Insolvency News and Updates

source: Queensland Business Review www.qbr.com.au

Corporate insolvencies are on the rise, but the spike has not been as sharp as expected, according to specialist firm Restructuring Works.

Restructuring Works’ third quarterly Business Stress Report reveals some plateauing in insolvency numbers, resulting in mixed predictions for future activity.

The number of companies entering some form of external administration in May 2009 was a relatively modest 829.

This result marks a 6 percent increase compared with last year, but falls short of a record 1,095 in March.

The value of all bank new asset impairment charges in the March quarter was $7.1 billion, which is a decrease from the December quarter high of $8.1 billion.

However, the rolling year total to March 2009 has increased to $23.5 billion, which is more than five times the average of the previous five years of $4.5 billion.

Restructuring Works Director Cliff Sanderson says the report shows the number of insolvencies and their subsequent values are slightly off their peaks.

“This raises the question as to whether this is another ‘green shoot’ or just a pause on the way to the expected deluge of insolvencies,” he says.

“After 1987, it took four years for insolvencies to peak with the number of insolvencies doubling and the value of those insolvencies up five fold. So far, we are only 18 months or less into this cycle so, if it follows 1987, it is still early days.

“This time around the number of insolvencies is up around 37 percent, which is in line with post-1987, but the value of insolvencies has already gone up five fold, so that is well ahead of post-1987.”

The Business Stress Report saw two possible conclusions from its research.

Firstly, “insolvency numbers have peaked much faster than they did post-1987”, or “if we follow the trends of post-1987, then the number and value of insolvencies will be materially more severe than post-1987”.

“I think the research is showing a pause in the rise in insolvencies and there is worse to come. I say that for two reasons. Firstly, we are seeing a large increase in the number of enquiries from directors of companies in financial distress but those directors are only just now starting to make the decision to actively address their company’s problems,” Sanderson says.

“Secondly, a key driver of insolvency numbers is the ATO, which has publicly stated that it is willing to look at arrangements with businesses rather than pursue insolvency proceedings. In practice, we are finding that the ATO, and the banks, have been very accommodating in restructuring company debts.

“But a reasonable proportion of the companies that are being given some latitude will ultimately fail. So it will take some time but ultimately we will see a further material rise in the number of insolvencies.”

Tim Neary | BrokerNews.com.au | Thursday, 16 July 2009

According to Restructuring Works, a business specialising in corporate restructuring, its third quarterly Business Stress Report reveals that corporate insolvencies have risen again, but not as much as expected. The new numbers raise the question as to whether insolvencies have peaked or whether it is the calm before the storm.

Key findings from the report:

The latest Business Stress Report revealed some plateauing in insolvency numbers with the following key findings:

• The value of All Bank New Asset Impairment Charges in the quarter to March 2009 was $7.1 billion which was actually a decrease from the December quarter record high of $8.1 billion. However, the rolling year total to March 2009 has increased to $23.5 billion. That is more than five times the average of the previous five years which was $4.5 billion.
• The number of companies entering some form of insolvency administration in May 2009 was a relatively modest 829. That was a 6% increase over the prior year May but off the peak of 1095 in March 2009. However, the total for the year ended May 2009 was 9,954 which is an increase of 37% on the average of the previous 5 years.
• The research also examined in detail what happened to insolvency numbers after the 1987 Stock Market crash and found that the number and value of bad debts did not increase materially for about 18 months post-1987 and the did not peak until 1992.

Restructuring Works Director Cliff Sanderson says “The Business Stress Report shows that the number of insolvencies and the value of those insolvencies are slightly off their peaks. That has surprised a lot of people. This raises the question as to whether this is another “green shoot” or just a pause on the way to the expected deluge of insolvencies.”

Sanderson continued: “After 1987, it took 4 years for insolvencies to peak with the number of insolvencies doubling and the value of those insolvencies up five fold. So far, we are only 18 months or less into this cycle so, if it follows 1987, it is still early days. This time around the number of insolvencies is up around 37%, which is in line with post-1987, but the value of insolvencies has already gone up five fold, so that is well ahead of post-1987.”

The Business Stress Report saw two possible conclusions from its research:

• That insolvency numbers have peaked much faster than they did post-1987; or
• If we follow the trends of post-1987, then the number and value of insolvencies will be materially more severe than post-1987.

