Michael.1
Insolvency and related law and policy, and more

Michael Murray is an Australian author and commentator on corporate and personal insolvency law and related issues, in Australia and internationally. He has a strong law and policy background, is independent of any connections, and his views are his own. He gives no legal advice. 

Further Covid-19 Restructuring Survey Results – Australia

In my post of 3 May 2020, I reported on various surveys both during the COVID-19 crisis, and before.

One that was then pending was from KordaMentha Corporate and TMA which surveyed more than 300 corporate renewal professionals, lawyers and lenders.

Their survey results are now out –  View the results. – and some responses are these:

  • Those surveyed identified cost reduction, rather than revenue growth, as a key focus area as businesses position for recovery.
  • four out of five professionals believe companies in the hospitality, tourism and retail/consumer services industries will last less than three months without a return to business as usual or more government help. Many would last a month or less.
  • The next most vulnerable industries are education, real estate and manufacturing, where four out of five practitioners believe companies can last less than six months.
  • The most resilient industries are energy and utilities, mining and health, with three out of five practitioners believing those companies could last more than six months.
  • Most of the turnaround industry believes Australia’s post-pandemic economic recovery will be gradual rather than quick, with 58% believing the recovery will be U-shaped and only 10% V-shaped.
  • Most respondents believe the Commonwealth and State governments have done enough to support Australian businesses in response to the COVID-19 epidemic.
  • 25% of respondents believe businesses are not prepared to ramp up once social distancing restrictions are lifted.
  • 63% of respondents say debt or equity financing for recovering businesses will be worse over the next 12 months.

While the outlook for some industries is clear, the outlook for others is mixed. One third of respondents expect food and agriculture to be negatively impacted over the next 12 months but one third believe it will be positively impacted. In media communications, half expected a negative impact but a third expected a positive impact.

The survey revealed a ‘calm before the storm’ sentiment in the industry, with 59% having an increase in enquiries over the past month, but 27% experienced a reduction in enquiries.

As to the law:

  • 65% believed Australia’s turnaround and insolvency legislative regime was sufficient to deal with the economic impact of COVID-19.
  • 55% said the relaxation of Australia’s insolvent trading laws would reduce the number of corporate crashes over the next 12 months.

Suggested changes to the laws in the COVID-19 environment included:

  • extension of the relaxed insolvent trading laws;
  • reconsideration of a safe harbour regime for small to medium businesses;
  • an extension of the employee Fair Entitlement Guarantee Scheme to voluntary administrations for a defined period; and
  • introduction of US-style Chapter 11 restructures.

 

 

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