PRESS RELEASE
2 January 2009
Grant Thornton Turnaround Index – as at 30th June 2008
New figures show that the number of companies going into examinership has increased dramatically, however, fewer companies are emerging successfully from the process.
Statistics compiled by Grant Thornton’s Reorganisation and Recovery department show that in the year to end June 2008, there were a total of 26 companies in Ireland which sought the protection of the High Court.
This compares to a total of eight companies that went into examinership for the previous 12 months to end of June 2007 – more than a three fold increase.
When the success rate is scrutinised, however, there has been a severe decline in the number of companies that continue to trade after examinership,
For the first six months of 2008, the Grant Thornton Turnaround Index shows for every one company that had a successful outcome to the process, three and a half companies failed and ceased trading.
This rate is drastically down on the success rate for the same period in 2007, which saw 100 per cent of the companies that sought examinership surviving.
Michael McAteer, Recovery and Reorganisation partner in Grant Thornton, believes there are two main reasons for the rising failure rate.
“These figures suggest that the wrong sort of companies may now seeking the protection of the High Court through examinership. If we look specifically at the Construction sector, in the first six months of this year, five companies sought examinership and only one of these was successful.”
He continued, “The other reason that companies may be failing to successfully trade their way out of examinership, is a lack of access to finance. The credit crisis has meant many companies are finding it increasingly difficult to get cash, and thus they have little chance of survival. The manufacturing sector is proof of this with five appointments in the first six months of 2008 and only one success story.”
All indications are that for the latter half of 2008, this trend is becoming even more pronounced. Initial figures would suggest that there were more than double the number of companies seeking the protection of the High Court in the latter part of the year, compared to the first six months.
Paul McCann, partner Recovery and Reorganisation, believes the pattern will continue into 2009. “We are seeing up to two companies a week now at the High Court hoping to be placed in examinership, but these companies face a greater risk of being wound up due to the harsh economic circumstances they are operating in.”
“Companies will have a better chance of survival once credit becomes more freely available,” Paul McCann concluded.