Restructuring in retreat
Daily Telegraph
26 Jan 2009 Page 28
The number and value of companies forced into insolvency administration dramatically rose over the past year, while the number of companies that came to a restructuring agreement dropped significantly.
According to the first Business Stress Report from Restructuring Works, the number of companies entering insolvency administration in the year to November 2008 rose 25 per cent compared with the previous five years' averages.
The report also found that the value of all bank new assets impairment charges more than tripled to $13.3 billion in the year to September 2008, compared with an average $3.7 billion for the previous five years.
Only 5.5 per cent of companies that had entered insolvency administration in 2008 were able to be restructured, compared with an average high of 14 per cent in 1999.
"There is a very low success rate in restructuring Australian companies that strike financial difficulties," Restructuring Works chief executive officer Cliff Sanderson said.
"It's a real concern that only one in 18 companies enter a formal insolvency procedure can find their way through the insolvency legislation and creditor negotiations to agree to a restructuring."
"What was a low restructuring success rate in the late 1990s is getting materially worse."
