‘An earthquake is coming’: Insolvency second wave looms as once-strong businesses falter
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Shayne Kukulowicz a partner at Cassels Brock & Blackwell LLP, and chair of the firm’s restructuring and insolvency group, said some proceeding could cure operational or balance sheet issues and a streamlined business may emerge. But much depends on the trajectory of the spread of COVID-19, rolling lockdowns and the development of a vaccine.
“An insolvency proceeding won’t increase the number of customers at a restaurant,” Kukulowicz said.
One thing struggling businesses appear to have in their favour at the moment is a reluctance by bankers to pull the plug on loans in the midst of a global economic and public health crisis.
“Banks may be concerned about the optics of enforcing against companies that are struggling due to external factors,” said Kukulowicz.
In addition, he said, the “practical reality” right now is that it would lead to a distress sale with a dearth of buyers for assets in hard-hit sectors.
Rogers said Canada’s large banks are “cognizant of reputational issues,” which may be keeping them from calling loans where businesses are falling behind in payments, or are likely to do so once government support disappears.
“They understand their critical role in supporting Canadian business and the far reaching consequences that would occur should that support waiver,” he said.
Banks may be concerned about the optics of enforcing against companies that are struggling due to external factors
Shayne Kukulowicz, partner at Cassels Brock & Blackwell
But their “measured patience” is also driven by solid business reasons.
“Banks are rational and pragmatic commercial actors and take a long-term strategic view,” he said. “Who wants to sell a distressed airline or hotel in this environment?”
Still, as the winter and holiday season approaches, travel and related businesses from airlines to hotels to car rental agencies — and now restaurants — will be on the watchlists of insolvency and restructuring experts.
These sectors “will remain under stress as customers elect to remain close to home,” said Rogers.
Financial Post
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