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Certain sectors, such as hospitality, retail and energy, for various reasons have experienced challenging times in recent years. With the advent and expansion of online services, more traditional organisations have suffered. However, though sectoral trends posed unique problems, a near decade-long economic expansion has seen bankruptcies decline. In 2019, US bankruptcy filings were down 60 percent on 2009 and unemployment was at an all time low of 3.5 percent. Despite troubling geopolitical trends, the economic outlook, in the US at least, appeared positive at the turn of the year. But things changed quickly.

UNITED STATES

Kugman Partners

“In the time period preceding the COVID-19 pandemic, the US economy was characterised by continued growth. Following the summer of 2019, the US economy entered its 10th year of expansion, the longest on record. As a result, bankruptcy filings continued their over 60 percent decline from 2009, the height of the Great Recession. Segments of the economy were, however, experiencing challenges, called ‘micro recessions’ by the US Federal Reserve. In 2019, agriculture, energy and retail experienced micro recessions, resulting in significant increases in bankruptcies in each segment year over year.”

ARGENTINA

Marval, O’Farrell & Mairal

“Over the last 12-18 months, there has been an increase in the number of companies experiencing financial difficulties in Argentina. By the end of 2019, the country was facing another foreign exchange crisis which began in 2018, and which worsened after the primary presidential elections in August 2019. Due to the economy contracting, increased inflation, continued depreciation of the Argentine peso and reduction of the Argentine Central Bank’s reserves throughout the end of 2018 and 2019 we also saw an increase in the number of companies facing financial distress.”

UNITED KINGDOM

BM&T

“Over the last 12-18 months, bankruptcy filings in the UK have been reasonably stable. There was an uptick through the first three quarters of 2019 and a decrease in the fourth quarter. Figures for 2020 are bound to be impacted by the COVID-19 crisis. Interestingly, KPMG produced figures for April 2020, the first full month in lockdown, and reported a significant decrease in insolvency filings. Although counterintuitive, there are explanations. Many businesses went into a form of hibernation and awaited government intervention. Some have survived by the unwinding of their working capital and many will have received government help through the furlough scheme to pay wages and a variety of grants and loans.”

GERMANY

PwC Germany

“To look at this from a broad perspective and reflecting on the state of the German economy, we are looking at a past decade of continuous growth. Amid high sovereign debt levels in southern Europe and Brexit, Germany in particular has long been perceived as a safe haven of the eurozone. However, with the growth engine starting to sputter from rising global protectionism, US-China disputes and increasing geopolitical tensions, we have seen an uptick in restructuring activity since early 2019.”

SWITZERLAND

Prager Dreifuss Ltd

“In recent years, and until the outbreak of COVID-19, the economic situation in Switzerland was generally favourable and there were very few sizeable bankruptcies. In 2019, 15,808 bankruptcy proceedings were opened, a slight decrease of 0.7 percent compared to 2018. While there was a general decrease in insolvencies for businesses in Switzerland, certain regions did record a substantially high amount of bankruptcies in 2019 compared to previous years. The canton of Zurich, Switzerland’s most important economic centre, and Central Switzerland showed the highest increase in bankruptcies, with 8 percent and 5 percent, respectively.”

ITALY

Clifford Chance

“Statistics show that in 2019 the aggregate number of bankruptcy filings decreased compared to 2018. In the last 12-18 months, several major companies operating in different sectors have applied for insolvency procedures. In addition, statistics show a high rate of small and medium sized businesses declared bankrupt. For larger employers, the in-court or out-of-court debtor in possession procedures, such as restructurings, scheme of arrangement or Chapter 11- like procedures, are frequently used, due to the remaining value recoverable from a sale or restructuring and the availability of resources needed to prepare filings, such as business consultants, appraisers, legal costs and so on.”

ROMANIA

BM&T European Restructuring Solutions

“A lot has changed globally of late as countries have been confronted with the COVID-19 crisis. Prior to the outbreak, arguably, Romania and several other countries in the region were still suffering the effects of various other crises, including the global financial crisis among others, so COVID-19 has simply added more fuel to the fire. Governments and nations are fighting the outbreak in various way and with different tools. Romania is, I think, a country of two extremes; it has done a good job on the medical front, but it has done poorly economically.”

INDIA

Mazars in India LLP

“The Insolvency and Bankruptcy Code, 2016 (IBC) consolidated the earlier laws concerning restructuring and rescue in India and has effectively been in operation since January 2017. The latest bankruptcy statistics reveal that filings saw an 87 percent year on year increase in 2019 from 2018. The last two quarters of 2019 saw the biggest spikes, with an increase of over 80 percent in each quarter. The increase could be attributed to massive stress in the system and creditors increasingly relying on the IBC for recovery and resolution. Banks in India have also been under pressure from the Reserve Bank to address the ‘twin balance sheet’ problem for a while now.”

AUSTRALIA

Ankura Consulting (Australia) Pty Ltd

“The restructuring landscape has changed in recent years with the introduction of the safe harbour regime and a push toward informal and consensual restructuring and away from formal insolvency processes. Overall, there has been limited activity in the restructuring market as debt and equity markets have provided solutions. Further, fallout from the Royal Commission into misconduct in the banking industry has seen retail banks reluctant to enforce their security in distressed situations and receivership appointments have been minimal.”

CONTRIBUTORS

Ankura Consulting (Australia) Pty Ltd

BM&T

BM&T European Restructuring Solutions

Clifford Chance

Kugman Partners

Marval, O’Farrell & Mairal

Mazars in India LLP

Prager Dreifuss Ltd

PwC Germany