Banks are keeping alive “zombie” U.K. companies that are able to pay interest charges but not loans themselves, the Financial Times reported, citing a survey by consulting company KPMG.
KPMG found that the average time taken to resolve the affairs of such companies, typically small to medium-sized, is 12 to 18 months, up from six to 12 months two years ago, the newspaper said.
Richard Fleming, who heads restructuring at KPMG, said that, while zombie companies aren’t technically insolvent, in another interest-rate environment they would be, and lenders are hoping for “miracle cures,” the FT reported.
KPMG concludes from the survey that formal insolvencies occur when relationships between companies’ managers and their banks break down, and when lenders perceive that managements are weak, the newspaper said.
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