Ten Big Companies That Are Veering Toward Bankruptcy

Posted Sep 18, 2009 12:21pm EDT by Vincent Fernando and Joe Weisenthal in Investing, Media, Products and Trends, Recession

Related: AMD, LVS, S, M, GT, MYL, HTZ

From The Business Insider, Sept. 18, 2009:

Despite a few green shoots in the economy and a rocketing stock market, many large companies are still struggling to avoid bankruptcy.

A new report by Audit Integrity identifies some high-profile names "that have the highest probability of declaring bankruptcy among publicly traded firms."

Which companies appear the worst off? We took the list and removed any company with a market cap under $3 billion. We then ranked the remaining names by a simple measure of the market's perceived bankruptcy risk - Market Cap (MC) divided by Enterprise Value (EV). The less MC vs. EV, the less residual shareholders' value (above what debt holders can claim) the market is pricing-in for the company. Thus a lower MC/EV means the market thinks the company is more likely to go bankrupt.

1. Hertz

When you have tons of debt financing your fleet of cars, falling rental demand really hurts.

While the company raised new capital in May for some breathing room, Fitch and Moody’s actually cut their ratings for the company in July.

Ignoring the downgrade, shares kept rallying and are now at over five times the March $2 low. Best of luck.

Market Cap (MC)/Enterprise Value (EV) = 32%

2. Textron

What a tough time to be selling business jets.

Textron wrote down $2.3 billion its backlog this year after it canceled a new jet design, and demand for its other aircraft-related offerings has plummeted.

Shareholders may be heartened by the company’s ability to push back some debt maturities lately, but deteriorating credit quality at the company’s leasing arm makes the outlook uncertain at best.

MC/EV=39%

3. Sprint Nextel

Sprint Nextel is bleeding customers, and could lose as many as 4.4 million net post-paid subscribers this year.

This is a huge problem when you have large amounts of maturing debt over the next few years.

A recent Deutsche Telekom acquisition rumor offered some hope, but that appears to have faded. Facing a difficult road ahead on its own, the company better keep its lawyers on speed-dial.

MC/EV=41%

4. Macy's

Does anyone even shop at department stores anymore?

Same store sales will likely keep falling at Macy’s right through 2009. With $2.4 billion of maturing debt over the next five years, the company is trying to cut costs, and has already reduced its dividend.

Hopefully the US consumer will bounce back soon, and actually want to shop at Macy's.

MC/EV=47%

5. Mylan

In a classic case of management empire building, Mylan overpaid big time when it bought Merck’s generic business back in 2007 and is now stuck with $5 billion of long-term debt as a result.

From 2007 – 2008, the company lost over $1.3 billion very much due to goodwill write-downs.

While the company could earn $300 million this year, they’ll have to earn far more than that in the future to make their debt manageable.

MC/EV=51%

6. Goodyear

Demand for Goodyear tires has sunk, and the company is saddled with massive debt and pension obligations.

It doesn’t help that The United Steelworkers union prevents the company from proper cost control by forcing factories to stay open.

Shareholders have to wonder how much value will be left of the company after bondholders and the union members have their way.

MC/EV=53%

7. CBS

Weak advertising and falling license fees have sent CBS's earnings off a cliff in 2009.

If they remain depressed for too long, the company could have trouble refinancing $3.2 billion of debt coming due over the next five years.

It will really come down to whether or not CBS’s earnings collapse is merely cyclical, or the result of structural trend whereby traditional TV is dying.

As a business blog, we can't help but feel partly guilty here.

MC/EV=55%

8. Advanced Micro Devices

When will AMD actually make money again? The question is becoming more important by the day since it carries over $5 billion in long-term debt.

After losing almost $3 billion from 2007 – 2008, analysts expect the company to lose more money in 2009 and 2010.

While the shares rallied from their February $2 low, they still appear stuck in a long-term down trend from $40 highs way back in 2006.

MC/EV=55%

9. Las Vegas Sands

Las Vegas Sands over-expanded and over-levered in the last few years and now has over $10 billion in debt to deal with.

Despite jumping 13 times from their March low, Las Vegas Sands shares still face an uphill battle.

Conditions in Las Vegas are horrible, Asian expansion isn’t enough, and if this lasts too long then LVS will end up in bankruptcy court looking like it bit off more than it can chew.

MC/EV=60%

10. Interpublic Group

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.

MC/EV=80%

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Taiwanese man 'too old' for jail

A Taiwanese jail has reportedly turned away a 96-year-old man, saying he would not be able to look after himself behind bars.

