Restructuring and Insolvency Activity at the Top End of Town on the Rise

Mining, Mining Services and Retail continue to face particular challenges

Corporate Finance & Restructuring

May 10, 2016

Analysis and commentary by FTI Consulting shows that the number of companies entering external administration over the past 12 months is running 18% above the same time last year. In addition, there has been a marked increase in restructuring and insolvency activity at the large corporate and institutional end of the market.

“A number of notable insolvencies at the top end, including Arrium, Dick Smith, Queensland Nickel, Laura Ashley and the widely reported Chapter 11 of coal miner Peabody have dominated the sector,” said Quentin Olde, Senior Managing Director, Corporate Finance & Restructuring at FTI Consulting.

“The trend seems to indicate that mining, related services and downstream processing continues to show strain as a result of low commodity prices continuing. The retail sector has shown noticeable signs of strain with a number of insolvencies and reported profit downgrades by major retailers.

“In recent profit announcements all of the Big 4 banks have indicated that they have increased provisions for bad debts on specific clients including Dick Smith, Arrium, Peabody and also on a portfolio basis for SME and Corporate related debt portfolios,” Mr Olde said.

The analysis and comments follow a review of the ASIC Insolvency Statistics for both February and March 2016.  For the 12 months to March 2016, the total number of companies having entered external administration is 10,299, an increase of 18%.  For the same period last year (i.e. the 12 months to March 2015) the equivalent number of companies is 8,751.

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