The latest statistics from the Insolvency Service show a broadly flat quarter on quarter picture with insolvencies rising just 0.4 percent from the third to the fourth quarter last year. The year on year comparison shows a 7.2 percent rise in corporate insolvencies and a 12.4 percent for company voluntary arrangements (CVAs). Hotel, restaurant and transport companies saw the largest increase of 32% in administration appointments while real estate continues to dominate the data, making up around a third of all appointments.
This broadly flat result, in the face of an extremely challenging economic climate, suggests companies and their lenders are turning to measures other than formal insolvency procedures to restructure businesses’ debts.
David Costley-Wood, Restructuring Partner at KPMG in the UK, commented: “These insolvency figures do not reflect the enormous amount of work that is going on to restructure debt in ways that fall short of a formal insolvency. These include debt sales, debt for equity swaps, and refinancings, all of which can avoid the underlying business going into a formal administration."
“Where a formal insolvency appointment is necessary to crystallise the debt, freeing the viable part of the business, administration can help the efficient recycling of assets and in certain cases ‘pre-pack’ administrations can help to avoid the uncertainty associated with a fully fledged trading administration and save more jobs; La Senza and Blacks are two high profile names that have recently restructured along these lines and we are seeing a huge amount of similar activity in mid-sized UK companies more broadly.”
There were some sector trends of note:
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This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.