Sun Hsin-ming, a former railway worker, was sentenced to three months in jail for squatting.

He refused to pay a fine to stay out of prison, insisting that he was innocent of the charges against him.

But as soon as he turned up at the jail he was sent back to the prosecutor's office, according to local media.

'Illegal occupation'

White-haired and frail, stooping over his walking stick, Sun Hsin-ming seems an unlikely criminal.

But he became Taiwan's oldest convict when he was given a three-month sentence for illegally occupying the dormitory of his former employer, Taiwan's national railway administration - something he fiercely disputes.

"The court is in a mess and won't listen to reason. I am really angry. I haven't done anything wrong," he told reporters.

The Apple Daily newspaper said prosecutors now plan to send Mr Sun to a prison hospital ward in the central city of Taichung to serve his sentence.

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German fat cat turns to hot dogs

By Ray Furlong BBC News, Frankfurt

Thomas works in the shadow of the skyscraper where he was a trader

Thomas Brause used to earn a six-figure salary working as a trader in a gleaming Frankfurt tower. Now he sells sausages on the street outside.

"My friends and family said: 'You're crazy'," he said. "But they also said: 'Go for it!'"

His stand is a converted bus that he bought on eBay. In front of it, office workers and labourers from a building site opposite chat over Bratwurst and French fries on white cardboard trays.

When Thomas looks up, he sees the skyscraper where he worked until the world financial crash arrived.

"I was working for an American brokers with offices all around the globe," he said. "It ended on 10 December 2008 - a Wednesday. The Friday before we'd had our Christmas party. Our bosses had come out from London to celebrate with us.

"The Wednesday started normally, but then at 1100 an e-mail came round from human resources. By 1400 we were out the door."

At first, Thomas tried sending his CV to get similar jobs. But in a changed market, he was offered around half his previous salary. So he hit upon his radical change of direction.

"I'd first got the idea when I was working in the office," he said. "I'd think: hmm, lunch wasn't up to much this afternoon. I could really use a good German Currywurst with chips."

No less stress

But amidst the slick cafes of Frankfurt, no-one was selling grilled sausage smothered in ketchup and curry powder. Thomas spied a gap in the market.

So now there are long queues in front of his bus every lunchtime and Thomas hopes his business will soon be in the black. "If I can earn 60-70% of my former wage with my snack bar, I will be more happy than before," he said, presumably not including his former bonuses in the calculation.

He used to handle deals worth millions of dollars - via computer screens and the telephone. Now, he sells Bratwurst with mustard and brown bread for 2.40 euros (£2.15; $3.50), and French fries for 1.60 euros. "And my sister's home-made cakes," he added. "I mustn't forget to mention them.

If you're not happy with your job, it's bad for you Thomas Brause

"These are real things, not abstract things. You can touch them. I deliver something and I get something in return. It's more satisfying."

In a way, what he has done is a fantasy for many highly-paid people in demanding jobs.

"I've heard lots of people moaning about their jobs," said Mr Brause. "As soon as people get to management level they dream of this, and this was a dream of mine for a while because I was pretty fed up with my job too. The office politics was terrible."

But as the sausages sizzled on a hot plate, Thomas said quitting his high-powered job had not made life less stressful.

"I work 14-hour days," he said. "I get up at 0530. This is more stressful than before! I did my previous job for 24 years so I was very used to it. Now, I have to learn a lot of things and cope with circumstances I've never seen before.

"But I would say I'm happier. If you're not happy with your job, it's bad for you. I lost everything but it was an opportunity. So now I'm here - and I'll see where I am in a year's time."

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Developing world myths

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Remember what he says: Richer countries do worse trying to buy health care than Poorer country's who have it and try to find wealth.

Antibiotic resistance clue found

MRSA highlights the problem of antibiotic resistance

US scientists have uncovered a defence mechanism in bacteria that allows them to fend off the threat of antibiotics.

It is hoped the findings could help researchers boost the effectiveness of existing treatments.

The study published in Science found that nitric oxide produced by the bacteria eliminates some key effects of a wide range of antibiotics.

One UK expert said inhibiting nitric oxide synthesis could be an important advance for tackling tricky infections.

Antibiotic resistance, for example with MRSA, is a growing problem and experts have long warned of the need to develop new treatments.