Sanderson said: “I think the research is showing a pause in the rise in insolvencies and there is worse to come. I say that for two reasons. Firstly, we are seeing a large increase in the number of enquiries from directors of companies in financial distress but those directors are only just now starting to make the decision to actively address their company’s problems. Secondly, a key driver of insolvency numbers is the ATO which has publicly stated that it is willing to look at arrangements with businesses rather than pursue insolvency proceedings. In practice, we are finding that the ATO, and the Banks, have been very accommodating in restructuring company debts. But a reasonable proportion of the companies that are being given some latitude will ultimately fail. So it will take some time but ultimately we will see a further material rise in the number of insolvencies.”

James Thomson | Smart Company | Friday 15 May 2009 11:10

Opposition Leader Malcolm Turnbull has used his official reply to the federal budget to call for help for struggling small businesses, proposing measures to improve cashflow and help businesses restructure after insolvency.

Turnbull said many of his ideas to help SMEs came after a listening tour he conducted with businesses around Australia.

“All of them have a modest cost – proving you don’t need to borrow recklessly to do the right thing by small business,” he told Parliament last night.

The centerpiece of the Coalition’s small business policy is a proposal to allow SMEs to “carry back” tax losses. Turnbull argues that if a business makes an operating loss this year, they should be able to carry them back against previous year’s profits and recover a refund of up to $100,000 against taxes paid over the past three years. Similar rules have been introduced in the US to help small businesses whether the downturn.

But Turnbull threw in a surprise into this budget reply by calling for reform in Australia’s insolvency laws.

“Australia’s insolvency laws do not encourage the reconstruction and rehabilitation of businesses that hit hard times. Too many jobs and too much value is lost when viable businesses are wound up or their assets sold in fire sales.”

In recent months a number of insolvency experts, including Restructuring Works director Cliff Sanderson, have called for changes to insolvency laws to give companies a better chance to turn their situation around. He suggests Australia should consider moving towards the British model under which banks are unable to appoint receivers to a company.

While Turnbull did not detail the changes he would like to see, his says the Coalition would “support a change to our laws which will emphasise reconstruction of these businesses”.

“Reform in this area, in these times especially, could save thousands of jobs that would otherwise be lost.”

Turnbull also suggested re-targeting existing support for apprenticeships to ensure that those businesses that take on apprentices receive most funding in the first two years of the apprenticeship.

Turnbull also used the reply to lash the size of the budget deficit and the Government’s prediction that Australia’s net debt will hit $188 billion over the next four years.

He has also urged the Government to scrap its plan to cut private health care rebates for people earning more than $75,000. Instead, Turnbull has suggested increasing tobacco taxes.

Deborah Ralston, Robert Turnbull | businessspectator.com.au | 10:43 AM, 15 May 2009

Over the course of 2008 the number of businesses entering external administration rose from 372 in January to 813 December, as the economy reeled under the impact of the Global Financial Crisis.

The causes of business failures in a buoyant economy can be internal weaknesses such as poor management (43 per cent), cash flow problems (40 per cent) and trading losses (34 per cent) (ASIC, 2007). Business failures can merely reflect markets operating effectively to weed out uncompetitive players.

However, in a recession business failure can be due to external factors such as the unavailability of finance to rollover debt, unanticipated falls in market demand, increases in bad debts and the domino effect of business failures in trading partners.

Business failures impose social and economic costs on other businesses, communities, employees and government and accelerate an economic downturn. Consequently, the public interest is served by insolvency laws that maximise the opportunity to preserve potentially viable businesses during a downturn.

Recognising this need, in 1992 law reforms were introduced that established the voluntary administration procedures and Deed of Company Arrangement (DOCA). The aims were to maximise(s) the chances of the company, or as much as possible of its business, continuing in existence; and to achieve a better result for creditors and members than an immediate winding up of the company. (s.435A, Corporations Act).

While the intent is clear, few companies survive administration and even fewer go on to enter into a DOCA. The process is more often only a means of processing competing creditor claims than a means to achieve a business turnaround.

Indeed, data from Restructuring Works indicates that since 1999, of the 67,000 companies that have entered some form of insolvency administration only around 10 per cent managed to execute a DOCA. During 2008, that percentage dropped to only 6 per cent, suggesting that the administration process had become little more than a precursor to a formal creditors’ winding-up.

With a rising rate of business failure, urgent action is needed to ensure that the administration and DOCA processes deliver on the spirit and intention of the legislation.

So, where is it going wrong? There are five key issues.

