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SandDance: Tracking Bankruptcy Risk Using Predictive Analytics (Video)

Summary

Bankruptcy risk is becoming a national narrative; regardless of sector but especially in energy and even more so especially in oil and natural gas.

Bankruptcy has become this year’s financial McCarthyism.

But is bankruptcy really all that predictable? Is bankruptcy really that easy to spot?

We don’t think it is; But, in saying that, we also don’t think that bankruptcy risk and bankruptcy itself are completely unpredictable.

In an effort to help provide something of a structured, repeatable, scalable process for identifying bankruptcy risk that we present a “Part 2” to our 12-Month Default Probability series.

Bankruptcy risk is becoming a national narrative; regardless of sector but especially in energy and even more so especially in oil and natural gas. It seems that with each new day yet another major financial publication is updating us with speculative commentary on "who's next", which company is seeing its balance sheet weaken most, which company is the market showing a disdain for. Bankruptcy has become this year's financial McCarthyism.

But is bankruptcy really all that predictable? Is bankruptcy really that easy to spot? Sure, there are traditional identifiers of bankruptcy risk - such as high levels of leverage, precipitously falling revenues and/or EBITDA, an equity price plumbing the lows (for those that prefer to track technical metrics). But is the single most sophisticated area of finance - stressed equity - really this easy to silo into identification columns? We don't think it is.

But, in saying that, we also don't...


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