Property company insolvencies rise as UK zombies are killed off
LONDON: The rate at which UK property companies entered insolvency reached its highest point in six years in 2015 as rising property values prompted lenders to put “zombie” companies out of their misery and reclaim their assets.
Some 346 property companies went out of business in the second quarter of 2015, the most recent period for which figures are available more than four times the equivalent figure in 2010, according to data compiled by the law firm EMW.
In the year to April 2015, 1,307 property groups were wound down. The figures have been rising steadily since 2010 as the aftermath of the financial crisis played out and property prices recovered. “Banks have been holding on to these sour loans since the credit crunch struck and are using this opportunity to recoup some of the value tied up in this bad debt,” said principal at EMW Geoff Willis.
He added that, during the recession, banks were unwilling to further depress property prices by putting assets from insolvent companies on the market. “Banks haven’t been able to achieve the prices they wanted to get for this debt by selling to distressed debt investors such as private equity firms.” Companies liquidated during 2015 included Murray International Holdings and its subsidiaries, Scottish firms headed by Sir David Murray, a metals and property entrepreneur who formerly owned Rangers Football Club.
They closed with total debts of at least £200m under pressure from the Bank of Scotland after failing to recover from the 2008 crash. Another Scottish property company, SI Hotels Glasgow Investments Limited which owned Glasgow’s Radisson Blu hotel entered administration in November, while two divisions of Skelwith Group, a York based luxury developer, went into liquidation.
Mr Willis said the overall rise in insolvencies “is down to improved property prices, rather than an indication the market is in trouble”.