On Sub-primeitis (or the sub-prime ate my homework)!

November 20, 2007

doghomeworkk.jpegLast week was unusually busy in terms of filings, with the bulk of non-accelerated filers whose quarter ended Sept. 30, required to get their Qs in by Wednesday (the deadline for accelerated filers was Nov. 9). So it seemed like a good time to see just how many companies, and, perhaps more importantly, which ones, have come down with a case of sub-primeitis.

During the first two weeks of November, there were 1,227 filings that mentioned the word sub-prime in one way or the other. That’s a more than four-fold increase over the same period last year, when only 296 filings mentioned the word. It’s also nearly double the number of companies that mentioned sub-prime during the last Q filing deadline in early August. Last year, and even last quarter, the bulk were made by real estate companies or those in the mortgage business. But this time around, it’s an entirely different story.

Just look at the 10-Q that Vonage (VG) filed last Wednesday, which notes that problems in the sub-prime market may have a negative impact on their liquidity because “in light of the uncertainties in the sub-prime mortgage market, these alternatives may not be capable of being accomplished on a timely basis or on satisfactory terms, if at all. Echostar (DISH), also dipped into the sub-prime excuse pool, noting that “increased mortgage defaults as a result of subprime lending practices and increasing oil prices, may impact some of our markets” in the Q it filed last week. MRU Holdings (UNCL), best known as My Rich Uncle, the student loan company, noted in its Q that because of the sub-prime crisis “the cost of our credit facilities has increased to reflect current market conditions”.

To be fair, financial companies and housing companies still make up the bulk of the filings. And most of the disclosures are limited to “risk factors” where companies typically disclose anything that can potentially go wrong. But at a growing number of companies, the sub-prime mess seems to be turning into the latest excuse.

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