Busts likely despite dip in insolvency

A significant number of company failures are expected to materialise this year, despite new figures showing a continued steady decline in the level of corporate insolvencies during the first quarter of the year.

According to corporate recovery and insolvency experts, Kavanagh Fennell, the first three months of this year saw a near 13% year-on-year reduction in insolvencies, with 303 failures being recorded compared to 347 for the same period last year.

The company said that, while the first quarter figures continue to paint a positive picture, it expects to see “a significant number” of insolvency actions this year as a whole, mainly in the property sector and helped by new legislation making it cheaper and easier for firms in trouble to apply for examinership.

According to Kavanagh Fennell partner David Van Dessell: “Although the incidence of corporate insolvencies could fall further during 2014, we do not anticipate the drop will be significant, as we expect an increase in examinership applications — particularly under the new legislation, where SME directors can utilise the process to restructure SME corporate debt, while continuing to trade under the protection of the court.

“We also anticipate sustained activity in the property receivership area, as the property market strengthens in urban areas, leading to better returns for secured creditors. We also envisage increased personal insolvency activity, that should be borne out by the second quarter figures to be issued by the Insolvency Service of Ireland.”

Closer inspection of the first-quarter figures shows a 29% annualised fall — from 90 to 64 — in the number of construction-related firms going out of business; a 20% fall in cases in the hospitality sector and an 11% drop in business failures in the retail sector — from 56 to 50 cases. Conversely, there was a 33% rise in motor industry- related insolvencies, with the number of cases going from nine in the first quarter of 2013 to 12 this year.

At 185, the number of creditor voluntary liquidation cases were down nearly 30% on the same period last year. Court liquidations, meanwhile, doubled to 24; while a 23% year-on-year rise in receiverships — to 89 — was noted and there were five examinerships, representing a 29% decline on the first quarter of 2013.