First, under Australian law it is an offence to engage in insolvent trading. Directors are obliged to appoint administrators if they consider the firm is or may become insolvent. Directors may become personally liable for debts incurred if the firm trades while it is insolvent.

Other countries are more flexible. In the UK, for instance, directors will only be liable if they ought to have concluded there was no reasonable prospect of avoiding insolvent liquidation and if they did not take steps to minimise potential loss to creditors. This provides UK directors with more latitude to attempt a management-led business recovery and better protection when doing so.

Directors in the United States are also unlikely to be held liable if they have acted with due diligence and in the belief that the company can be turned around. Germany, one of the only countries which have similarly inflexible laws to Australia, has suspended them recently partly due to the impact of the financial crisis.

Second, the appointment of an administrator immediately triggers default terminations of most contracts, including credit facilities. Temporary moratoriums that constrain secured creditors from enforcing their charges and landlords from exercising rights under their leases are too limited to facilitate a business turnaround or recovery-focussed administration.
Consequently, the appointment of an administrator results in an immediate loss of confidence in the business. This is specifically what the 1992 reforms were intended to avoid. Administration also commonly precipitates the appointment of receivers by secured creditors to recover debts from the assets subject to any charge.

Third, the premise of our insolvency laws is that the incumbent management should be replaced by external administrators. This approach may reflect Australia’s colourful history of high profile business failures and occasional rogue behaviour by directors and others.

However, rogue conduct should not colour all cases. From the perspective of creditors and shareholders seeking to preserve the value of their investment, immediately removing existing directors or management may not always deliver the best outcomes. If business recovery is the primary objective, the liability of directors may need to be considered separately from the question of their continuing involvement in the recovery or turnaround process.

The fourth issue is that the DOCA process only deals effectively with unsecured creditors claims and does not ordinarily bind secured creditors, which presents two difficulties. First, secured creditors who exercise priority claims over company assets can recover their debt by disposing of secured assets, denuding the going concern, and leaving little or no residual value for other creditors or shareholders. Second, because most companies have a mix of secured and unsecured debt they end up incurring the costs of both the bank’s receivership and the administrator.

Where to from here? When the DOCA reforms were enacted, scant consideration was given to the merits of constraining the rights of secured creditors in favour of a system focussed on business recovery and turnaround in the interests of all stakeholders.

Amendments to the Corporations Act introduced in December 2007 to improve processes and increase efficiency, do little to address this fundamental problem.

In 2003 the Inquiry into Australia’s Insolvency Laws re-examined the issues and reconsidered the possible establishment of a system based on the United States’ Chapter 11 process. It concluded that a US-style system was not desirable in Australia as it is administered through the courts and places business decisions in the hands of the judiciary, thereby being both costly and time-consuming. These fears, together with concerns about debtors remaining in control of the business, make a Chapter 11 process unpopular in Australia.

It is time to take a fresh look at what is required to reduce the social and economic impact of business failure and bring us into step with international best practice. A system that presents a more effective and efficient approach to business recovery and turnaround is required if the aim is to maximise the chances of maintaining companies as going concerns.

Deborah Ralston is Acting Director, Melbourne Centre for Financial Studies and Professor of Finance, Monash University

Robert Turnbull is Special Counsel, Macpherson + Kelley Lawyers and a member MCFS Industry Advisory Committee

The Australian | Scott Murdoch and Teresa Ooi | April 16, 2009

THE bad debts of Australian banks have hit nearly $21billion as the major institutions face a sharp rise in corporate and business borrowers striking trouble as a result of the worsening economic slowdown.

Research by Restructuring Works, an adviser to distressed corporates, shows debt provisions by the banks during the past year were four times than the historic average of just $4 million a year.

The rush of corporate failures has been headlined by the demise of Babcock & Brown and Allco, but a number of smaller businesses face an uncertain future as the cycle collapses.

The biggest increase in bad debts for the banks occurred in the fourth quarter of last year, when the majors had to use $7.8billion worth of cash to cover their losses.

Restructuring Works director Cliff Sanderson said there had been a 30 per cent increase in the number of companies declaring insolvency, but worse was to come as the global slump crippled domestic demand and depressed economic activity.

“The companies that have hit the wall in the last year” were large corporations that had big valuations, but the number going into insolvency was “not huge”, Mr Sanderson said.

“The effects of this will hit middle and small business” over time, he said.

It was the same after the 1987 crash, he said — the bad loans at the banks did not peak until in the mid-1990s.

