Companies that Might Go Bankrupt?

Interesting Reuters story: Audit Integrity Announces Results of Corporate Bankruptcy Study; Identifies Companies Most Likely to Declare Bankruptcy.

Essentially, this company has attempted to model out future predictions of bankruptcy, and do it better than Altman's Z Score (something I have never used in the past). This company found TV and Publishing companies to be the most at risk, with autos and airlines slightly less risky.

Here is a quote from the CEO:

"Evidence shows that bankruptcy filings tend to lag after an economic downturn so its extremely important that investors and those concerned with the risks around corporate failure mitigate their exposure to companies likely to collapse," said Jack Zwingli, CEO of Audit Integrity. "Market volatility and sudden downturns such as we have been experiencing must be factored into bankruptcy risk. Fraud also plays a part, especially when companies are faced with survival decisions. These are the toughest companies to identify because, on paper, they appear solvent. Our model uncovers the underlying fraud that can be behind seemingly healthy financial statements."

I agree with the above statement. The question remains: Do prices already reflect the higher probability of default going into a Chapter 11 proceeding?

For those that are lazy, here is the list:

* Advanced Micro Devices, Inc.

* Amkor Technology, Inc.

* AMR Corporation

* Apartment Investment and Management Co.

* CBS Corporation

* Continental Airlines, Inc.

* Federal-Mogul Corporation

* Hertz Global Holdings, Inc.

* Interpublic Group of Companies, Inc.

* Las Vegas Sands Corp.

* Liberty Media Corporation (Capital)

* Macy's, Inc.

* Mylan Inc.

* Oshkosh Corporation

* Redwood Trust, Inc.

* Rite Aid Corporation

* Sirius XM Radio Inc.

* Sprint Nextel Corporation

* Textron Inc.

* The Goodyear Tire & Rubber Company

Admittedly, I have long exposure in a few of these names. And maybe I have been around too long, but I know the stories on about 17 of the 20 mentioned above (personally have never looked at: Mylan, Redwood Trust, and Textron). That being said, it is hard for me to back into a bankruptcy filing for a number of these companies, which begs caution on the overall list. It does bring up some interesting ideas to pursue further for possible distressed debt opportunities or possibly some potential equity shorts.