Big Companies Heading For Bankruptcy?

I read an article not too long ago called “10 Big Companies That Are Veering Toward Bankruptcy” on The Business Insider. The article included contents of a corporate bankruptcy study issued by Audit Integrity.

That is a very strong accusation to make and one company didn’t take to kindly to it!

Photo by dierk schaefer, courtesy of flickr

According to Yahoo! Finance, Hertz (HTZ) “strongly objected” to its inclusion on the list, and the company released a lengthy statement calling its inclusion “baseless and misguided.”

Hertz presented a few points regarding its financial stability to disprove the bankruptcy allegation and, of course, bolster its standing in the court of public opinion.

Here are a few of those points:

1. Moody’s has rated $2.1 billion in Hertz notes at “Aa1″ after a successful refinancing.

2. Hertz has over a billion in “corporate liquidity.”

3. Year over year, Hertz’s cash flow for the first six months of 2009 has improved by $1.6 billion.

The Business Insider took the original list of twenty firms provided by Audit Integrity and narrowed it down to ten by removing small companies (<$3 billion market cap) and then ranking the remaining firms by market capitalization divided by enterprise value (MC/EV).

Hertz topped the list. While I understand the concern regarding the firm’s solvency, I do think it’s a tad extreme to label the company so boldly based on a two-layered screener based on market cap and one ratio.

The list also included Macy’s (M), Sprint Nextel (S), CBS (CBS) and Las Vegas Sands (LVS).

The proof remains in their performance, but we’ll see if any other companies feel strongly enough to issue an official response.