Company directors were slow to identify the early signs of distress, and just 6 per cent companies that appointed administrators survived to trade again, Mr Sanderson said.

Investment bank Goldman Sachs JBWere said this week the market and the economy had recorded 17 years of expansion, leaving little experience among directors and bankers to deal with economic stress.

“I think directors either don’t see the early signs of distress or they don’t want to,” Mr Sanderson said.

“They don’t seem to recognise it early enough, and when they do they are reluctant to act.”

Meanwhile, businesses that employ at least 500 workers are taking more than 62 days — double the standard 30-day payment terms — to settle accounts, a report finds.

This was an increase of 2.8 days on the December quarter, when businesses tended to settle their bills in less than two months, researcher Dun & Bradstreet said.

The report analyses payment data from more than 300,000 companies across all industries.

The slowing of the economy has also brought on an increase in the number of customers falling behind on mortgage repayments.

Bank of Queensland chief executive David Liddy said last week it had experienced a “slight blowout” in 90-day arrears, but commercial lending arrears had remained steady.

“Certainly as unemployment increases we’re going to see a little bit more stress in those areas, but I’m confident the way our book is structured that we’ll come through this very cleanly,” Mr Liddy said.

Small businesses with less than 20 employees are the best payers, settling their bills within 54 days, the report says.

Chief executive Christine Christian said poor payment behaviour indicated that firms were still feeling pressure from the global financial crisis.

“Our findings continue to show that Australian companies are holding on to their cash for longer periods in an attempt to manage their cashflow and improve liquidity,” she said.

James Thomson | Smart Company | Wednesday 15 April 2009

A report from insolvency firm Restructuring Works has revealed why directors of struggling companies are so hesitant to put their companies into administration – just 6.4% of companies that entered administration in the year to February 2009 were successfully restructured.

Restructuring Works director Cliff Sanderson says the statistic (which measures the number of deeds of company arrangement deals with creditors against the number of total administrations) is a signal that Australia’s restructuring laws are not working.

He is calling for a full review of restructuring laws and suggests Australia should consider moving towards the British model under which banks are unable to appoint receivers to a company.

Sanderson argues that bank-appointed receivers look after their client first and other creditors second, and make it extremely difficult for a director to get a restructuring through.

“I think it’s essential that we move towards that UK model,” he says.

The company’s “Business Stress” report also noted a big jump in the value of bad debts within Australian banks, which soared from $4.4 billion in calendar 2007 to $20.7 billion in 2008.

Sanderson says while banks are still in a strong position with bad debts at that level, it does provide a forward indicator of future insolvency action.

“It’s a big thumping number in terms of the value of insolvencies, and an indicator of the level of businesses struggling in Australia, and struggling badly.”

Sanderson says he is finding his “pipeline is full – as in there is lots of potential work – but people are not frantic” at present. “But in our view, it’s a matter of time.”

He points out that in the last big recession, the first big collapses did not occur until 1989, a full two years after the sharemarket crash of 1987. “And bad debts didn’t actually peak for two to four years after that,” he says.

“Directors will hang on as long as they possible can, because they know that administration means the end of your company.”

Chartered Secretaries Australia | Cliff Sanderson | April 09 Vol. 61 No. 3

All of us have some idea about the level of corporate distress at the moment, right? Let’s trot out a couple of pieces of accepted wisdom:

“The number of companies going broke is through the roof”
“Banks don’t appoint Receivers as often anymore”
“If you want to save a company that’s in financial trouble the way to go is a Voluntary Administration”

All wrong. And don’t start getting complacent because some other truly worrying facts are emerging.

Some truths and some myths

Restructuring Works has recently produced the Business Stress Report. Some of the findings did reinforce what we would expect in the current economic crisis but there were also some myths exposed:

• Myth 1 – The number of insolvencies is way up!
The number of companies entering some form of insolvency administration in the year ended December 2008 has increased 27% when compared to the average of the previous 5 years (Graph 1). So the number of corporate insolvencies is up but they are not through-the-roof. Well, not yet.

• Myth 2 – Banks don’t appoint Receivers as often as they used to!
The number of appointments by secured creditors, most commonly receiverships, is up a massive 105% on the average of the previous five years (Graph 2). That is a surprise. We have heard for a while that banks are stepping back and encouraging directors to sort out their company’s problems themselves. Well the statistic show that banks may not like appointing receivers, but they are doing it twice as often as they used to!

