Case Study: Prater saved from Carillion fall-out by credit insurance
Prior to its ongoing liquidation, Carillion plc was a highly successful British multinational facilities management and construction services company, with its headquarters in the United Kingdom.
Although it was listed on the London Stock Exchange and had grown to one of the largest construction companies in the UK, Carillion experienced significant financial difficulties in 2017. In January 2018, the company went into compulsory liquidation, with liabilities of almost £7 billion (over R116 billion*). PwC UK announced on their website and gave guidance to creditors on how they could register as a creditor in the liquidation, if they had paid for goods or services which were not received; or had not been paid for goods or services supplied to the affected Carillion companies.1
Prater’s credit insurance insulates the company from the Carillion collapse
According to the Construction Enquirer, Prater said it expected to avoid any bad debt from Carillion’s collapse. In preparing accounts, the directors assumed that their outstanding contract balances of £3.5 million (approximately R58 million*) would be recovered. This is good news as according to Company Rescue, the liquidation process can take up to 24 months, or even longer depending on the complexity of the liquidation.
In addition, if the defaulting company is investigated for wrongful or fraudulent trading, this could further lengthen the liquidation process. In some countries, the government takes its portion of the liquidation proceeds in taxes – 17% in England to be exact. This is obviously taken out of the amounts recovered to re-pay the creditors. So even though a company registers as a creditor in the liquidation process, one cannot be certain as to when they will see their debt paid, or even guarantee the returns the creditor will receive.2 This is why trade credit insurance is important for businesses today.
Insulate your business from financial losses
In today’s highly competitive environment, you need to operate as a prudent business owner.
Losses caused by non-payment, whether due to liquidations, such as that of Carillion, debtor defaults and business rescue are common occurrences when trading as a business locally, as well as in foreign countries.
An unsecure debtor’s book could affect your ability to operate, your profitability and your reputation. Ensuring your business’ most important asset – your trade debtor’s book, against these losses is imperative and becoming more of a necessity.
Credit Guarantee is well-equipped to insure your business against non-payment of debtors. With our over 60 years’ experience in providing leading domestic trade credit insurance, international trade credit insurance and bonds and surety cover to a diverse range of businesses, we can protect your business’ cash flow and reputation.
A trade credit insurance or policy from Credit Guarantee, will not only insulate your company from bad debt caused by insolvency, protracted default and political risks; but, you will also experience further trade credit insurance benefits including improved cash-flow, increased new and repeat business and better terms from suppliers.
Partner with us and safeguard yourself against the non-payment of your debtors – contact us at any one of our offices nationwide.
Credit Guarantee is an authorised Financial Service Provider. Licence No. 17691
*Exchange rate of £1 to R16.65 utilised at time of production of article and due to change.