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Spotlight On...
Insolvency Market T
SPOTLIGHT ON...
he illustration below shows how the receivership and liquidation market has tracked in the last few years. What is interesting about these statistics is how little examinership has been used
through the financial crisis. These figures relate just to corporate enforcement and do not reflect the level of enforcement against personal debt and assets held by individuals which appointment numbers are not advertised.
this is an integrated approach to receivership with the bank, the receiver and third party service providers who are aligned with agreed service levels and fee arrangements. On the trading businesses this has evolved into a receiver/operator model whereby receivers on appointment enter into a management agreement with a specialist operator to manage a business on the receiver’s behalf pending sale. This is particularly well developed in areas such as hotels, pubs, pharmacies, convenience stores and supermarkets to name a few.
The vast majority of activity in the insolvency market, unsurprisingly, has been property related primarily around
deleveraging activity within the various
banks in the lower to mid-tier exposures. This has resulted in the development of what are commonly referred to as “receivership platforms”. Simply put
The sale of property by receivers has become commonplace in recent years. Many buyers perceive a price discount solely because a receiver is selling a property and there is a misconception that a receiver will sell at a reduced value simply because it is a perceived to be a ‘fire-sale’. In fact, as a vendor, the
Declan McDonald, Partner, Corporate Recovery and Insolvency, PwC Ireland
The last six-to-seven years have seen an unprecedented level of activity in the insolvency market with enforcement volumes peaking in 2012. The improvement in the property market and general uplift in economic activity has seen the level of corporate enforcement tapering off in 2014.
receiver has a duty of care to obtain the best price in the market at the time of sale and it could be argued has a higher duty of care than many other vendors in the market. On residential properties, in particular, the price gap between similar properties sold in receivership or by private sale has narrowed considerably and in most cases is non-existent. If there is a discount, it will generally be more to do with an information deficit or the reduced level of warranties given by a receiver.
In some instances, buyers express frustration with a receiver sale and argue that it can take longer and be a more difficult transaction than a normal private sale. Broadly speaking there are two reasons for this. Firstly, the receiver may be attempting to rectify documentation problems particularly if the borrower is not co-operating. In these circumstances, the receiver may need to take remedial actions to bring the paperwork up to date, such as planning compliance, architect certificates, health & safety certificates etc. Secondly, the receiver needs to be fully satisfied that the market has been tested and is obtaining the best price possible for the property. This needs to be fully documented, with written professional advice received from the sales agent in relation to the proposed selling price. Most private vendors will not have this duty of care obligation and hence may facilitate a slightly quicker sale. Off market receivership sales are rare and will require an increased level of attention in terms of the best price criteria being satisfied.
SME Landscape
The last number of years has been an extraordinarily difficult time in Ireland for small indigenous trading businesses particularly those reliant on the domestic