The debate on the level of restructuring activity continues apace, with two big-hitters in the area nailing their colours to the mast.
According to recent research published by Deloitte, the level of restructuring activity in the UK is expected to fall this year.
In its annualUK Restructuring Outlook, the research firm interviewed 40 key restructuring lenders in the UK, including traditional bankers, alternative lenders and asset-based lenders. It found that three quarters (76%) of banking institutions, asset based lenders and alternative lenders expect to see no change (24%) or a fall (52%) in levels of restructuring activity this year.
This follows a quieter 2013, when 40% of respondents saw the volume of cases decrease, despite having anticipated an increase.
However, the findings contradict the view of law firmTaylor Wessing, which believes there will be a rise in restructuring activity this year. It claims that after nearly 5 years of record low interest rates, any earlier-than-expected rise could see more high-street casualties from increased pressure on cash flow. Last year alone saw the collapse of Jessops and Blockbuster.
Neil Smyth, restructuring partner at Taylor Wessing, said: "An upturn in the economy and a possible increase in interest rates will mean activity in the restructuring market is likely to increase in 2014. More money in the market will create opportunities for enforcement and sale, and any interest rate rise will put more pressure on all concerned to act."
Yet Nick Edwards, head of restructuring at Deloitte, disagrees: "Expectations of increases in restructuring activity did not materialise in 2013, as larger companies were able to refinance and the UK economy picked up. Banks in the UK have been strengthening their balance sheets through deleveraging non-core and non-performing loan portfolios, while investor appetite for opportunities has been pushing up prices and increasing deal flow."
Edwards continued: "These factors will continue to impact restructuring activity this year, although businesses with greater working capital requirements could hit difficulties as they try to fund growth. We could also see more restructuring in the retail sector as the high street continues to evolve."
So will less restructuring activity lead to fewer corporate insolvencies? Deloitte believes so, pointing to the fact that insolvency was only the third most likely outcome from a restructuring in 2013. An exit via refinance/sale occurred in 38% of cases, with 20% amending and extending ? just 18% resulted with insolvency.