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Is IPG "Veering Toward Bankruptcy"? Um ... Probably Not.

The Business Insider has produced a listicle claiming that Interpublic is one of 10 big companies "veering toward bankruptcy." IPG -- parent of McCann Erickson, Deutsch, et al -- is listed as No. 10 because its market cap divided by its enterprise value is a mere 80 percent (don't ask).

Here's the entirety of TBI's case:

As one of the largest advertising and marketing companies in the world, IPG was slammed by the global recession.
As the company's CEO said during recent second quarter results, the downturn "is proving steeper and more lasting than expected".
Revenues have fallen double digits and the company's exposure to General Motors as its largest client hasn't helped.
BNET readers know that I'm often a doomsayer when it comes to agency finances. But this is one case where I will be very surprised if IPG gets anywhere near bankruptcy court. (AgencySpy seems to think it's overblown, too.)

First, IPG's exposure to GM -- via McCann and Deutsch -- is helping right now because both those agencies are working on GM's business (in contrast to Omnicom, where BBDO's role has recently come into doubt on Chrysler).

More importantly, companies only go bankrupt when it becomes impossible for them to pay their debts. Here's IPG's debt picture:

  • Cash, cash equivalents and marketable securities totaled $1.77 billion
  • Debt totalled of $2.04 billion
IPG just retired another $36 million of that debt. Even so, IPG still has more debt than cash. Does this mean bankruptcy? Of course not. There's only a $250 million difference between its cash and its debt right now, and its total debts aren't due until 2017. Here's IPG's debt repayment schedule:

(Click to enlarge.) As you can see, only $137 million is due this year. So IPG has on hand more cash than it immediately needs to service its debt. More importantly, remember that despite the recession IPG is still making $1.5 billion in revenues every quarter.

So, chances of IPG going bankrupt? Close to zero, all things being equal.

On the other hand, if you're an IPG employee and you haven't familiarized yourself with this slide show, you're an idiot. IPG will fire you a long time before it files Chapter 11, so you don't have to worry about it.