Aussie investment bank has warned of a potentially massive wave of corporate bankruptcies over the next decade, with some companies looking to liquidate as early as 2018.
The Australian National Institute of Corporate Finance (ANICF) said in a report that the number of companies that could go under as a result of the current global recession was set to rise to over 700,000 by 2020, from the current low of about 700,600.
“The number of entities that could become insolvent in the next few years could be as high as 1,300,000, with a peak of 1,500,000 in 2025,” ANICF’s chief economist, Anthony Alesina, said.
“There will be a major economic fallout from this as companies have no viable option to survive without the taxpayer support they receive.”
The company that may have the most leverage to go bankrupt in Australia is the supermarket giant Woolworths, which will have around $1.5 billion of debt by 2026.
However, that’s less than half of the $2.5 trillion in assets that Woolworth has in its coffers.
“Woolworths is the most heavily leveraged Australian company, with around $2 billion of capital,” ANF’s Mr Alesino said.
However that does not mean it will be able to survive for very long.
“While Woolworth is a big company with a lot of capital, there are many smaller Australian companies that may be struggling,” Mr Aelsino said, noting that the average Australian company is valued at $4 billion.
“For the small Australian businesses, it’s a difficult situation to be in.”
Mr Aesinos comments come as Woolworth’s chief executive, Tim Woolworth, has been under fire for comments he made in January.
“We need to have a big conversation about the future of Australian agriculture and what the future is going to look like for our farmers,” Mr Woolworth said in an interview with Fairfax Media.
“And we need to take that to the next level by getting people in a position where they can actually start to grow, because the world is changing.”
In an interview in February with Fairfax, Mr Woolsworth said the company was “committed to the future” and was “on a mission to grow the company”.
“I have to say I think that the company is really committed to the growth of our business,” Mr Gold said.
But in the same interview, Mr Gold also said Woolworth was focused on growing its global reach and “reimagining” its brands.
“I think we’re really in a really exciting period,” Mr Goldberg said.
Woolworth told Fairfax that it was focused only on the UK, with the UK’s future still unclear.
The company did not specify when the UK would be sold.
“If you look at our strategy and our strategic goals, there’s no doubt that we’re going to be very focused on the United Kingdom and we’re very committed to growing the company,” Woolworth chief executive Tim Woolsworth told Fairfax Media in January, referring to a report published by the Australian Business Council.
“So yes, we’re looking forward to the UK.”
The Woolworth group, which is the third-largest Australian company after Woolworth and Australia Post, is also struggling with the loss of some key employees and the possibility of bankruptcy.
In June, Woolworth announced a plan to slash the workforce to about 400 people by 2023, with half of those laid off.
Woolies chief executive also said the group was planning to cut the number who would be on the payroll by 30 per cent.
“It’s the first time we’ve reduced that number,” Mr Wood said.
The Woolies latest earnings report, released on Tuesday, showed the company’s net loss rose to $4.8 billion in the three months to July 31.
Wooliore said that it had been the subject of a number of investigations, but said it had not been “discussed with any potential parties”.