Hey there,
We don't go actively looking for Zombie companies. For those new to the term, it refers to companies who don't generate enough cash to service their debt and they are on the verge of insolvency. There are a few ways to 'classify' them but the most popular seems to be EBITDA-to-interest coverage ratio below 1.
In essence, the company does not generate enough to cover interest on their debt and they will either have to borrow more, issue shares, or sell assets to do so. Neither of which will go over very well. You typically see this among small bio-tech firms.
A good recent example of this was Hertz south of the border. Here in Canada - I can't think of one off the top of my head, but Cineplex (CGX) is one that comes to mind. Not because of normal operations, but because of the current situation. Since it generated little revenue during the pandemic and even with theatres opening, attendance is constrained - it has generated negative EBIDTA in the second quarter. Through the first six months, it only had adjusted EBITDA of $5.2 million and interest obligations of ~$49 million. Short term, it can survive but the longer this goes on, the more precarious their position.
Air Canada is another - however, its important to note that both these examples are in this situation because of the pandemic.
Mat