Halloween on the ASX: The number of ‘zombie’ companies is creeping up

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More listed companies are on the brink of collapse thanks to higher interest rates, rising business costs, tighter capital markets.

More than 100 companies listed on the Australian stock exchange are on the brink of collapse, a rise of 51 over the past six months alone, with a restructuring expert predicting the rise of “zombie” companies will continue.

“The rubber has to hit the road at some point when you think of the economic uncertainty that’s going on,” said KPMG head of turnaround and restructuring services Gayle Dickerson.“Zombie” companies tend to be close to defaulting, may have liabilities that exceed their market value, are breaching their covenants or are barely making profits.

“If you’re already a company struggling and you’ve got another rate rise, you’ve got to service that debt,” Dickerson said. “One of the options might be to seek an alternative lender, and sometimes their interest rates can be even higher. So it can be a cycle.” “Not yet,” said Dickerson, who earmarked consumer discretionary retail and construction sectors as vulnerable in the months ahead. “Watch this space, I suspect that may shift.”

 

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