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The Meltdown shuffle

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Hanging onto the Bottom Rung

And then there's Moody's Bottom Rung. We were tipped off to this new service by a Bloomberg article, which pointed out that the "deepening recession raises the risk that [corporate] borrowers may miss interest payments."

And that's exactly what the Bottom Rung tracks: companies with debt that Moody's defines as "speculative grade" but which we all know by the oft-repeated ephithet of "sub-prime." The list is compiled based upon, among other things, Moody's debt ratings, which the company defines as their "opinion of the ability and willingness of an issuer to make timely payments on a debt instrument, such as a bond, over the life of that instrument."

Unfortunately for those of us who track the health of the tech sector, there are a lot of familiar names among the 283 companies hanging onto Moody's Bottom Rung. Among them are chip-designer and former chip-maker Advanced Micro Devices (AMD), WiMAX champion Clearwire, betting-its-life-on-the-Pre Palm, IT-backup and archive big-boy Quantum, security and management-systems veteran Unisys, and IP-backbone providers Global Crossing and Level 3 Communications.

To be sure, Moody's is not saying that these companies will default on their corporate debt. It's just saying that their positions are shaky.

And they may be wrong even about that. Bloomberg, for example, quotes a spokesman for another company on the list, Eastman Kodak, as saying "Any speculation, however informed, suggesting that Kodak is less than financially sound is irresponsible. Kodak is financially solid, and we are taking the right actions to ensure that we remain a strong and enduring competitor."

Still, being identified by Moody's as being on the Bottom Rung can't be confidence-inspiring. After all, if you're among the bottom 283, you're sharing that rung with the aforementioned General Motors - hardly company you'd like to keep during a Meltdown.

If the Meldown continues to melt, we'll be forced to lower our culinary standards to eating at Arby's and El Pollo Loco, buying cheap wine at BevMo, and vacationing at Six Flags this summer instead of Paris.

Oops, those companies are all on the Bottom Rung too. ®

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