Here, we have a short cut, where we don't have to invent new antibiotics Dr Evgeny Nudler, study leader

The latest research, done by a team at New York University, showed that in bacteria the production of nitric oxide - a small molecule made up of one nitrogen and one oxygen atom - increased their resistance to antibiotics.

They found the enzymes responsible for producing nitric oxide were activated specifically in response to the presence of the antibiotics.

They also showed that nitric oxide alleviates damage caused by the drugs as well as helping to neutralise many of the toxic compounds within the antibiotic.

The researchers then showed that eliminating nitric oxide production in the bacteria allowed the antibiotics to work at lower, less toxic doses.

More effective

Study leader, Dr Evgeny Nudler, said developing new medicines to fight antibiotic resistance, such as that seen with MRSA is a "huge hurdle".

"Here, we have a short cut, where we don't have to invent new antibiotics.

"Instead we can enhance the activity of well-established ones, making them more effective at lower doses.

Dr Matthew Dryden, consultant in microbiology and communicable disease at Royal Hampshire County Hospital and general secretary of the British Society for Antimicrobial Chemotherapy, said if the enzyme which creates nitric oxide could be inhibited, it could suppress the ability of the bacteria to counteract antibiotics.

"This would be a useful therapeutic advance, especially as we are running out of new classes of antibiotics and there is less antibiotic development in general."

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Child mortality drop 'too slow'

Unicef says preventable diseases are the biggest killers of children

The UN children's agency says child mortality is decreasing, but the rate of decline is not enough.

A new report says more than eight million children under five died last year with pneumonia and diarrhoea the two leading causes of death.

Unicef says 40% of under-five deaths take place in just three countries - Nigeria, India and DR Congo.

The report singled out Malawi and Eritrea as success stories, but said in South Africa child mortality had risen.

Unicef says the world is failing to reach the UN's target of a two-thirds reduction in under-five child mortality between 1990 and 2015.

In 1990, 12.5 million children under the age of five died.

"Compared to 1990, 10,000 fewer children are dying every day," said Unicef Executive Director Ann Veneman in a statement.

"While progress is being made, it is unacceptable that each year 8.8 million children die before their fifth birthday."

'Improvement possible'

Unicef says the tools are there to significantly reduce child mortality.

They include bed nets to stop malaria, improved water and sanitation and increased vaccination programmes.

Those countries that use these tools - even some of the poorest nations - have seen big improvements in child survival rates, Unicef says.

But in some countries progress is at best slow and at worst non-existent.

In South Africa, under-five mortality has actually increased since 1990.

The reason, Unicef says, is the high rate of HIV and Aids among mothers.

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Innovators shortlisted for award

Professor Sir Alec Jeffreys is based at the University of Leicester

The creator of DNA fingerprinting heads the shortlist for the prestigious Millennium Technology Prize.

Professor Alec Jeffreys is joined by Prof David Payne, co-inventor of an optical amplifier which transformed telecommunications, on the list.

Prof Payne's co-inventors, Prof Emmanual Desurvire and Dr Randy Giles, are also finalists.

Dr Andrew Viterbi, whose algorithm aids communications, and biomaterial pioneer Prof Robert Langer are also contenders.

The Millennium Technology Prize, a kind of unofficial Nobel Prize for technology, is one of the most prestigious awards for innovation and is given every second year for a technology that "significantly improves the quality of human life, today and in the future".

The prize is awarded by the Technology Academy Finland, an independent foundation established by Finnish industry, in partnership with the Finnish government.

If nothing else, DNA has captured the public's imagination Sir Alec Jeffreys

The winner of the prize receives 800,000 euros, while the creators of the other innovations will each be awarded 115,000 euros.

Previous recipients include Sir Tim Berners-Lee, creator of the world wide web, and Prof Shuji Nakamura, inventor of blue, green and white light-emitting diodes (LEDs) and the blue laser diode.

Continued development

Sir Alec, from the University of Leicester, UK, said being shortlisted was a great honour and "a great recognition for DNA technology and the way it has progressed over the last 24 years".

"If nothing else, DNA has captured the public's imagination; it's out there every single day in papers and on the television; and the technology has reached out and touched the lives of 20 million people," he told BBC News.

He added: "Every single time this has happened it's a drama for that person, in terms of a DNA test; whether it's a father learning about his son, an immigrant family being reunited or an innocent man being saved off death row."

Sir Alec's innovation has been described as a "Eureka" moment, when he looked at the X-ray of a DNA experiment he was working on in September 1984 and saw both similarities and differences in his technician's family DNA.

