SA debt recovery focus amid growing list of struggling businesses in August

SA creditors are losing patience on debt recovery, as a major security firm and well-known hospitality group join the list of insolvent businesses.

Creditors are losing patience over debt recovery as insolvencies rise.

A national security business and well-known hospitality group joined the list of struggling businesses in South Australia in August, leaving creditors to chase millions.

There were 15 liquidations, but the number of businesses reaching out for external support was much higher, with creditors “taking off the Covid gloves”.

In the 12 months to June, 139 businesses in SA started insolvency proceedings, 86 of them attributed to creditors moving to wind up companies, ASIC records show.

Major Adelaide-based security services business Titanium Security sought help from administrators Mackay Goodwin in August.

Titanium Security founder Danny Grotegoed is working with administrators on a deal for creditors. Picture Glenn Hampson.

The business, founded by Danny Grotegoed in Adelaide in 2007, owes more than $5m in state and commonwealth taxes, with about 108 employees owed $600,000 in unpaid salaries, including superannuation entitlements.

Mr Grotegoed is working with administrators on a Deed of Company Arrangement proposal for creditors.

Also, this month, acclaimed Italian restaurant Martini on the Parade became the first local small business to initiate a new restructuring process introduced by the federal government at the start of this year.

The business owes creditors less than $1m and like other hospitality businesses, has been in a battle for survival as Covid-19 restrictions built pressure.

The Norwood venue last month appointed restructuring practitioner Oracle Insolvency Services to help restructure and settle its debts.

Oracle Insolvency Services founding partner Nick Cooper said there had been a “significant spike” in insolvencies in August.

“We’re seeing that the tide is starting to turn with creditors,” Mr Cooper said.

“The goodwill shown when Covid first hit is fast running out and those owed money want to be paid,” Mr Cooper said.

“At this stage, it’s not the ATO that’s chasing down debts, it’s smaller suppliers who are struggling to stay afloat themselves as they feel the effects of the pandemic for a prolonged period of time.”

Restaurants are being hit hard but personal bankruptcies are also up, including among beauticians, hairdressers and building subcontractors.

“We’ve recently been seeing more company directors entering into bankruptcy whose businesses have been hit hard by Covid and aren’t worth selling,” Mr Cooper said.

With Martini on the Parade, directors remain in control and it’s “business as usual”, with trading continuing while Oracle puts a proposal to creditors to settle debts.

“This is a good way to try and turn around a struggling business before it’s too late,” he said.

Mr Cooper said he expected the “upward trend in insolvencies” to continue over the next 6-12 months.

“The advice to any business in trouble is to seek professional help immediately,” he said.

“There is financial assistance available and options to negotiate with creditors.”

Commercial law firm Cowell Clarke said businesses were “taking off the Covid-19 gloves” to recover debts.

Oracle Insolvency Services partners Dominic Cantone, Yulia Petrenko and Nick Cooper have been busy through the pandemic.

Martini on the Parade owner and chef Larry Piscioneri.

Cowell Clarke director and debt recovery service team leader Symoane Mercurio said creditors were becoming “more persistent and litigious” when chasing down money owed.

“Last year when the pandemic first took hold, we noticed businesses were reluctant to

pursue overdue debts, instead choosing a more wait-and-see approach,” Ms Mercurio said.

“However the Covid-19 grace period appears to have ended.

“As the government financial assistance has gradually been removed, there’s been an even greater emphasis among businesses on their cashflow and receiving every dollar owed.”

Broadly speaking, the sense of uncertainty is greater among businesses within hospitality, retail, accounting, franchising, logistics and construction sectors.

“We have found some businesses have insufficient or outdated trading terms and conditions, which can restrict their ability to recover associated interest or legal costs,” Ms Mercurio said.

Cowell Clarke director Symoane Mercurio said creditors were becoming “ more persistent and litigious”. Picture: Tait Schmaal.

“Seeking legal assistance can help business owners and operators receive the payments they’re entitled to sooner, as well as giving them time back to focus on core business activities, rather than chasing down debtors.”

Research by CreditorWatch shows about nine per cent of SMEs in SA to be in arrears, a potential “red flag” for potentially insolvent businesses.

However, big banks and the Australian Taxation Office have continued to take a lenient approach as businesses navigate hard times.

Originally published as SA debt recovery focus amid growing list of struggling businesses in August