The number of Creditors’ Voluntary Liquidations, High Court Liquidations, Receiverships and Examinerships in the nine months ended 30 September 2009 has increased by a staggering 138% on the same period in 2008. Declan Taite, FGS Corporate Restructuring & Insolvency Partner analyses the statistics.

Figures compiled by FGS show that 1,135 companies were placed in liquidation, receivership or examinership in the first 9 months of 2009, representing a dramatic increase (138%) on the 477 failures for the same period in 2008.

The acceleration in the number of failures in the last quarter has continued from the first six months of the year where some 733 failures occurred.  Should the trend continue for the remainder of 2009 it is probable that some 1,500 to 1,600 failures will occur compared to 753 failures in 2008.

The tables below set out an analysis of these failures by industry (table 1) and geographical location (table 2).

Table 1
Summary of Insolvent Liquidations, High Court Liquidations, Receiverships and Examinerships by Industry
Period 1 January 2009 to 30 September 2009

Industry	Number of Cases 9 Months Ended 30 Sept 2006	Number of Cases 9 Months Ended 30 Sept 2007	Number of Cases 9 Months Ended 30 Sept 2008	Number of Cases 9 Months Ended 30 Sept 2009
Construction & Engineering	92	73	190	399
Hospitality Services (Bars/ Restaurants/Hotels/Food Processing)	33	32	68	164
Professional & Consultancy Services	12	16	28	69
Retail	18	25	24	58
Furnishings/Interior Design	3	6	24	93
Transport & Haulage	15	5	20	29
Manufacturing	15	19	20	41
Printing & Packaging	7	18	18	29
Healthcare & Leisure	22	11	17	45
Information Technology	15	14	15	39
Motor Industry	10	4	15	68
Media & Marketing	2	9	14	16
Clothing	12	15	12	42
Security	6	4	7	13
Miscellaneous	8	3	4	22
Horticulture	10	2	1	8
Total	280	256	477	1,135

Table 2
Summary of Insolvent Liquidations, High Court Liquidations, Receiverships and Examinerships by County
Period 1 January 2009 to 30 September 2009

County	Number of Cases 9 Months Ended 30 Sept 2006	Number of Cases 9 Months Ended 30 Sept 2007	Number of Cases 9 Months Ended 30 Sept 2008	Number of Cases 9 Months Ended 30 Sept 2009
Dublin	133	119	210	495
Cork	26	16	34	110
Limerick	14	9	27	49
Galway	14	14	25	70
Meath	12	15	18	39
Kildare	9	16	17	50
Wexford	8	8	15	22
Donegal	3	7	15	18
Kilkenny	1	3	13	14
Wicklow	8	9	10	29
Tipperary	-	6	10	18
Louth	16	3	10	35
Kerry	3	2	10	15
Waterford	2	2	9	16
Offaly	6	1	9	19
Clare	2	13	8	19
Westmeath	3	4	7	19
Mayo	6	3	7	12
Leitrim	-	-	6	3
Cavan	2	1	5	20
Carlow	7	-	4	7
Monaghan	1	1	4	7
Sligo	-	-	1	5
Laois	1	1	1	19
Longford	3	-	1	12
Roscommon	-	3	1	13
Total	280	256	477	1,135

The figures, whilst representing significant increases, are not overly surprising when set against a backdrop of continued recessionary pressures both nationally and internationally.  The ongoing lack of liquidity, cashflow constraints, increasing unemployment, negative consumer sentiment etc. have all contributed to the increase.

The ongoing demise in the construction sector is obvious from the statistics.  399 or 35% of all failures occurred in this sector.  This compares with 28% in 2007 and 40% in 2008.  To put these figures into context, there were more failures recorded within the sector in the first nine months of 2009 than were recorded in the same periods in 2006, 2007 and 2008 collectively.

The failures in the construction sector, in the main, continue to be small to medium sized developers and or sub contractors.  However in the past number of weeks there has been an increase in the size and magnitude of the entities failing. The ongoing reduction in house prices, a virtual stop in the number of new units being built, uncertainty regarding the availability of credit for small to medium type developers and purchasers all indicate that much uncertainty is likely to prevail in the short term.  The uncertainty is likely to be further compounded by delays in establishing The National Asset Management Agency (“NAMA”).

With regard to the trends emerging from the first nine months of 2009 it is noted that Dublin continues to account for the majority of failures. Some 495 or 43% of all failures in the period took place in the capital in contrast to 119 or (47%) in 2007 and 210 (44%) in 2008.

Significant increases in the number of failures in Cork (34 in 2008 as opposed to 110 in 2009); Galway (25 in 2008 as opposed to 70 in 2009); Meath (18 in 2008 as opposed to 39 in 2009) and Kildare (17 in 2008 with 50 in 2009) should be noted.  The only county which recorded a decline in the number of failures was Leitrim.

Notable trends in the industry sectors, in which the failures have occurred, include the significant increase in failures in the hospitality sector such as pubs, restaurants and suppliers to the industry where 164 collapses occurred or 14% of the total. This compares with 68 failures in the sector in the same period in 2008.

Other notable sectors in which failures occurred were professional services (69), retail (100) of which 42 were recorded in the clothing retail area and home furnishings / interior design (93).  In addition the motor industry experienced a dramatic increase in failures from 15 in 2008 to 68 in 2009.

A significant increase in the number of receiverships was recorded in the first nine months of 2009 when compared with the same period in 2008.  Between January and September 2009 financial institutions / debenture holders appointed receivers to 123 businesses as opposed to 34 in the same period in 2008.  The majority of these receivership appointments have occurred in the construction / development and hospitality sectors.  The draft NAMA legislation includes provisions for the appointment of “Statutory Receivers”.  It will be interesting to observe if NAMA, once established, will pro actively invoke this entitlement.

The utilisation of the examinership process has also increased in the first nine months of 2009.  79 companies had examiners appointed to them in the first nine months of 2009 as opposed to 30 in the same period in 2008.

It would appear that there is now a greater awareness and appetite amongst distressed and ailing businesses to look at restructuring options, in particular examinerships as a credible alternative to the traditional liquidation or receivership process. However this must be measured against the recent comments from Justice Peter Kelly regarding the number of companies that do not successfully come through the process and the recent Supreme Court decisions in relation to the Zoe Group of companies.

Declan Taite is a partner in the FGS corporate restructuring & insolvency division located at the Dublin office:

t: +353 (0) 1 418 2000
e: declan.taite@fgspartnership.com