Liquidity risk and insolvency risk for banks | Kiran Kumar posted on the topic | LinkedIn (2024)

Significant upturn in Company Insolvencies in MayAt The Debt Recovery Bureau, we’ve been tracking the numbers of company insolvencies for a couple of years now. This has been by monitoring the filings of Statement of Affairs at Companies House. Whilst not an absolute figure of all such insolvencies, it does give a good indicator of the state of matters.What we did see in May was a significant upturn and for the first time in the two years we have been monitoring, there was an average of more than 100 filings per day for the entire month. I expect this to equate to more than 2,500 insolvencies for the month of May once the official figures are released, beating March 2023’s record.This reinforces what we are seeing; an increase in debt recovery work as cash dries up for many businesses and individuals. In addition, those who do have cash are holding onto it for longer and stretching credit terms as far as they can. This has a knock-on effect for their creditors and the additional financial stress is pushing more and more companies over the precipice of insolvency.In addition, Insolvency Practitioners we know and work with are very busy currently. As well as out traditional overdue invoice debt collection, we are seeing increased work volumes from our Insolvency partners as they struggle to deal with the higher volumes.Please don't allow your business to get sucked down by others. Protect your business as best you can by knowing your customers, invoicing promptly, keeping on top of credit control and speaking to us about any of those stubborn/difficult ones!#SofAFigures #debtrecovery #debtcollection #insolvency

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With insolvencies surging to 30% above pre-COVID levels, experts are advising business owners to proactively manage costs and financing while prioritising profit over margin squeeze to avoid a similar fate.This advice follows the latest Alares Credit Risk Insights, revealing an increase in #ATO tax debt recovery actions and court recoveries from major banks.Andrew Spring, a partner with insolvency specialist Jirsch Sutherland, said too many businesses were being forced to chase sales instead of margins and “robbing the future to pay for the past”.Wayne M. CEO of small business lenderFifo Capital, said he had seen the same “misguided” pricing strategies lead to insolvencies and explains how working capital can help businesses navigate these challenges. https://lnkd.in/gr6vzSfx#Insolvencies #Taxman #SmallBusiness #SMEs #BusinessNews #FinancialNews #SMEfinance #WorkingCapital #brokernews

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Corporate bankruptcies and defaults are surging – here’s why. Corporate defaults rose last month, with 41 in the U.S. so far this year. That’s more than double the same period last year, according to Moody’s Investors Service. Companies are defaulting on their debt due to uncertain economic conditions and heavy debt loads. High interest rates have made it difficult to refinance, as debt is more expensive. The number of bankruptcy filings in the U.S. this year has also sharply risen, to levels not seen since 2010.https://lnkd.in/g9aECKk4#tradeguard #receivableputoptions #arputs #receivableputs #tradereceivables #accountsreceivables

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High interest rates impact the increasing number of corporate defaults and bankruptcies according to Tero Janne and Mark Hootnick Co-Heads of Capital Transformation & Debt Advisory in Lillian Rizzo’s CNBC article.Read more here: https://lnkd.in/e4b_KQaM#finance #debtadvisory #leverage #liquidity #bankrupcy #defaults #restructuring #investmentbanking

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There are nearly 60,000 businesses with warehoused Revenue debt of €1.8 billion with 85% of the total warehoused debt held by about 6,000 businesses. Unless the Revenue extends its deadline for either repaying the debt or reaching a phased payment agreement, companies who are unable to either repay or reach an agreement by May 1st are likely to require some form of restructuring.In a dynamic business landscape marked by rising insolvencies, the importance of effective debt collection cannot be overstated. 💼💡 As businesses navigate through uncertainties, optimizing cash flow becomes paramount for sustainability and growth. 📈💰Debt collection isn't just about recovering outstanding amounts; it's a strategic pillar for maintaining financial health. ⚖️ Proactive debt collection practices ensure that companies can meet their obligations, safeguarding both their own viability and the stability of the market at large.In times of economic volatility, a robust debt collection strategy acts as a safeguard, helping businesses weather the storm. 🌧️ It's not just about minimizing losses; it's about fostering a culture of responsible financial management that resonates throughout the industry. 🌐✨Contact us today if you recognize the significance of debt collection in today's market and wish to add additional resources to your finance team. 💪🤝 #accountsreceivable #DebtCollection #FinancialResilience #BusinessStrategy #MarketDynamicshttps://lnkd.in/edYMrRen

