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Tuesday, 29 January 2013

Are zombie firms under threat from the banks ?

The Institute of Turnaround (IfT) has said that there are signs that the banks are looking to sell on their debt to the so called "Zombie Firms" as they are beginning to run out of patience.  This was in part illustrated by the collapse of HMV where the £176m of debt was sold onto Hilco.

The selling on of the debt is perhaps a good strategy in that the banks will start to get something back.  However, the IfT has warned that if these purchasers of the debt are not interested in the long term future of these businesses then many will close and thousands of jobs lost.

IfT chairman Iain MacRitchie warned a “zombie company massacre” could take place, particularly in the troubled specialist retail and consumer electronics sectors – which would leave even more empty spaces on UK high streets.

The presence of "zombie firms"( numbers have been estimated at between 75,000 and 160,000) has temporarily saved jobs – but many believe that they have has also prevented bad businesses from being killed off, capital from being reallocated to more productive uses and is cluttering up bank balance sheets.

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