Katrina Edge and Bruce MacNeil, of Ogier (Jersey) LLP, explain how global events and economic pressures are forcing many companies to seek advice on debt and corporate restructuring
REPORTS in June of a 40% year-onyear increase in corporate insolvencies in England and Wales demonstrate the combined impact of government Covid-19 support being withdrawn, soaring energy costs, inflationary pressures, interest-rate increases and weakening demand.
This is reflected in the nature of the instructions coming into our jurisdictions from distressed companies across the globe. We expect the impact of these pressures to not only result in an increase in global restructuring and insolvency activity, but also an increase in activity in the Jersey market.
Currently we are seeing an increase in contingency planning and security reviews both from credit institutions and borrower clients. Clients are also reacting to increased interest rates, supply-chain issues and currency fluctuations which are impacting new transactions and prompting pricing reviews for current lending portfolios. We expect this to continue over the next year.
Over the past 12 months, our Jersey team has advised a number of creditors and large multinational companies requiring debt and corporate restructuring advice (including on debt for equity swap transactions and security enforcements). As inflationary and other economic pressures continue, we expect to see increased demand for this type of advice both for multinational companies (involving Ogier teams in Jersey and our other jurisdictions) and local Jersey businesses.
Globally, the steadiest flow of restructuring work post-Covid is from the Asian markets, primarily impacting our teams in the Cayman Islands, BVI and Hong Kong (in respect of BVI/Cayman work originating from Asian markets). We continue to see investors, investment managers and credit institutions, who are showing less tolerance for liquidity excuses, starting to take strategic steps to address these. We expect this trend to continue over the next 12 months, with more aggressive action possible given the well-publicised strain in capital markets and the property market in China.
Looking ahead over the next year, we expect credit institutions will undoubtedly play their part in the financial markets by working with businesses to amend existing credit facilities and restructure generally. However, the above factors may well lead to further insolvencies in this period.