He said the only people not celebrating this honour were "criminals who were being caught thanks to DNA fingerprinting".

The current research focus, he explained, was to reduce the time lag between taking a DNA test and getting a result, or fingerprint.

"It can be as quick as a few hours, but we want to get it down to a second, to real time. Imagine the security possibilities if we could establish identity that quickly," he said.

Fibre solution

Prof Robert Langer, who is based at the Massachusetts Institute of Technology, is a pioneer in biomaterials and has been shortlisted "for his inventions and development of innovative biomaterials for controlled drug release and tissue regeneration that have saved and improved the lives of millions of people".

Prof Payne's co-creation helped transform global communications

Italian-American engineer Andrew Viterbi has been shortlisted for his creation of an algorithm that makes billions of phone calls every day possible on mobile networks.

The Viterbi algorithm, said the Academy, was "the key building element in modern wireless and digital communications systems, touching lives of people everywhere".

Three scientists have been shortlisted for their work in developing technology which made possible the creation of a high-speed global fibre-optic network.

In the mid-1980s, Prof David Payne, and his team at Southampton University, was in competition with Dr Emmanuel Desurvire and Dr Randy Giles at Bell Labs to develop an optical amplifier that could solve the inadequacies of fibre optic cables of the day.

The two teams developed an optical amplifier, called an erbium-doped fibre amplifier, which was power efficient and enabled light to travel along cables without having to be transformed into an electrical signal and then resent with a new laser.

Keeping pace

Prof Payne was first to publish a paper about erbium-doped fibre amplifiers, but Dr Desurvire, now at Thales Research, and Dr Giles, now director of optical subsystems at Bell Labs, were first to make it a working tool.

The amplifier transformed the telecommunications industry and is now a vital part of the global optical fibre network that acts as a backbone to the net.

Prof Payne said he was proud and humbled by the way his amplifiers had helped the global roll-out of the internet and optical telecommunications.

He said fibre to the home was essential if Britain was going to compete with broadband take-up around the world.

"Sadly broadband speeds in this country aren't really broadband at all. I won't be happy until every home has a one gigabit per second connection," he told BBC News.

He added: "If we were able to afford to dig up the road in the 1980s to roll out cable TV then we can afford to do it again."

He said fibre networks needed to grow if they were to cope with demand for bandwidth in the future.

"Forward projections show that we will fill up the bandwidth of the existing backbone around 2015. What that means is that you have to put in as many fibres every year as the growth of the internet.

The winner of the Millennium Technology Prize will be announced on 11 June.

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Poll: Muslim Americans Still Struggle for Acceptance

By Amy Sullivan / Washington Wednesday, Sep. 09, 2009

Muslim women pray at a conference in New York City

Melanie Stetson Freeman / The Christian Science Monitor / Getty

Eight years after the terrorist attacks on 9/11, Muslim Americans — particularly Muslim-American women — continue to face battles in their struggle for acceptance and the right to wear religious garb in public settings. A new poll from the Pew Forum on Religion and Public Life finds that Americans see Muslims as encountering more discrimination than any other religious group. But while Americans are more likely to be familiar with Islam or personally know a Muslim than they were at the time of the attacks, levels of tolerance are lower today than they were in the months immediately following Sept. 11. (See pictures of Muslims in America.)

It may be difficult to remember now, but just days after the attacks in New York City and Washington, President George W. Bush went out of his way to remind Americans not to confuse ordinary Muslims with the handful of terrorists who committed the violence. "We should not hold one who is a Muslim responsible for an act of terror," Bush said on Sept. 13, 2001.

The message appeared to sink in. A Pew Forum poll conducted that November found that only 17% of Americans held unfavorable views of Muslim Americans, a decrease from 24% just eight months earlier. The shift was most striking among conservative Republicans — in March 2001, 40% viewed Muslim Americans unfavorably, but by November, that number had plummeted by more than half to 19%. In the wake of the attacks, Americans were also reluctant to say that Islam encourages violence more than other faiths; only one-quarter agreed with that statement in March 2002. But by the time the war in Iraq began one year later, that view had changed dramatically, with 44% of Americans willing to associate Islam with violence.

Today, the broad tolerance that existed in the days following 9/11 has largely evaporated. Nearly 40% of Americans still say they think Islam is more likely to encourage violence, according to a new Pew Forum survey, and only a minority hold favorable views of Muslims (the latest poll does not distinguish between Muslims and Muslim Americans).

