Bad Press – Helping or Hindering Rescues?

The parallels between the 1930 Great Depression and our current situation are striking:

There are numerous "bad cop" stories in the news-papers at the moment. I am sure some of those are founded on solid belief, however, I wonder if the recent attacks on Pre-Packaged Administrations and Company Voluntary Arrangements (CVA) will help.

There is uncertainty on the street, in the shops and in industry. Banking, for the first time in our memory is now considered a high risk environment. “Good”, I hear many shout; scandal, bonuses and lending strategy stories echoing fresh in our minds, however . . .

The Insolvency legislation created some very strong and very powerful tools, to assist with the economic downturn. Fuelling uncertainty and creating more PR issues for high street lenders at a time when these tools are being used at their best - business survival - is surely a mistake.

Pre-packaged administration is a tool and when used correctly, helps businesses survive. Often, they have been used to "flip" a business back to the directors without any management changes or the injection of (much needed) turnaround finance. These proposals are often rejected by creditors but the turnaround profession recognises this and only use administration where appropriate.

It is a fact that some turnarounds do not work, but let's not shy away from the fact that distressed or insolvent businesses are unable to pay their creditors. It is inevitable that some creditors will lose money when a business is being restructured to survive. This is a fact of life when a business is insolvent. However, the creditors' position is often improved by the business going through a restructuring, when compared with terminal insolvency. This could be as simple as the continuation of supply with those creditors in a new entity.

Given the potential upside compared with the reality facing the businesses, their creditors, banks, landlords, employees and clients; surely we should support the use of the insolvency tools at a time when those businesses and the economy need them the most. For the experienced turnaround professional there are various tools upon which he can call. A pre-packaged administration with a CVA is one of them.

TMP has been a market leader in the turnaround field for over 16 years, using insolvency procedures, turnaround finance, commercial prowess and deal-making finesse to restructure companies. We have helped hundreds of businesses, large and small; we have won awards; we have pioneered new techniques and in some cases influenced case history.

All of this puts us in the driving seat to help fight for companies and where appropriate, their right to survive in the current economic climate.