Corporate restructuring report: Maples & Calder
Paul Dobbyn, head of insolvency at international law firm Maples and Calder in Dublin, examines insolvency law market trends during the 1980s and 1990s.
There have been a number of high-profile cases of restructuring and insolvency before the Irish courts. Equally, there is a considerable amount of company restructuring taking place behind closed doors.
The cases that don't end up in court or don't make the headlines are often the most telling and insightful. Therefore, it is important to delve beneath the surface of insolvency to establish how restructuring and insolvency are evolving.
Contrasts
During the 1980s and early 1990s, insolvencies in Ireland related mostly to traditional manufacturing entities, which contrast dramatically with the current landscape where the bulk of insolvencies relate to construction, engineering and property-development companies.
The number of insolvent companies is expected to rise further during the course of this year.
The interesting dynamic in the 1980s, unlike the recession of today, was that banks were eager to facilitate businesses acquiring assets out of insolvency by providing loans. The banks created liquidity within the market, which stimulated the economy at the time.
Examinership
Today, the financial difficulties of certain banking institutions have resulted in little, if any, liquidity in the market with the unwillingness of banks to fund distressed asset sales. The appointment of a receiver is seen as a last resort primarily to protect the assets.
Another interesting aspect of the 1980s was the absence of a remedial process. Examinership legislation did not come into effect until 1990. The absence of a remedial process meant that the options available tended to be nuclear: in the case of a company's demise, it involved liquidation, or where the relevant insolvent company had given security, a receiver was appointed.
The banks, who were the principal lenders in the 1980s, had a say over the demise of a particular entity, where there was a secured lender.
The situation changed in 1990 with the introduction of the examinership process. The new legislation was effectively introduced to ensure that a process was in place to facilitate all interested participants in a company and not solely secured creditors.
Capital injection
In the 1980s and 1990s, examinerships were mostly in connection with going concerns, for example, manufacturing and service companies that had encountered cashflow difficulties where the injection of capital in many cases provided the solution and ensured the company's survival.
Today, in the case of insolvent construction and property development-companies, whose survival is dependent on mothballing their assets, examinership is not a realistic option.
The courts have put down a fundamental marker: namely such a proposal does not ensure survival of the entity as a going concern and the courts will not entertain an application for examinership.
Looking back at the 1980s and at the current situation, certain elements of what makes a good restructuring and insolvency lawyer emerge. An insolvency lawyer has to be a "jack of all trades," with a knowledge skillset not solely in insolvency but in banking, litigation and corporate law.
Knowledge skillset
In larger restructurings and insolvencies a lawyer will need to have the ability to tap into specialised knowledge within these skillsets and other practice areas.
Maples and Calder, with its specialised construction and litigation team led by Dudley Solan, is well positioned to service the market. This team is bolstered by the Dublin-based Maples and Calder finance team, led by Nollaig Murphy, and the corporate team led by Edward Miller.
Looking ahead, it is clear that construction and property-development companies are set to dominate the landscape of insolvency activity in Ireland. The National Asset Management Agency (Nama) will shape and determine the insolvency environment.
Paul Dobbyn is head of insolvency at international law firm Maples and Calder Dublin. He has extensive experience spanning three decades covering the recession of the 1980s to date, advising banks, receivers, examiners and liquidators on all aspects of insolvency law
