ANNUAL REVIEW

Bankruptcy & Restructuring 2014

July 2014  |  BANKRUPTCY & RESTRUCTURING

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Though the recovery is underway, today’s market remains precarious and any business can quickly run into difficulties. If unchecked, missed market expectations, reduced operating profits or severe cash problems can swiftly push firms past the point of no return.

 

UNITED STATES

Robert Trust

Linklaters

“The US is experiencing near historic lows in the number of Chapter 11 filings of large companies. Many companies that might otherwise need to restructure their balance sheets have been able to refinance their debt out-of-court by accessing the high-yield bond markets and taking advantage of low interest rates. Companies have also benefited from the availability of covenant-lite loans, making it less necessary to even obtain amendments or waivers from lenders. Even those large companies that are unable to restructure out-of-court have sought to minimise their time in Chapter 11 by filing pre-negotiated or pre-packaged Chapter 11 cases.”

 

ARGENTINA

Martín Campbell

Marval, O’Farrell & Mairal

“In the last decade Argentina has experienced the most active corporate reorganisation period in its history due to the financial crisis in 2001, and the number of bankruptcy and reorganisation filings has dropped substantially to annual historical averages. During the last 18 months, however, the number of bankruptcy and reorganisation filings has begun to rise again, especially during the end of 2013 and the beginning of 2014.”

 

UNITED KINGDOM

Graham Lane

Willkie Farr & Gallagher (UK) LLP

“The economic recovery is gathering pace, formal insolvencies are down, and the continued low interest rate is assisting businesses that might otherwise be facing financial difficulty. The number of so called ‘zombie companies’ is reducing, although there are still some that will ultimately become insolvent rather than return to full health, particularly when there is a rise in interest rates.”

 

RUSSIA

Grigory Marinichev

Morgan Lewis

“It is not necessary to check the statistics to understand that the number of bankruptcy filings in Russia is growing year on year. This is partially due to the turbulent economic environment and high leverage of most Russian corporates. Also, given the existing legal framework and numerous loopholes in Russian insolvency law, for creditors with unfair intentions filing for bankruptcy can often be an effective way to ‘clean’ the company’s debt or strip valuable assets from the company to the detriment of its creditors.”

 

ITALY

Sabrina Pugliese

KStudio Associato (KPMG)

“In the last 12-18 months the number of total restructuring and bankruptcy cases has remained largely stable. However, the composition of such cases has changed significantly, with an increasing number of bankruptcies and, among restructurings, an increasing number of ‘second round’ cases against first time restructurings.”

 

SPAIN

Alberto Núñez-Lagos

Uría Menéndez

“According to data provided by the 2013 Yearbook of bankruptcy statistics – Anuario de Estadística Concursal – published by the Land and Mercantile Registrars Association of Spain, in 2013 the number of companies filing for insolvency increased by 11.7 percent over the previous year. This was lower than in 2012 and 2011 which saw an increase of 37.3 percent and 19.8 percent respectively.”

 

SWITZERLAND

Peter Dauwalder

KPMG AG

“The global financial and economic crisis caused Switzerland’s GDP to contract by 1.9 percent in 2009. In the following years, bankruptcy filings for small and medium sized companies continuously increased until its peak in June 2013. From the second half of 2013 and into the first four months of 2014, we observed a reversal of this trend resulting in the number of bankruptcy filings decreasing. Bankruptcy filings between July to December 2013 and January to April 2014 were 2.5 percent and 5.2 percent lower than the prior year, respectively.”

 

IRELAND

Maurice Phelan

Mason Hayes & Curran

“Total corporate insolvency numbers have declined by about 25 percent over the past year. The biggest percentage fall off is in the construction sector and this is likely linked, in part, to a significant recovery in house prices, currently running at 10.6 percent per annum – 22.4 percent in Dublin and 1.7 percent outside Dublin – and a perceived shortage of supply. While there are no hard figures available, the total quantum of debt being dealt with in new insolvencies is probably down 50 percent year on year, as most of the very high debt insolvencies of recent years have been dealt with or are in their final stages.”

 

HUNGARY

Csaba Vári

Squire Patton Boggs

“In Hungary, failed or bankrupt companies are removed from the corporate register and terminated. According to recent surveys, there has been an increase in the termination of the companies from the corporate register and also liquidations. In May this year the three-month average for terminated companies increased to 3500 per month, up from 2700 last year. Of these, 1750 companies were terminated by liquidation procedures and 245 by forced deregistration procedures. In the meantime, the number of newly established companies decreased to 1884 in May this year.”

 

SOUTH AFRICA

Stefan Smyth

PwC South Africa

“Detailed statistics on liquidations and business rescues, which are the two key barometers of measuring business failures, are difficult to obtain in South Africa at a sufficiently granular detail to determine true success and failure rates. The latest available statistics, however, show an overall cumulative decline in liquidations over the past two years, and an element of this is likely to be as a result of the increase in business rescue filings – approximately 1000 since its introduction in May 2011. In all, there has been an overall decrease of approximately 25 percent in liquidations in the first five months in 2014 compared to the same period in 2013.”

 

NEW ZEALAND

Michael Harper

Chapman Tripp

“As New Zealand’s economic cycle has improved, the number of formal insolvencies has decreased, but the fallout from the collapse of a large number of finance companies during the global financial crisis continues. During the last year, the significant insolvency events were the creditor compromises for state-owned coal producer Solid Energy, the receivership of media company MediaWorks, and the receivership and liquidation of construction company Mainzeal.”


CONTRIBUTORS

Linklaters

Marval, O’Farrell & Mairal

Willkie Farr & Gallagher (UK) LLP

Morgan Lewis

KStudio Associato (KPMG)

Uría Menéndez

KPMG AG

Mason Hayes & Curran

Squire Patton Boggs

PwC South Africa

Chapman Tripp


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