Corporate Debt Rising in Australia

The impact of the economic downturn in Australia last year was demonstrated by a 12 percent rise in the number of corporate debts referred for collection, and a U.S. $1,300 increase in the average value of the referred debt, according to a brief report today from financial research firm D&B.

The average value of corporate debt referred for collection was about $7,100, compared with $5,800 in 2006, a rise of 22 percent, according to D&B’s report, “Corporate defaults increase as credit crisis bites.”

Christine Christian, D&B CEO, said in the brief that the dollar value and number of debts referred for collection increased substantially in the second half of 2007. These increases suggest that many firms “are facing significant cash flow difficulties,” she said.

"It is clear that some businesses let their collections practices slip during good economic conditions and were caught off guard when the cycle began to turn,” said Christian.

The Banking, Insurance and Finance sector saw the greatest increase in the average value of debt referred, a rise of 300 percent to $23,500, D&B reported. The Telecommunications sector followed with an average debt referred of $9,900.

The Telecommunications and Utilities sectors referred the highest number of debts for collections, though Utilities saw its referrals rise by 80 percent compared with a 26 percent rise in Telecom.

Australian businesses average 52.6 days to settle accounts. D&B predicts that about “7,500 businesses will go into liquidation and more than 4,000 will file for bankruptcy in the 12 months” ending June 30, 2008.