Going Concern Notes Keep Coming from Auditors (AIG, CTIC, COA, NYNY, TGIC)

We are still seeing many auditor notes containing a “going concern” doubt about companies and their ability to continue operations without added funding or business changes.  Last week,we outlined many household names that had received going concern notes.  Even American International Group, Inc. (NYSE: AIG) has a going concern note in the International Lease Finance Corporation unit’s annual report.   This week we have already seen another wave of these from Cell Therapeutics, Inc. (NASDAQ: CTIC), Coachmen Industries Inc. (NYSE: COA), Empire Resorts Inc. (NASDAQ: NYNY), Triad Guaranty Inc. (NASDAQ: TGIC).

American International Group’s  International Lease Finance Corp. unit leases aircraft and said its survival is in doubt as it needs to raise additional financing from its parent or from another lender.  It borrowed approximately $1.7 billion in the third quarter of 2008 from AIG Funding Inc. to repay its maturing commercial paper obligations and other general obligations as they came due.  It also drew down the maximum available on our revolving credit facilities of $6.5 billion.

Cell Therapeutics filed its annual report for 2008 and noted that its independent auditor’s report contains a “going concern” qualification.  The company has just approved an authorization to increase the number of shares so it can raise capital, and it has provided updates  for its Phase III data for Pixantrone for aggressive relapsed non-Hodgkin’s lymphoma.

Coachmen Industries  is a small cap company that manufactures recreational vehicles and system-built housing.  The management discussion and analysis noted that its annual report should be read assuming that it will continue as a going concern with recurring losses, minimal working capital, and inability to generate sufficient cash flow to meet obligations and sustain operations.

Empire Resorts said that its annual report contains a statement from its auditor, Friedman, with the dreaded going concern note.  This gambling and entertainment operator is down about 80% even after doubling off lows.

Triad Guaranty Inc. (Nasdaq: TGIC) announced this week that its audited financial statements in  the 2008 annual report included a “going concern” note in the unqualified audit opinion received from Ernst & Young.  Providing private mortgage insurance has only gotten worse.  Even the foreclosure moratorium hasn’t helped.

Again, these are not anywhere near all of the “Going Concern” notes that have been coming out.  These are just the ones from stocks which have been previously active.

Jon C. Ogg
March 25, 2009