Muslim Americans are also increasingly battling to adhere to their religious beliefs in the workplace and other public spaces. In Philadelphia, the police department disciplined an officer for wearing a hijab (a headscarf that covers hair and sometimes the neck), and the move was upheld in court. Legislators in Oklahoma and Minnesota have proposed legislation that would prohibit women from wearing a hijab for drivers-license photos. And in Oregon, the state legislature just affirmed a law prohibiting public school teachers from wearing religious garb. The law was originally developed in the 1920s as an anti-Catholic measure aimed at priest collars and nun habits, and it was supported by the Ku Klux Klan. Now some Muslim advocates worry that they are being targeted the same way. "Attire is always a red flag," says Ibrahim Hooper, spokesman for the Council for Islamic-American Relations. "But what we're seeing is the overall trend of a vocal minority in our society trying to block any accommodation to Muslims." (See the top 10 religion stories of 2008.)

At the same time, Muslims have become a more familiar part of American society — nearly half of all Americans claim to personally know someone who is Muslim, compared with just 38% of Americans in November 2001. And that number will probably rise in the future, as familiarity with Islam and Muslims is much more common among younger Americans.

A majority of Americans under age 30 (52%) know a Muslim, but less than one-third (30%) of those over age 65 do. That's significant because researchers have found that knowledge of Islam and Muslims tends to make an individual more inclined to express favorable views of the two. "People who know a Muslim tend to be less likely than others to see a connection between Islam and violence," says Gregory Smith, a senior researcher at the Pew Forum. (See people finding God on YouTube.)

It may well be, however, that an uncomfortable gray area exists between tolerating Muslim Americans and fully integrating them into U.S. society. It's not an accident that several recent cases challenging the right of judges to ask Muslim women to remove their hijab in the courtroom have come out of Michigan, which has the largest Arab population outside of the Middle East. Muslims are visible everywhere in the metro Detroit area, selling magazines in the airport, taking orders at Starbucksa and manning tellers at local banks — but the community is still struggling with the question of how far to extend accommodation for their beliefs and practices.

Muslim Americans still enjoy a status less fraught than that of their cousins in Europe, where France is considering banning the wearing of burqas in public and has already outlawed headscarves in schools, and where this summer Muslim women wearing what have been termed "burkinis" were refused entry to pools in France and Italy. But Americans are still divided on whether to embrace the declaration that President Obama made during his speech in Cairo this summer. "Freedom in America is indivisible from the freedom to practice one's religion," said Obama. "That is why the U.S. government has gone to court to protect the right of women and girls to wear the hijab, and to punish those who would deny it."

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Eight years since the 'dark day'

Dealing with the legacy of the attacks is one of Barack Obama's toughest challenges

By Roger Hardy BBC Middle East and Islamic affairs analyst

Across the United States, the memory of 9/11 - that fateful Tuesday in 2001 when suicide attacks struck New York and Washington - is still very much alive.

This year the annual commemoration of the attacks in the US has been given a new name - the National Day of Service and Remembrance.

President Barack Obama and his wife Michelle have called on Americans to carry out community service as a way of honouring "the heroes of that dark day".

Down but not out

Dealing with the legacy of 9/11 is one of Mr Obama's toughest challenges.

There has been no repeat of 9/11 on American soil - but around the world al-Qaeda and its extended family are still in business.

Three recent events show that the global threat remains real:

• the hotel bombings in the Indonesian capital Jakarta in July
• the assassination attempt in August against the Saudi prince who is in day-to-day charge of his country's internal security
• and the conviction this week of three British Muslims for their involvement in a plot to bomb seven transatlantic airliners in 2006.

Al-Qaeda leaders could still be winning the global battle for hearts and minds

The consensus among most experts is that al-Qaeda is down but not out.

It has been weakened by constant pressure from the US and its allies. Some of its middle-ranking leaders have been killed in US air strikes by pilotless Predator drones.

In two important countries where it once seemed strong - Iraq and Saudi Arabia - it has been pushed on to the defensive.

But the same experts tend to think that, in the global battle for Muslim hearts and minds, al-Qaeda has outperformed its adversaries.

Its ideology still seems to have a potent appeal to disaffected young Muslims around the world.

Epicentre

On the global jigsaw of extremism, the main front is now the remote and lawless region along the Afghan-Pakistani border.

This is not just where Osama Bin Laden and his number two, Ayman al-Zawahiri, are thought to be.

For the jihadists, Afghanistan, Pakistan - and perhaps India - now look more promising terrain than Iraq.

