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The coronavirus (COVID-19) pandemic was a ‘black swan’ event that caused huge disruption and distress for many companies. Though it has receded, companies have been forced to contend with other financial and geopolitical challenges. Inflation, higher interest rates and wars in Ukraine and the Middle East have contributed to the squeeze. At the same time, the cost of living crisis has impacted consumer confidence and spending, with implications for a range of industries, especially retail and hospitality. The construction industry has also been hit hard by a drop in demand for new housing.

UNITED STATES

Teneo

“Across multiple sectors, we are observing the consequences of one too many ‘kick the can down the road’ resets. The worst performing quartiles, the most undercapitalised entities and those with the weakest management are being sold or liquidated. Further, following the Silicon Valley Bank situation, along with rising interest rates, it has become increasingly difficult for smaller, startup type companies to raise capital. This, coupled with all the special purpose acquisition companies (SPACs) that were formed over the past few years, has resulted in several inadequately funded early-stage companies becoming liquidity constrained and being forced to file for bankruptcy in order to sell their assets or liquidate.”

MEXICO

Hogan Lovells

“At least for new businesses, failure remains a constant in Mexico. According to data from the Development Center for Business Competitiveness, only 25 percent of small and medium-sized enterprises in Mexico survive their first two years in business. However, many companies opt to attempt reorganisation outside the courts. Based on publicly available data, the number of insolvency filings in Mexico has remained consistent over the last 18 months. From June to November 2022, 32 cases were initiated, followed by 41 cases from December 2022 to May 2023, and 34 cases from June to November 2023.”

COLOMBIA

Alvarez & Marsal

“In 2023, Colombia’s corporate sector faced significant challenges, as demonstrated by a notable increase in insolvency applications. This trend reflects the ongoing economic adjustments needed in the face of global economic shifts and domestic pressures, including the aftermath of the coronavirus (COVID-19) pandemic, supply chain disruptions and inflation. These factors required strategic shifts within the business landscape to ensure viability amid complex financial challenges, such as diversifying products and services, investing in technology to improve efficiency, and adjusting business models to better meet consumer demands.”

CAYMAN ISLANDS

Alvarez & Marsal Cayman Islands Limited

“Against a backdrop of rising interest rates, inflationary pressure and sustained geopolitical tension, it is somewhat surprising that there has been no marked increase in insolvency and restructuring winding-up applications being filed with the Grand Court of the Cayman Islands. In fact, the number of applications filed has remained relatively consistent year-on-year, with approximately 50 winding-up petitions filed in 2022 and 2023. After a relatively muted start, one year on from its introduction, the restructuring officer regime is gaining significant traction.”

UNITED KINGDOM

RPC

“While activity levels have generally been high, the overall picture in the UK has been mixed. As has been widely reported, the economic conditions have been challenging for many businesses and the number of corporate insolvencies in 2023, at 25,158, was the highest seen for 30 years. The overwhelming majority of these, however, were creditors’ voluntary liquidations, reflecting that it has tended to be the smaller companies to date that have suffered most. But many larger companies are also beginning to feel the squeeze.”

SWITZERLAND

Prager Dreifuss Ltd

“When the financial support measures taken by the Swiss Federal Council to support businesses suffering from the effect of the coronavirus (COVID-19) pandemic came to an end in 2022, the number of bankruptcies increased by 22 percent compared to 2021. Higher interest rates, rising inflation and the global banking crisis caused the number of bankruptcies to rise further in 2023, but only by 5 percent compared to 2022. It is likely that Switzerland reached its peak in terms of the number of bankruptcies in 2023.”

ITALY

Cleary Gottlieb Steen & Hamilton LLP

“After a couple of years of robust recovery following the coronavirus (COVID-19) pandemic, in 2023, growth in the Italian economy slowed significantly, and according to the EU Commission’s forecast, in 2024 it is expected to further deteriorate. The poor performance of the German economy, with which Italy’s manufacturing sector is largely integrated, is also expected to hinder Italian growth. This macro trend has had an impact on failing businesses and the number of bankruptcies in Italy, in addition to the expiry of COVID-19-related public support measures.”

HONG KONG

CMS

“There was an increase in the number of winding-up petitions presented in the last 12-18 months. According to the Hong Kong Official Receiver’s Office statistics, the number of winding-up petitions presented in 2023 was 566, compared to 481 in 2022, and the number of winding-up orders made in 2023 was 354, compared to 303 in 2022.”

CONTRIBUTORS

Alvarez & Marsal

Alvarez & Marsal Cayman Islands Limited

Cleary Gottlieb Steen & Hamilton LLP

CMS

Hogan Lovells

Prager Dreifuss Ltd

RPC

Teneo