We have developed a restructuring framework for businesses impacted by COVID19 disruption. Our tailored hibernation strategy aims to stabilise the business during the disruption period and improve the businesses financial position post pandemic through a combination of informal and formal restructuring methods.
It’s important for businesses to put in a regime that will allow them time to understand the impact of the current environment and to adequately assess their options and plan. Time is a key success factor for weathering the Coronavirus disruption.
Directors need to act early at the first signs of financial stress. Taking early and appropriate action to deal with a company’s financial difficulties will put the Company in the best position to turn a company around and avoid administration and/ or liquidation, as well as to trigger safe harbour protection.
We recommend any businesses who are experiencing financial difficulties to contact us to arrange for an obligation free consultation to assist in exploring options for the businesses. Our restructuring, insolvency and advisory Partners are available to discuss your needs at any time:
Christian Sprowles, Partner (0447 660 007) firstname.lastname@example.org
Michael Hogan, Partner (0421 619 942) email@example.com
Brendan Copeland, Partner (0435 925 568) firstname.lastname@example.org
Determining the correct response for businesses will be dependent on each businesses’ own financial situation. The available options vary dependent on whether the business is sufficiently capitalised or undercapitalised.
The government has announced a stimulus packages for financially distressed businesses which will provide much needed relief for some, however it should be put into perspective by asking the following questions:
• Despite the stimulus measures will the business run out of cash in the short to medium future? (i.e. what liabilities cannot be deferred and how does this affect cash flow)
• What does the business look like post- stimulus? Can the business repay the accrued liabilities (increased bank debt, trade creditors, lease and ATO liability)? Some businesses may be deferring insolvency and should be looking at a holistic restructuring approach.
• How will suppliers react to the stimulus measures? For instance, with a freeze of the insolvent trading provisions and lengthening of time for compliance to creditors statutory demands to 6 months, suppliers may tighten up credit terms with “Cash on Delivery” type arrangements.
The stimulus measures are short term by nature. Businesses must have regard to the longer-term working capital impacts caused by the COVID-19 pandemic, which would include the use of stimulus measures and broader restructuring measures that deal with post- stimulus.