Bankruptcy expert sees defense, media as vulnerable in 2013

By Nick Brown

NEW YORK (Reuters) - Mid-market defense contractors as well as media and coal companies could be at risk of tumbling into bankruptcy in 2013, credit market guru and New York University professor Edward Altman said on Thursday.

With the U.S. government mulling significant cuts to the defense budget, smaller companies that contract with the government for defense projects could suffer, Altman told a group of restructuring professionals at his 12th annual Corporate & Sovereign Credit Market Outlook luncheon.

Altman is known for establishing the so-called "Z-score" method of predicting a company's bankruptcy risk.

He did not name defense companies he thinks could be bankruptcy candidates, but he said the problems likely would hit smaller firms and that larger ones are not in danger.

In an interview with Reuters after his speech, Altman said the coal industry is expected to continue to suffer as natural gas remains a cheaper energy alternative. One major player in that industry - Patriot Coal Corp (PCXCQ.PK) - filed for bankruptcy last year, blaming in part the glut of natural gas.

Altman said media companies will also face challenges as specialized online media outlets gain strength.

"The Internet media world is getting very crowded," Altman said in the interview.

Corporate bankruptcies have been less common in recent years as lenders and governments have been more willing to lend to struggling companies.

In his presentation, Altman said he expects that to change over the next several years, but not necessarily in 2013.

Also at the event, sponsored by bankruptcy trade group the Turnaround Management Association, restructuring experts offered varying outlooks on the business side of the field.

Flip Huffard, a managing director at The Blackstone Group (BX), said many companies that refinanced or extended debt maturities several years ago may not be in a position to do so again.

"These are companies that are getting to the end of the line, and actually need to fix their capital structures," Huffard said. "They're done with Band-Aids."

(Reporting by Nick Brown; Editing by Phil Berlowitz)

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