Business-rescue bids rise

MANY companies are likely to continue to struggle and those already restructuring may require stronger measures to resolve their problems as economic prospects take a dive‚ a report by Deloitte has found.

Deloitte senior manager for restructuring services Wanya du Preez said yesterday that South Africa's main industries were facing increasing pressure from risks such as labour unrest‚ electricity supply constraints and input cost pressures.

Du Preez said there had been an increase in business-rescue applications‚ especially among those sectors affected by the strikes. However‚ many companies were leaving it too late to be saved.

She is the author of Deloitte's latest South African Restructuring Outlook survey, which includes interviews with more than 30 restructuring professionals.

The report found that 72% of respondents believed the country's economy would stagnate in the coming year‚ barring any trigger events like an interest-rate rise‚ while most of the other respondents expected a recession.

According to the survey‚ 50% of restructuring teams expected an increase in activity of more than 20% in the next 12 months.

Du Preez said it could be expected that several manufacturers would find themselves facing major financial challenges that could affect their ability to trade. For many‚ the only options that seemed to be available were closure and liquidation.

Unfortunately‚ those options often became a reality if businesses waited too long before applying for business rescue.

A business-rescue expert from Webber Wentzel‚ Lara Kahn, said yesterday she agreed with the finding that business-rescue applications were on the rise due to the tougher economic conditions.

But one positive trend was that courts were more willing to provide business-rescue orders now than they had been in the past‚ giving business-rescue practitioners more time to try to save a company. – BDpro