According to R3 there are four “zombie indicators”, any of which could mean that a company is nearing the point of insolvency, but still able to hang on, neither failing nor thriving:
1. Just being able to pay the interest on debts, but not reduce the debt itself.
2. In the event of a rise in interest rates, the business will be unable to pay its debt at all.
3. Struggling to pay debts when they fall due.
4. Having to negotiate payment terms with suppliers.
Lee Manning, R3 president, comments: “The implication here is that these businesses have been ‘running on empty’ for quite some time now and with no reserves left in the tank, they may not be able to carry on for much longer.”
R3′s research also reveals that the retail sector featured most prominently across three out of the four zombie business indicators while the construction sector has the largest proportion of businesses that are only able to pay the interest on their debts.
Source:
bankingtimes.co.uk