• Myth 3 – To save a company, appoint a Voluntary Administrator!
The percentage of companies successfully restructuring is very low and trending lower. Only 27% of companies that enter Voluntary Administration successfully agreed a Deed of Company Arrangement (”DOCA”) with their creditors in 2008. Remember that Voluntary Administrations is the bit of the insolvency legislation that is supposed to save a company. Well that’s not happening very often.
If the number of companies going broke is not too bad, does this mean we have been worrying unnecessarily? Afraid not. We should worry as some frightening realities did emerge. Even though the number of companies going broke is up a bit, the value of those insolvencies is up a staggering amount. We measure this by looking at Bank New Asset Impairment Charges. The value of those bad debts in our banks has more than tripled to $13.3 billion in the year to September 2008 compared to an average $3.7 billion for the previous five years (Graph 3).

Feeling scared yet? If not here is some more. Corporate Australia is twice as indebted as it was just five years ago and Australian households are close to twice as indebted as they were just ten years ago.

So the quick summary – companies are twice as indebted as they were just 5 years ago, more companies are in financial distress, the companies going broke are the big ones and yet the success rate for companies successful restructuring is very low and getting lower.
Some (not so) brave predictions

We have already started to see many major companies in either informal workouts or formal insolvency appointments. The pileup at the big end of town is a reality. So where is it heading?

Let’s look at the last major stock market correction back in October 1987. The wave of large corporate insolvencies didn’t begin until late 1988 and early 1989 with the likes of Bond Corp, Quintex, Equiticorp and Spedley. It didn’t hit the real economy until 1990 through to 1993 when the bad debt figures in the banks went through the roof and specialist insolvency firms quadrupled in size. Early 2009 has seen the start of the flow on effect to medium and small enterprises.

Our conclusion is that the number of corporate insolvencies is set to skyrocket in 2009 and 2010.

Key Lessons from the Research

The low success rate in company restructurings is a real concern. There are some reasons for it.

Firstly, the success rate has never been high. The Australian system removes power from the directors and shareholders and places control in the hands of an independent expert, the insolvency practitioner, and the creditors. Other insolvency regimes, such as Chapter 11 in the US, leave control in the hands of the existing directors who are supervised by the Courts. This gives additional negotiating power to the company and its directors to force through a deal.

Secondly, directors have learnt over the years that companies rarely survive a formal insolvency appointment. Hence they are reluctant to make an appointment of an external expert which leads to the self-fulfilling situation that when they do appoint an external expert it is often too late to save the company.

It is unlikely that any meaningful changes will be made to insolvency laws in the immediate future and yet many companies will become financially distressed during 2009 as a result of the global economic crisis. So what does a director do?

There are a wide variety of tried and tested techniques that can be used to save a company. We’ve successfully restructured many companies in Australia and internationally during the last 20 years. Our basic philosophy is to use the “Least Drastic” restructuring methodology. We use the term Restructuring Spectrum to describe the various situations a company may face and when a company’s financial position is established we can then identify the corresponding “Least Drastic” solution.

One thing is for sure – there will be lot of companies in financial distress in 2009 and directors of those companies should seek advice from a restructuring professional.

Mark Fenton-Jones | The Australian Financial Review | 6 March 2009

Specialists with the skills to save businesses from becoming part of corporate history are in big demand. Practices are looking to recruit them in growing numbers, although some experts prefer to establish their own boutique operations.

In the past year businesses in difficulty have underpinned the boom in restructuring work that has big firms looking to recruit specialists as boutique pop up to cater to the skyrocketing demand.

A “business stress report” by new firm Restructuring Works showed that the number of companies entering into some form of insolvency administration in the year ended Dec 2008 increased by 27 % to 9113, compared with the 7163 average of the previous five years.

The number of appointments by secured creditors was up 122 per cent to 957 over the average of the previous five years (431).

The report also noted the value of all bank new asset impairment charges more than triple to $ 13.3 billion in the year to September 2008, compared with an average $3.7 billion dollars for the previous five years ($3.7 billion).
“The value of a bad debts is the real reason for the increase in corporate restructuring services,” restructuring works managing partner Cliff Sanderson said.

Restructuring practices typically work with businesses that are either underperforming, in financial difficulty, or insolvent, with the general aim being to help than to continue in business, rather than bury them.

Outside specialist are often brought in to help diagnose exactly where a business is underperforming, while financial difficulty can require skills in turnaround management or debt refinancing.