It is here that al-Qaeda and its Taliban allies are stepping up the pressure.

Elsewhere, al-Qaeda "franchises" operate in North Africa, Yemen and south-east Asia.

And, as the airliner plot showed, al-Qaeda continues to target Europe, using young "home-grown" Muslims, including converts.

The Obama effect

But if the picture is broadly familiar, there is one new element in the equation - Barack Obama.

Obama has made outreach to the Muslim world a high priority

His election prompted a fierce attack from the al-Qaeda information machine.

Ayman al-Zawahiri went so far as to use a racist slur, calling the new president a house slave.

This suggested the jihadists saw Mr Obama as a trickier target than his predecessor, George W Bush.

The new president was quick to make outreach to Muslims a priority.

He dropped the term "war on terror" and other language deemed counter-productive.

And in a much-publicised speech at Cairo University in June, he offered Muslims a "new beginning" in their relations with America.

He pledged to withdraw US troops from Iraq by 2012 - and called the situation of the Palestinians "intolerable".

But, three months on, even Muslims who welcomed the speech are sceptical.

They see Israel building more settlements in the West Bank, they hear US officials threaten Iran with "crippling" sanctions and they watch the build-up of American troops in Afghanistan.

"He speaks like Obama," remarked one American Muslim commentator, "but acts like Bush."

Islamophobia

While coping with Muslim suspicion of the West, the president also has to deal with the other side of the coin - Western suspicion of Islam.

This is not a temporary law and order exercise, but a long-term war fought for the defence of Western civilisation Nile Gardiner, Heritage Foundation

Many still believe that what's under way is a clash of civilisations.

"The danger posed by Islamists is the gravest threat to the free world since the fall of communism and the earlier crushing of Nazi Germany," wrote Nile Gardiner in the London-based Daily Telegraph this week.

Mr Gardiner works at the Heritage Foundation, a conservative think-tank in Washington.

Challenging extremism, he went on, "is not a temporary law and order exercise, but a long-term war fought for the defence of Western civilisation".

An anonymous comment posted on the Telegraph website reads: "Militant Islam does the dirty work for Islam."

Such sentiments - in stronger or more muted form - are not uncommon.

Students were recently sent home from their school in Florida for wearing T-shirts - supplied by a local church - proclaiming "Islam is of the Devil".

'Narratives of humiliation'

Healing the rift between Islam and the West is a long-term challenge.

Writing in Newsweek, seasoned American diplomat Ryan Crocker ponders the lessons of 9/11, eight years on.

Mr Crocker recently retired after almost four decades in the State Department, serving as US ambassador in Kabul and most recently in Baghdad.

Americans, he writes, have yet to learn that "imposing ourselves on hostile or chaotic societies is no solution".

"The perceived arrogance and ignorance of overbearing powers can create new narratives of humiliation that will feed calls for vengeance centuries from now."

What's needed, he says, is "strategic patience" - something Americans have traditionally "found hard to muster".

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Afghan election process 'biased'

By David Loyn BBC News, Kabul

Mr Abdullah said the election was being stolen from the Afghan people

The main challenger in the Afghan election has claimed the body carrying out the count is being manipulated by the incumbent President Hamid Karzai.

Speaking exclusively to the BBC, Abdullah Abdullah said the election commission was on the president's side.

Since the Afghan election three weeks ago, the number of claims of fraud in the voting have been rising.

As the counting goes on Mr Karzai has just passed the 50% mark that means he does not have to face a second round.

But now for the first time, Mr Abdullah has said that the counting process itself is flawed.

In a strongly-worded interview for the BBC, he said the election was being stolen from the Afghan people, and the Independent Election Commission was anything but independent.

"It's not independent at all; it's on President Karzai's side," said Mr Abdullah.

"It has been corrupt, and their malpractice is now widespread. I think it's not for the good of the country that somebody who commits massive fraud rules the country for (almost) five years."

Mr Abdullah said the way the election had been conducted was a recipe for instability.

"I'm not talking about just my own supporters, but those who cast their vote for Mr Karzai," he said.

"Their vote is now part of the fraud. And on top of that, a fraudulent outcome: illegitimate rule for another five years. I think this in itself is a recipe for instability in this country."

But Mr Abdullah said he still wanted a fair result to be found through peaceful channels.

Earlier this week the international body overseeing the process took their first decisive step - ordering the election commission to hold a recount wherever there were suspicious ballots - potentially opening months of arguments.

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