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Archive for July, 2010

Role of insolvency practitioner to be reduced

July 30th, 2010 No comments

The Insolvency Service has launched a consultation which could see the roll of insolvency practitioner reduced and the courts become more involved.

The consultation proposes to give company directors a ‘restructuring moratorium’ to provide businesses with ‘breathing space’ to negotiate with creditors.

Applications are to be made in court where creditors can be represented then insolvency practitioners would be involved in ‘key stages’ of the application process. However, their role has yet to be decided.

The government agency is going to allow companies three months to negotiate a repayment deal. The restructuring moratorium could effectively prevent creditors taking any action against a company such a petitioning a winding up order or a landlord repossessing premises.

Edward Davey, the minister responsible for the insolvency service, said that he ecouraged anyone in restructuring to ‘study’ the proposals set out in the consultation.

The changes to the insolvency process in the UK will make it similar to the administration process, US Chapter 11 scheme. US insolvencies are generally overseen by the courts, as opposed to the UK where they are overseen by insolvency practitioners.

‘Few consider’ airline insolvency

July 28th, 2010 No comments

Only a few passengers think of the possibility of their airline going bust when booking a plane ticket.

The survey conducted by the Air Transport Users Council (AUC) found that just five of 2,072 people polled mentioned airline insolvency when asked to list considerations when booking a flight.

A further 30 per cent were not aware if their last flight had been financially protected or not and 34 per cent didn’t know if their last travel insurance policy included financial protection.

Carried out in March by Ipsos Mori, the survey further asked about passengers’ experience of booking tickets online.

And as many as 17 per cent said that they made a mistake and 13 per cent said they had dealt with technical issues.

Those people that had problems with their online booking, a large proportion of them were left out of pocket to some degree.

16 per cent of passengers had also mistakenly paid for optional services they didn’t want according to the poll.

AUC chairman Tina Tietjen said: “Only five respondents mentioned the risk of an airline going bust. This was despite respondents, when asked, generally considering it was important that travel arrangements were financially protected and only 8% of them saying that they would definitely not pay to be protected.”We have previously called for Government to introduce a universal protection scheme against the failure of scheduled airlines. We have suggested it be along the lines of the Air Travel Operators’ Licensing (Atol) scheme for tour operators.”

The benefits of the Atol scheme were demonstrated due to the recent fall of Goldtrail Holidays, which saw the company’s customers being repatriated and those yet to travel issued a full refund.

If you are looking for business recovery and need to speak to an insolvency practitioner then get in touch with Real Business Recovery, the team dedicated to helping you and your business during these difficult financial times.

One in ten mergers and acquisitions involved distressed businesses

July 26th, 2010 No comments

One in ten (9.4 per cent) of UK mergers and acquisitions during the first half of 2010 involved distressed businesses looking for business recovery.

In total the 1,491 deals completed in the UK, 141 involved companies were acquired out of administration or other formal insolvency procedure. The research was carried out by Experian Corpfin on behalf of insolvency trade body R3. The research found that in the first six months of this year the total of value distressed deals amounted close to £519 million. (£518.505m)

R3 President, Steven Law, said, “Insolvent businesses continue to feature in a significant proportion of deals within the UK. The number of distressed deals has more than doubled since 2008 when on in twenty-five deals involved an insolvent business. The recession may have officially ended but distressed businesses and assets are continuing to come onto the market.

“For buyers with access to funding, there is the opportunity to extend their portfolio while values remain subdued. For the businesses themselves, an acquisition represents a fresh start and a chance to secure the jobs of the workforce.”

North East residents top insolvency

July 23rd, 2010 No comments

Citizens living in the North East were nearly twice as likely to be declared insolvent during 2009 in comparison to people in London.

The figures released by the Insolvency Service showed that the North East has the most number of people who were unable to keep up with debt repayments as a proportion of the population. London has the lowest.

38.1 people per 10,000 adults in the North East were declared bankrupt or took out individual voluntary arrangement or debt relief during the year, in comparison to 19.6 per 10,000 in London.

The South West were the next most likely to be declared insolvent at 35.9 per 10,000 followed by the East Midlands at 35.3.

South East had the second lowest figure by the North West at 29 and 30.6 per 10,000.

London had the smallest jump in comparison to last year, while the North East had the highest increase in insolvency numbers.

