Posted: 04/05/2012
Around 100 businessmen and women attended a recent KPMG seminar entitled: ‘Going for broke! Insights into offshore and cross border insolvency'.
The seminar, presented by restructuring professionals Linda Johnson and Mike Pink, provided an overview of the local insolvency landscape, as well looking at the high profile special administration of MF Global UK Limited.
Mrs Johnson, restructuring director for KPMG in the Channel Islands,used examples from her local experience to demonstrate the similarities between large, high-profile global insolvencies, such as MF Global, and those at a local level.
“Regardless of size or complexity, the duty of liquidators remains the same: To protect and preserve value for all stakeholders. Even seemingly straight forward liquidations can encounter unforeseen complexities or problems, and this is where the timely and pragmatic solutions offered by an experienced insolvency professional can assist in preventing futher value erosion” she said.
In the wake of the financial crisis the number of local insolvencies has been relatively low compared with that seen in the UK, however this may well change in the coming years given the continuing austere economic conditions and restriction of available finance.
“Over the past 18 months we have undertaken an increasing number of forensic investigations, however there appears to be a lot more stress bubbling away below the surface and the indicators suggest that we might see an increase in the number of formal insolvency proceedings locally,” said Mrs Johnson.
The illiquid market conditions add to the complexity of insolvencies particularly where there are property or infrastructure assets, or side-pocketed investment securities to realise.
“Insolvency proceedings require a multi-disciplinary, and often a multi-jurisdictional, approach incorporating the necessary specialists, such as M&A, tax, valuation, legal and corporate finance. The strength of KPMG's global network allows us to leverage the skills and capabilities of specialists in the jurisdiction where assets are located, assisting us to protect and maximise value for stakeholders” she said.
Joining Mrs Johnson, and providing insight to the wider European picture, was KPMG London's restructuring associate partner Mike Pink. Mr Pink is joint special administrator of MF Global UK Limited and Dunfermline Building Society, and has 25 years of insolvency experience.
Mr Pink provided his own perspective on the European insolvency landscape, taking into account the Euro currency stability issues, the sovereign debt crisis and the rebalancing of economies in the wake of the financial crisis. He identified real estate, retail and construction as those industries most likely to become over-leveraged and facing issues such as liquidity and debt refinancing.
The second half of his address looked specifically at the administration of MF Global UK Limited, which is first administration under the provisions of the UK Investment Bank Special Administration Regulations 2011.
“We first found out about MF Global being in difficulty on a Friday afternoon and were appointed the following Monday, this gave us just a weekend to try and work out what was going on,” he explained.
“The complexities of interpreting the requirements under the new Special Administration Regime, as well as the complexities around taking control and unwinding the business, which operated in some 70 international exchanges and clearing houses, continues to make this assignment extremely challenging.”
At the moment the Channel Islands seem to have escaped relatively unscathed. However with the Eurozone crisis continuing to dominate the headlines and increasing cash flow pressure in the corporate sector, it is important not to be complacent.