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A&P operator goes bankrupt, as predicted by its Altman Z”-Score

|Includes:The Great Atlantic & Pacific Tea Co. Inc. (GAP)

The Great Atlantic & Pacific Tea Company (NYSE: GAP, prior to its suspension yesterday), operator of the A&P and Pathmark supermarket chains, announced on Sunday that it had filed for Chapter 11 bankruptcy protection. A few weeks ago, GAP had come up on my radar screen as a short candidate for a grocery store market neutral trade, due to its Altman Z”-Score of about -4 (recall that scores below 1.1 indicate risk of bankruptcy). I passed on it at the time, because its share price was below $5, and the brokerage I’m currently using for these trades doesn’t allow shorting of stocks with share prices below $5.

Stocks: GAP