31.1 people per 10,000 across England and Wales were declared insolvent during 2009, up from 24.9 per 10,000 in 2008.

In 2009, a record of 134,142 people went insolvent during 2009, and this is expected to grom to 150,000 by the end of the year.

Since the final quarter of 2007, the number of people declared insolvent is on the rise due to the credit crunch and rising unemployment as well as the increases in the cost of living. These problems have left a number of people unable to repay their debts.

London also has the lowest number of people declared as bankrupt at 11.1 per 10,000 while the South West had the highest at 21.6 per 10,000.

Rise in companies going bust

July 21st, 2010 No comments

The official recorder of insolvencies has seen a sharp increase in the number of Scottish companies going bust.

Data issued for April to June by the Accountant in Bankruptcy, recorded a rise of 66 per cent compared with the same quarter last year.

The total of companies declared as insolvent has risen from 183 to 304. This includes companies that either voluntarily opted out of their business or were forced out by creditors.

861 company insolvencies were recorded in the financial year from April 2009.

A total of  5,378 individual Scots, were declared as insolvent between the end of March and June.

This was a 15 per cent drop on the same time last year, however a huge increase on the previous quarter.

“It has been hoped that the peak in personal insolvency has stabilised at 5,000 or so per quarter but it would appear that the numbers are rising once again indicating that the after-effect of the recession is still being felt among many Scots,” Bryan Jackson, an insolvency practitioner at PKF said.

Personal insolvency was particularly affecting more affluent households, based upon the type of court action being used for bankruptcy he said.

Mr Jackson has seen examples of cases showing staggering levels of debt.

He said, “There are years of debts accumulated which individuals have been attempting to pay the minimum amounts against, but which have suddenly overwhelmed them.

“That we are still seeing this level of indebtedness several years into the recession indicates that we have some way to go before many people regain control of their finances.”

He added, “There is also evidence that the authorities are starting to get tougher with individuals in debt.”

UK business recovery at risk if banks don’t lend

July 19th, 2010 No comments

With banks failing to lend to businesses, Britain will move slowly away from an economic recovery, Business Minister Vince Cable said.

Britain’s recovery has been relatively slow since exiting the recession in the last quarter of 2009, growing just 3 per cent in the first three months of the year. Bank lending – particularly to the smaller firms - has remained subdued making business recovery a last priority.

“We could have a second credit crunch if we don’t get credit flowing, there is a real danger that growth in the economy could be undermined,” Cable said in an interview with the Independent on Sunday Newspaper.

“It is what I hear most from the businessmen and women I speak to, that the flow of credit and lending to business is still weak. Demand is already depressed, and the danger is that the lack of lending could depress it still further.”

Cable said that the government is working on new ways to get credit flowing but it must also find ways to redress the bias towards taking on debt and try to get more equity funding into business.

“We are still identifying new measures but it is important because the effects of quantitative easing will soon be wearing off,” he said.

The Government is taking steps to make Britain more competitive, such as lowering corporation tax and reducing bureaucracy to get Britain out of the gloomy situation. Cable sees that Britain needs to find a way to balance its economy, boosting high-tech manufacturing industry and reducing its reliance on the financial sector.

Pumping more money into the economy in order to get it moving again would create the risk of encouraging another housing bubble and would ‘only lead to another disaster.’

“What we are doing is tricky; we must encourage growth and re-balance the economy in a healthy way and geographically. It is going to be a difficult trick to pull off.”

Trump Entertainment to exit bankruptcy

July 16th, 2010 No comments

Trump entertainment, who operate three casinos in Atlantic City, have moved a step closer to emerging from bankruptcy following the approval from the New Jersey Casino Control Commission.

The Commission approved the company’s business recovery plans, under which a group of bondholders led by New York-based Avenue Capital Management will take control of Trump Marina, Trump Taj Mahal Casino Resort and Trump Plaza Hotel Casino.

Speaking to the Associated Press, Donald Trump said he was truly delighted with the Commission’s decision to approve bondholders’ proposals, which effectively ended a challenge from billionaire investor Carl Ichahn.

“This os a great victory for us, the bondholders and I,” he said. “We are going to make this very successful. We are really positioned to do something special. We got rid of so much debt and we have the best brand in town, by far.”

The reorganisation is expected to see $225 million of new equity into the company, ensuring that it benefits from improved liquidity and capital resources.

