Insolvency Insights - Analysis of ASIC's May 2013 External Administration Appointment Statistics

Corporate Finance & Restructuring

July 4, 2013

The ASIC figures, released this week, revealed 974 companies entered external administration in Australia during May, the highest on record for the month of May. (The ASIC statistics date back to 1999.) This result follows the 941 companies that entered external administration in April, which was a record for the month of April.

The increase in voluntary administrations could indicate trading businesses were getting into trouble and sought to restructure, while the increase in creditor wind ups was likely to be with companies where there was no hope of resurrection and the owners decided to end their businesses.

Generally, business owners have been using equity in homes and money from alternative sources in light of challenging economic conditions. As these sources of funds dry up, coupled with a flat or possibly deteriorating economy, this has forced business closure and an increase in insolvencies.

There are some positive conditions, such as low interest rates and a falling currency, which could benefit recently underperforming industries, however the impacts are yet to be seen.

As previously forecast by FTI Consulting, challenges facing those companies servicing the mining sector (i.e. from miners managing costs and reducing investment) are beginning to have an impact on the ongoing viability of some businesses. We expect this trend to continue in the near term.


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