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📊 𝗗𝗲𝗺𝘆𝘀𝘁𝗶𝗳𝘆𝗶𝗻𝗴 𝗗𝗲𝗯𝗲𝗻𝘁𝘂𝗿𝗲𝘀: 𝗨𝗻𝘃𝗲𝗶𝗹𝗶𝗻𝗴 𝗧𝘆𝗽𝗲𝘀 𝗮𝗻𝗱 𝗡𝘂𝗮𝗻𝗰𝗲𝘀 📈Let's decode the world of debentures, a financial instrument integral to companies' growth. Debentures stem from the Latin '𝘥𝘦𝘣𝘦𝘳𝘦,' meaning 'to borrow,' and embody a written acknowledgment of debt, outlining repayment terms and interest obligations.Various categories of debentures arise, driven by redemption, tenure, convertibility, security, interest rates, and more.🔰 𝗘𝘅𝗽𝗹𝗼𝗿𝗶𝗻𝗴 𝗗𝗶𝘃𝗲𝗿𝘀𝗲 𝗗𝗲𝗯𝗲𝗻𝘁𝘂𝗿𝗲 𝗧𝘆𝗽𝗲𝘀:1. 𝗦𝗲𝗰𝘂𝗿𝗶𝘁𝘆 𝗔𝘀𝗽𝗲𝗰𝘁𝘀 🔒Secured Debentures: These carry a charge on enterprise assets, enhancing repayment security. A fixed charge ties to specific assets, while a floating charge extends to general assets, bolstering investor trust.Unsecured Debentures: These lack asset charges, often accompanied by floating charges by default. Typically, less prevalent due to perceived risk.2. 𝗧𝗲𝗻𝘂𝗿𝗲 𝗜𝗻𝘀𝗶𝗴𝗵𝘁𝘀 🗓️Redeemable Debentures: Due for repayment within the enterprise's lifespan, in lump sums or installments, often at a premium or par.Irredeemable Debentures: Known as Perpetual Debentures, repayable upon enterprise closure or long-term expiration.3. 𝗖𝗼𝗻𝘃𝗲𝗿𝘁𝗶𝗯𝗶𝗹𝗶𝘁𝘆 𝗩𝗮𝗿𝗶𝗮𝘁𝗶𝗼𝗻𝘀 🔄Convertible Debentures: Offer conversion to equity shares or other securities, driven by enterprise or holder choice. Conversion can be partial or complete.Non-Convertible Debentures: Remain unconvertible, prevalent among enterprise-issued debentures.4. 𝗖𝗼𝘂𝗽𝗼𝗻 𝗥𝗮𝘁𝗲 𝗦𝗽𝗲𝗰𝘁𝗿𝘂𝗺 💹Specific Coupon Rate Debentures: Carry designated interest rates, referred to as the coupon rate.Zero-Coupon Rate Debentures: Lacking fixed interest, sold at a discount, bridging the gap between nominal value and market price.5. 𝗥𝗲𝗴𝗶𝘀𝘁𝗿𝗮𝘁𝗶𝗼𝗻 𝗙𝗮𝗰𝗲𝘁𝘀 📑Registered Debentures: Hold holders' details, filed in a register. Transfers require a formal process, ensuring security and accountability.Bearer Debentures: Transferred through delivery, without formal registration. Interest coupons accompany these debentures.Mastering the diverse debenture landscape can empower investors and enterprises, shaping strategies for growth and financial stewardship.#DebenturesExplained #FinancialInstruments #InvestmentInsights #CapitalStructuring #BusinessFinance #DebtVsEquity #FinancialDecisionMakingEquivaluesearch Saumitra Mondal

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By the fourth quarter of 2024, default rates for U.S loans could reach a peak of 11.3%, indicating that more financially distressed businesses will struggle to service on their debt, according to Deutsche Bank analysts. Check out this article on the growing number of private equity-backed companies seeking bankruptcy. https://bit.ly/3qLAmVR #bankruptcy #distresseddebt #restructuring

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How do you determine if a debt restructuring plan is feasible?Restructuring need arises on the past performance assessment, holistic review of overall goals, objectives, and performance indicators. As the exercise starts, it manifests the failure of benchmarks and pledges set for improvement. Obviously, debts obtained in the past were either mis/under-utilized or there were gaps, not conceived before entering into a debt deal. Now, in order to restructure existing unstructured debt, the elasticity of stringency has to be increased manifold. Likewise, cash flow management without any incremental inflows will be undertaken. It needs to be seen that a cash-starved entity negotiating for debt restructuring has to demonstrate a viable business plan and a plan of action, wherein concrete and visible interventions will make the deal workable. The prime obligation will be that of a debtor, however, the creditor must also put certain firewalls that the cash inflow foregone presently will yield going forward. It’s a complex exercise and entails continuous monitoring that too on a real-time basis. There is hardly any dedication to quantification of the "feasibility" of the restructuring plan, nonetheless, the transformation of assertions into reality is still achievable, provided will is there. A win-win situation at the time of re-negotiations should not impair the sustainability of the business and the restructuring tilt should be “comprise” oriented with clear commitments along with timelines for their honor. Credits to Sardar Rahat Azeem#debtmanagement #debtrestructuring #cashflowmanagement #negotiations #commitments

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Insolvencies are back on the rise in the UK as rising #interestrates make it increasingly difficult to take on, finance and repay debt. Many companies are having to use their emergency cash reserves to meet their liquidity requirements, thus intensifying liquidity issues. As such, we’re seeing an uptick in the number of firms needing debt restructuring services and looking at ways to compromise their existing #balancesheet liabilities. David Milliken from Reuters provides further analysis in this article. #insolvency #refinance #restructuringplan

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U.K. ⛅ “The recent rise in company insolvencies has been driven by a high number of creditors’ voluntary liquidations. The outlook for the rest of 2023 is that there will be an even higher number of companies entering a formal insolvency process in almost every sector and industry.A high proportion of these insolvencies are small businesses, some of which had managed to keep going with the help of Government-led support packages and bounce back loans, but with rising interest rates and inflation, they are now struggling to repay loans and obtain financing."#uk #insolvency #liquidation#construction #engineering#business #management #future

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