Restructuring experts can help insolvent businesses, for example, by using voluntary administration to rescue a company or undertake an equity raising or sale of the business. But if the solution is to wind the company down, directors might want to control that process through a managed liquidation.

Grant Thornton, one of the larger mid tier practices, recently appointed Michael Owen as a director in its Sydney office after a year of significant growth in the firm’s recovery and recognition division. In the past 12 months in the firm’s national recovery and reorganization practice has more than doubled in size, from 41 to 84 staff (including 13 directors) and national director Paul Billingham is still looking for talented individuals.

‘It’s not the numbers. There are a lot of people moving out of either banking or other areas of accounting who want to come into recovery. There are two areas we are keen to look for: the four-to-six year experience guys who’ve got a pure insolvency background; and director level people with the right background in banking relationships and expertise,” Mr Billingham said.

Businesses with whom Grant Thornton are involved tend to be companies referred by major lenders that are highly leveraged because of aggressive transactions completed two to three years ago.
“They can’t carry the weight of debt,” Mr Billingham said.

Another mid-tier player, Ferrier Hodgson, focuses on forensic accounting, corporate advisory, and corporate recovery, with the latter offering insolvency management and restructuring. A partner in the practice Steve Sherman, said staff numbers in the Sydney office increased by 20 in the past year, and ranged from director level to school leavers.

He indicated that the firm’s corporate recovery had been steady in the past year and while the client base was traditionally financial institutions, the banks, for instance, had increased their own capacity for dealing with troubled clients rather than farming out the work.
Brisbane-headquartered Vantage performance will increase its ranks to eight when Phil Jefferson joins this week as a director.

Mr Jefferson was a founding partner of Jefferson Stevenson & Co, which merged with PKF; a former senior partner at Horwarth and is a member of Australian Securities and Investment Commission’s Companies Auditors and Liquidators Disciplinary Board.

Vantage’s managing director, Michael Fingland, said staff numbers grew by 40 per cent in 2008 and he expected to recruit three to five more in the next six months. As turnaround specialist, the firm works to prevent businesses failing and tends to see troubled organizations 6-9 months before they would have gone to insolvency practitioners.

Meanwhile Mr Sanderson, a former Ernst & Young partner who launched Restructuring Works in January this year, said that in the past 6 months or so, the big firms had been “Scrambling for staff” to beef up their restructuring practices, whilst smaller firms had only started doing so.

“All the smaller firms are expecting this and next year to be quite busy,” Mr Sanderson said. “That’s why I got back in the game, and there’ll be others like me.”

Watch out – the Banks are coming! Some of you will have had a look at the first Business Stress Report or my summary in my blog. We release the full Business Stress Report quarterly. In the intervening months, ASIC updates its Monthly Insolvency Statistics. The December numbers came out recently. We’ve analysed the numbers and again there are some surprises.

Our Press release said: “Our research shows that in the calendar year 2008 the number of corporate insolvencies has predictably increased, being up 27%. The concern is that the growth rate in insolvencies is up even further in the last quarter and worse still in the last month of 2008.”

Some details:

• The number of companies entering some form of insolvency administration in the 12 months ended December 2008 has increased to 9,113 which is a 27% increase over the average of the previous 5 years.
• The number of appointments by secured creditors, most commonly receiverships, more than doubled in 2008. They are up 105% on the average of the previous five years.
• The month of December 2008 saw 813 companies enter some form of insolvency administration. That is a drop from the 1,011 companies in November 2008 but traditionally December and January show the fewest number of companies being placed into insolvency. The 813 insolvencies is a 43% increase on the average for the past five Decembers.
• December has extended the record bad run of corporate insolvencies – each of the 8 months to December were the worst on record (since 1999).
• The value of All Bank New Assets Impairment Charges has more than tripled to $13.3 billion in the year to September 2008 compared to an average $3.7 billion for the previous five years.

There is a big surprise there. I think everyone expected the number of corporate insolvencies to be up. The surprise is that Secured Creditors, mostly Banks, are taking control of company assets far more commonly. They are appointing Receivers more than twice as often as they have in the past. So are the Banks happy to appoint a Receiver? Never. All Banks would say, and I believe them, that appointing a Receiver is the last option. They’d much rather a company come to them with workable plan.

So what does a Director do if faced with a Bank that is threatening to appoint a Receiver? First step is to call us. We have good relationships with all major lenders. But there is no magic pill. We need to have a look at your company and work with you to create a plan that we can take to the Bank. We know what Banks will be looking for and can help you save your company.