Navigating debt restructuring in uncertain times

2 minute read + pdf download  27.05.2025 Michael Hughes, Michael Scarf

The third edition of our Debt Restructuring Report comes as present global economic conditions are precarious and uncertain. Against this backdrop, this essential report explores the strategies that companies with vulnerable balance sheets can take to facilitate continued solvency or restore solvency. 

The past year has seen a significant increase in the number of businesses entering insolvency and appointing administrators. Insolvency statistics from the Australian Securities and Investment Commission’s (ASIC) reveal more than 12,000 companies entered external administration during the first 10 months of FY25. If the current run-rate continues, FY26 is expected to see around 15,000 companies enter external administration, a 35% increase from 2024.

We delve into this trend, examining the construction, food services, and some sectors of the mining industry which are most at risk, facing declines in profitability and cash flows due to macro factors and industry-specific headwinds.

Our aim is to provide readers with a comprehensive understanding of the current economic landscape and offer case studies and practical strategies for navigating these challenging times.

Debt Restructuring Report 2025

Explore the three key strategies: safe harbour, loan to own, and creditors’ schemes of arrangement.

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This report explores three key strategies: safe harbour, loan to own, and creditors’ schemes of arrangement. These strategies are increasingly relevant and effective in debt restructuring.

Safe harbour

An in-depth look at how directors are relying on this protection to enable insolvent companies to continue trading and the conditions under which it applies.

"The ‘safe harbour’ protection from personal liability on directors for insolvent trading is designed to enable director-led restructurings and facilitate a better outcome for creditors – and potentially shareholders – rather than the directors being required to appoint an administrator when insolvency is inevitable.” Michael Hughes

Loan to own

Insights into how this strategy is being implemented in various ways to gain control of distressed companies and repair their balance sheets.

"For a loan to own approach to be viable, the existing creditors must be willing to trade their debt. While Australia hasn’t had a particularly active secondary market in debt trading, there are signs this could be changing." Michael Scarf

Creditors’ schemes of arrangement

Exploration of how these schemes can provide companies with vital breathing space to implement a restructure at a later date.

“The creditors' scheme process has been more frequently used in the UK by distressed companies…However, given the flexibility of the scheme process, and the accommodating approach of the Australian courts, there is no reason why the creditor scheme process could not be utilised more." Michael Scarf

Gain access to comprehensive data, expert analysis, and actionable strategies to navigate debt restructuring.

Contact us to learn more about the three main restructuring approaches which can be adopted to deleverage the balance sheet to promote continued solvency or restore the company to solvency.

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https://www.minterellison.com/articles/navigating-debt-restructuring-in-uncertain-times