DYNAMICS GROUP AG Alvarez & Marsal finds financially distressed Swiss companies rarely use the debt restructuring moratorium as a tool for successful reorganisation
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Media Release Alvarez & Marsal finds financially distressed Swiss companies rarely use the debt restructuring moratorium as a tool for successful reorganisation
Zurich, 9th January 2024 – In Switzerland, the latest trend in company bankruptcies is pointing upwards. The weakness of the global economy, geopolitical conflicts and rising material and energy costs are likely to continue to weigh on the Swiss economy for the foreseeable future, further increasing the need for corporate restructuring and reorganisation in the coming year. Against this backdrop, global professional services firm Alvarez & Marsal has published its annual study on the use of the Swiss restructuring procedure or "debt restructuring moratorium". The procedure offers financially distressed companies protection from their creditors, time and other valuable instruments to restructure and reorganise. In contrast to bankruptcy, it allows companies or parts of companies capable of continuing as a going concern to preserve assets and jobs. According to Alvarez & Marsal, a debt restructuring moratorium can lead to better overall economic outcomes for creditors and the economy than bankruptcy. High success rate of up to approx. 60% could save many companies and jobs Alvarez & Marsal's latest study on Swiss debt restructuring moratoria shows that the number of Swiss companies using debt restructuring moratoria account for only 1.4% of corporate insolvencies in 2022 (compared with 1.6% in 2021, 1.5% in 2020, and 1.6% in 2019). This figure is very low compared with other markets where similar instruments are used much more frequently (US: 33%; Austria: 7%; UK: 6%; Germany: 1.5% in 2022). Swiss companies that have utilised a debt restructuring moratorium in recent years have been able to find solutions for their whole firm or individual business units with a success rate of up to 58% – thereby preserving jobs. Despite its advantages, the debt restructuring moratorium is not a widely used tool and its benefits are little known. The advantages of debt restructuring procedure include, for example, suspension or protection from debt collection and legal proceedings, no seizure of the debtor's assets, or the possibility of terminating long-term contracts if these stand in the way of successful restructuring. Tobias Fritsche, Director at Alvarez & Marsal, says: "The debt restructuring moratorium allows companies to react proactively to market conditions in a still-uncertain economic environment and to use the instrument for operational and financial restructuring.” Alessandro Farsaci, Managing Director of A&M Switzerland, comments: "The Swiss debt restructuring process is a powerful and efficient tool that can help avoid unnecessary bankruptcies, provided that companies consider this restructuring option at an early stage." The A&M study shows that although the Swiss legal framework provides a functional tool for the reorganisation of companies or parts of companies, too often decision-makers only consider this route when it is too late for even a court-ordered reorganization – because the proceedings are considered bankruptcy. The stigmatisation of bankruptcy in Switzerland often prevents companies from using an effective legal instrument that could significantly improve their prospects. A more proactive use of judicial reorganisation could help prevent avoidable bankruptcies, protect Swiss jobs and preserve value for all stakeholders. - - Notes to the editors Methodology The study's data collection is based on official publications in the Schweizerischen Handelsamtsblatt (SHAB) and is limited to corporations and limited liability companies. For the analysis of non-published debt restructuring moratorium proceedings, the authors collected data directly from the official Swiss bankruptcy courts. Of the 110 courts surveyed, 80% responded. The high response rate allows for robust conclusions to be drawn from the data. In addition, the data were discussed with the majority of the administrators active during the period under review. The allocation of rescheduling cases to a specific year was determined based on the date the provisional rescheduling was granted (e.g., if the provisional rescheduling was granted in 2020 and converted to a definitive rescheduling in 2022, the case is only counted in the 2020 period). Complete study The complete study is available here About Alvarez & Marsal Companies, investors and government entities around the world turn to Alvarez & Marsal (A&M) for leadership, action and results. Privately held since its founding in 1983, A&M is a leading global professional services firm that provides advisory, business performance improvement and turnaround management services. When conventional approaches are not enough to create transformation and drive change, clients seek our deep expertise and ability to deliver practical solutions to their unique problems. With more than 8,500 people providing services across six continents, we deliver tangible results for corporates, boards, private equity firms, law firms and government agencies facing complex challenges. Our senior leaders, and their teams, leverage A&M’s restructuring heritage to help companies act decisively, catapult growth and accelerate results. We are experienced operators, world-class consultants, former regulators and industry authorities with a shared commitment to telling clients what’s really needed for turning change into a strategic business asset, managing risk and unlocking value at every stage of growth. To learn more, visit: AlvarezandMarsal.com
CONTACT: Nicolas Weidmann Additional features: File: Media Release_Alvarez Marsal_Swiss Dept Restructuring Moratoria_24101_E_Final File: AM_Debt Moratorium Publication_19-22_EN
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1810453 09.01.2024 CET/CEST