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2011 Worst Year on Record for Corporate Insolvencies – Business Stress Report

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Every quarter here at Dissolve we break down the most telling corporate insolvency, liquidation and restructuring statistics into our Business Stress Report. Our latest report reveals that 2011 was the worst year on record for corporate insolvencies. You can download the full Report here and I’ve given a summary below.

ASIC recently released statistics for insolvencies for November 2011 and the 9,718 corporate insolvencies in the 11 months to November 2011 is 10% higher than for the same period in 2010.  The 11 months to November 2011 has already exceeded the full calendar year of 2010 which was the previous highest full year.

Interestingly, November 2011 itself, with 983 insolvencies, was up 17% on November 2010 but short of the highest ever November which was in 2008.

Other key findings of the latest Business Stress Report are as follows:

  • The cost of All Bank New Asset Impairment Charges (or “Bad Debts”) for Australian Banks in the period from January to September 2011, being the latest results available, is $15.7 billion.  That is a decrease from the same period in 2010, which was $18.1 billion, but still well above the average pre-GFC level of $3 billion.
  • An analysis on a state-by-state basis for calendar year 2011 reveals significant problems for Tasmania (up 82% on the average of the previous five years) and Western Australia (up 70%).  There is a more moderate increase in insolvencies for Victoria (up 21%), South Australia (up 36%) and Queensland (up 38%).  New South Wales is only up 9%.
  • Interestingly, the increase for Queensland insolvency numbers since the floods in January 2011 has, so far, not been as dramatic as expected.  For the 11 months to November in 2011 there have been 1,896 Queensland insolvencies compared to 1,826 for the same period in 2010, being an increase of only 4% for the year.  However, the months of October and November 2011 were records for that state so there are indicators that problems are now on the rise.
  • The percentage of insolvent companies successfully using insolvency legislation to restructure has continued to decline from its high of 14% in 1999 to a new low of 5%.

The number of corporate insolvency appointments in 2011 has seen a number of monthly “highest evers” and the calendar year 2011 was the highest ever calendar year.  The better news is that there are some indicators that the numbers may be plateauing. The cost of Insolvencies (All Bank New Asset Impairment Charges) has been on a slow decline from their peak at $11.4 billion in the June 2009 quarter but the $5 billion figure for the September 2011 quarter could be regarded as only “less bad” when compared to the pre GFC average of $1.1 billion.

Overall, the figures show that there has been a move from a smaller number of large insolvencies immediately post GFC to record numbers of insolvencies in 2011 but of a smaller value.

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