Zombie company

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"Zombie company" is a media term for a company that needs constant bailouts in order to operate, or an indebted company that is able to repay the interest on its debts but not reduce its debts. There are several types of zombie companies. The term regained popularity in the media during 2008 for companies receiving bailouts from the U.S. Troubled Asset Relief Program (TARP). A 2002 New York Times article about Japanese companies kept on "life-support" with loans include a headline that stated, "They're Alive! They're Alive! Not!; Japan Hesitates to Put an End to Its 'Zombie' Businesses."[1]


"Zombie company" is used to describe a situation which is in an economy where a failing company continues to operate with government support, but cannot stand on its own. The term can be traced to Edward Kane's explanation of the situation of insolvent savings and loan associations in the 1980s and of Japanese banks in the early 1990s. During the financial crisis of February 2009, Newsweek Magazine gave a down arrow to banks in its conventional wisdom watch section saying, "restructure them now, before we get Japanese-style "zombie banks" stalking a lost decade."[2]

Zombie companies are businesses that, although generating cash, are unable to attract enough investment to start paying off their debts. After covering running costs, fixed costs (wages, rates, rent) they only have enough funds left to pay off the huge interest on their debts, but not the debt itself. This is why they are called "zombie companies" - they are still trading, and so half living, but not able to invest or grow to pay off their debts, which is why they are also considered half dead. Zombie firms are loss-making and have little hope of improvement in the imminent future. Therefore, they depend on banks to grant them another loan to survive, effectively putting them on never-ending life support.[3]

Research from the Institute for Turnaround, the not-for-profit and leading membership body for turnaround and transformation professionals, estimates that there may be up to 100,000 zombie companies in operation in the UK. Zombies are often at an unfair advantage over their non-zombie competitors, because of the trading advantages they receive.

See also[edit]



  1. ^ James Brooke They're Alive! They're Alive! Not!; Japan Hesitates to Put an End to Its 'Zombie' Businesses. Bank of America is a good example of a Zombie company. October 29, 2002 Business section New York Times [1]
  2. ^ Conventional Wisdom Watch Feb. 23, 2009 page 12 Newsweek Magazine
  3. ^ "Frankfurt Business Media". cfo-insight.com. Retrieved 2014-07-28. 

External links[edit]

For more information about media coverage of zombie companies in the UK: BBC Chief Economics Correspondent Hugh Pym documentary on zombie companies: http://www.bbc.co.uk/news/business-20262282 Sky News reported on a spoof film in which an Arsene Wenger impersonator raises awareness of UK zombie companies: http://web.orange.co.uk/article/news/fear_of_zombie_firm_collapse_as_rates_rise