Fewer pubs going bust but expert warns of more pain

July 14th, 2010 No comments

The number of pub companies falling into insolvency fell by a third in the second quarter of this year from their 2009 speak. However insolvency practitioners fear that if planned Government cuts lead to falls in consumer spending, the sector will see more failures.

In the three months to 30th June, sixty pub operators filed for insolvency, compared with 88 in the final quarter of last year, said PriceWaterhouseCoopers.

However, this year’s figures are still comparatively high and is up nearly 10 per cent on the 55 that collapsed in the second quarter of 2008. David Chubb, of PwC, said, “Pub company insolvency rates have fallen from where we were a year ago but trading remains difficult and further failures are expected as lenders consolidate their positions.

“The statistics do not fully illustrate the extent of the problems in the sector. Some groups are being restructured without entering into the insolvency.”

Companies Capital City Brewing and London Town went insolvent this year, as did nightclubs such as London’s Fabric and Buddha Bar.

Number of UK insolvencies rises

July 13th, 2010 No comments

A record number of people in Bolton were registered as insolvent in 2009, figures revealed last night.

The rising unemployment brought on by the recession is said to be the main reason for the surge, which saw 642 people officially declared penniless.

These results are the highest number since records began in 2000 and towers over the 478 insolvency declarations in 2008.

People are able to declare themselves insolvent in a number of ways, including bankruptcy, by individual voluntary arrangements or by debt relief orders. And yesterday, national debt charity Debt Advice Foundation, warned that many individuals reach crisis point before asking for help and urged people not to delay in seeking support.

Managing director David Roger, said, “The tough economic conditions mean more people are struggling to keep on top of their finances – with record numbers of individuals becoming insolvent.

“Being in debt can be very stressful and people are often unsure what they should do or who to turn to for support.

“Many delay asking for help, which unfortunately means their situation can spiral out of control.”

And it’s not just Bolton that have been heavily affected.

In Bury, the 2009 figure was 422, compared to the 2008 total of 375. In Salford, 519 people were insolvent, compared to the previous year’s total of 501.

And with continual job losses, pay cuts and disposable income margins being squeezed, the charity is expecting the number of people tipping over into insolvency and needing advice to increase.

Debt Advice Foundation’s tips for people who are struggling with business debts don’t ignore the problem, evaluate your finances, set a budget and tell someone as it is important that you seek professional help as soon as possible.

Categories: insolvency Tags: ,

UK insolvencies to rise as 127,000 companies suffer financial distress

July 9th, 2010 No comments

UK insolvencies are expected to rise next year as austerity measures start to bite, and more than 127,000 companies continue to suffer ‘significant’ financial distress.

The companies between them owe more than £69,5bn, a 26 per cent rise on the first quarter, according to restructuring specialist Begbies Traynor’s latest Red Flag Alert report covering the second quarter of 2010.

The full detailed report monitors early signs of financial trouble with many companies across the UK.

“The increasing uncertainty surrounding the outlook for the UK economy represents a further significant challenge for UK corporates at a time when many had been preparing their business for recovery,” the report said.

“With over £69.5bn of liabilities still at risk of default, the potential ripple effect of current levels of distress could be far-reaching.”

Businesses currently facing the distress are down 21 per cent on the first quarter and 31 per cent on peak levels of 185,813 in the second quarter of 2009, remaining at historically high levels.

Average business debts of troubled companies have jumped 60 per cent to around £545,000 from £340,000 in the first three months of the year.

The drop in companies in distress and the rise in debts at risk of default suggests larger companies are now experiencing difficulties “potentially threatening greater job losses” and “indicating the continued fragility of the UK’s weak economic recovery.”

Ric Traynor, executive chairman of Begbies Traynor, said, “We are concerned that the levels of business distress will increase again, potentially from the first half of 2011, once the full effects of the coalition government’s fiscal tightening measures potentially impact the economy and particularly amongst those private sector businesses most dependant on public sector contracts.

“Thereafter, the levels of distress can be expected to remain pronounced for a number of successive quarters in line with the experience of recessions over the past 35 years, when the level of insolvencies grew strongly for two to four years after GDP stopped shrinking.”

Begbies raised its final dividend by 12 per cent to 1.9 per cent giving a total payout of 3.1 per cent for the year.

The company said that the activity levels for the first two months of the new year were slightly ahead of the last year and maintained its outlook for the current year.