Aussies entering administration increases

Laura Ashley1The number of Australian companies going into administration has surged over the past year, largely because of weakness in mining and retail.

Analysis of the corporate watchdog’s insolvency statistics puts the number of companies entering external administration for the 12 months to March at 10,299, an increase of 18 per cent on 8,751 in the prior corresponding period.

Recent high-profile insolvencies include large materials companies Arrium and Queensland Nickel, as well as retail businesses Dick Smith and Laura Ashley.

Coal miner Peabody Energy, which runs 10 mines in Australia, recently filed for Chapter 11 bankruptcy protection in the United States.

The managing director of corporate finance and restructuring at FTI Consulting, which did the analysis, said there had also been a marked increase in restructuring and insolvency activity at the large corporate and institutional end of the market

“The trend seems to indicate that mining, related services and downstream processing continues to show strain as a result of low commodity prices continuing,” Quentin Olde said on Tuesday.

“The retail sector has shown noticeable signs of strain, with a number of insolvencies and reported profit downgrades by major retailers.”

Australia’s big four banks have all increased provisions for bad debts on specific clients including Dick Smith and Arrium.

Western Australia experienced a 36 per cent increase in the number of companies entering external administration over the past year, rising to 1,006, while the number of firms in Queensland rose 23 per cent to 2,184.


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