Tentative Signs of Improvement but Corporate Insolvencies Remain at Elevated Levels

Mining States of WA and QLD Report Insolvencies at Higher than the National

Corporate Finance & Restructuring

August 8, 2016

Analysis and commentary by FTI Consulting reveals there are tentative signs of improvement despite corporate insolvencies across Australia remaining at elevated levels. The recent trend of insolvencies is showing some regression with total numbers of companies entering administration reducing for three consecutive months. In addition, the average number of companies entering external administration for 2016 to date is 727, the lowest annual average since 2007. This improvement will need to continue for a number of months to break an overall pattern of elevated insolvencies.

For the 12 months to May 2016, insolvencies rose nationally by 13% to a total of 10,155 when compared with the prior period (12 months to May 2015) where the equivalent number of companies was 8,966. By state, the mining economies of Western Australia and Queensland continue to report company insolvencies that are higher than the national average with Western Australia insolvencies rising by 29% to 1,022 and Queensland up by 17% to 2,147.

It is also interesting to note that across all the states, the clear majority of insolvencies occur by way of creditor wind up, accounting for 56% of insolvencies across Australia.

“In similar cycles, insolvencies were impacted by receivership appointments but we are continuing to see appointments initiated by the directors of companies, rather than creditors or other stakeholders. This change to market behaviour certainly seems well entrenched,” said Kelly Trenfield, Senior Managing Director, Corporate Finance & Restructuring at FTI Consulting.

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