an eye on industries in which they operate. While, it’s not to say that all businesses in a specific sector with notable problems are on the brink, it’s been easy for analysts to argue they’re operating in more dangerous waters than others. Reading the tea leaves, so to speak, alone is far from a catch-all for credit professionals, but it can be an important tool to getting ahead of a problem delinquency. Here are three major U.S. industries in said dangerous waters:

• Big Box Retailers: Circuit City and Borders have become the poster children for retail bankruptcies of late. The two former titans of sales careened into bankruptcy and eventual liquidation in a very public manner. Whether they just did a poor job of seeing where their core business was going trend-wise (like Borders failing to jump on the e-book bandwagon as quickly as its competition), or a matter of the big box retail concept failing to work in a down economy because of the high overhead, there are plenty of reasons the big box stores bear watching at present.

• Green Technologies: Five years ago, “green” and “sustainability” were top buzzwords in the business world. Promises of energy savings, forward-thinking and “saving the planet” were all the rage as the boom years continued. However, there was a cold slap of reality when the downturn came late last decade. Change often means up-front costs and investment, things that cash-strapped businesses or consumers don’t want to hear during a recession. Added in, the buzz on green/sustainability inadvertently invited oversaturation of activity into what are still niche industries segments, and a lot of these companies in this space simply don’t have enough market share to remain profitable without a near-term economic surge that few see as likely.

• Anything construction: Whether it’s housing or commercial real-estate companies, those reliant on public contracts or suppliers of products for such construction; they’re all facing the reality that various types of real estate suffered the biggest fall from the boom years. Additionally, they appear to be less likely to rebound quickly once economic rebound does kick into high gear. There’s still a glut of homes available for purchase and a lack of employed and able buyers, office/retail vacancies have been sky high in most major markets and investment in government-sponsored jobs is slowing dramatically with the debates over fiscal discipline and deficit reductions through the nation.