Partner Article

Yorkshire firms face complex restructuring challenges

Experts at Deloitte have warned that the restructuring of SMEs in Yorkshire has become increasingly complicated during the recession as more and more refinancing routes are closed off.

According to the surveyor, businesses in the retail, hospitality and leisure sectors are particularly at risk, while care homes and construction companies are also more vulnerable than others.

A survey of over 30 senior restructuring professionals at lending organisations showed that 52% expect the number of UK businesses seeking their help to increase in 2013.

Dan Butters, Restructuring Services Partner at Deloitte in Yorkshire, said: “It has become increasingly challenging to find quick solutions in stressed restructuring situations, due in part to the scarcity of refinancing options and the lack of options for further cost reductions.”

Deloitte has urged firms to investigate alternative routes to resolve refinancing needs, and stressed the need for close cash management.

Mr Butters continued: “Innovation and pro-activity are the key elements here. Management should engage with stakeholders promptly to gain early support, manage cash and working capital actively, and, most importantly, recognise when additional management support and advice is required.”

Deloitte blames “exotic” structures implemented during more prosperous times for the high levels of complexity in debt solutions that businesses are now facing.

The firm’s study predicted that retail companies would account for 20% of restructuring work in the next 12 months, while the healthcare, real estate and shipping sectors would take up 11% each, and manufacturing would account for 9%.

Mr Butters concluded: “There is still considerable work to be done to get companies back into shape and some will come around for a second or even third restructure before being finalised.

“The new entrants, such as distressed investor funds, bring much needed fresh capital; however, there remains the concern that too often the bid-offer spread is too wide.”

This was posted in Bdaily's Members' News section by Miranda Dobson .