Insolvency petition filings in the Cayman Islands spiked more than 30 per cent in 2013 when compared with 2012, resulting in the highest number of filings in the past three years, according to Appleby.
The increase reversed a downward trend in the number of petitions filed in 2011 and 2012 that had followed high numbers in 2009 and 2010 driven by the global financial crisis, according to the firm’s Snapshot report on petition filings in the Cayman Islands going back to 2008.
“The 2013 Cayman petition statistics suggest that investors are increasingly losing patience with investment managers’ efforts or promises of restructuring and other turnarounds,” says Appleby’s Cayman-based litigation and insolvency partner, Tony Heaver-Wren. “Looking back to 2008, these numbers also offer insight into how the international investment market has reacted to the prevailing economic conditions, at least insofar as it is routed through the Cayman Islands.”
The rise in petition filings in Cayman in 2013 suggests that the ramifications of the global financial crisis have not concluded, and the next wave of investor rejections of continued informal wind downs and other manager-led restructurings has begun, according to the report. While petition filings in 2013 were down from highs in 2009 and 2010, they were up 53 per cent from pre-recession 2008.
“Given Cayman’s position at the hub of the offshore investment funds industry and its close connection with the US investments industry, it is not surprising that there have been large fluctuations in the annual petition filings in the Cayman Islands since 2008,” says Heaver-Wren.
The report covers the following categories of petitions, most of which saw an increase in 2013: winding up, conversion of voluntary liquidation to court supervised liquidation, schemes of arrangement, and capital reduction.
There was a 33 per cent increase in insolvency petitions in 2013 fuelled by a rise in both the number of winding up petitions and in the number of petitions to convert voluntary liquidations to insolvent liquidations. In the first of these categories, winding up petition filings in 2013 were up 26 per cent when compared to 2012 and up 81 per cent compared to the 2011 filings. In the second category, in 2013 petitions for conversion of voluntary liquidation to court supervised liquidation based on insolvency grounds increased by 50 per cent compared to the same filings in the previous year. Meanwhile, schemes of arrangement picked up in 2013 as well, having reached their lowest point in the review period in 2012, and the number of share capital reduction petitions in 2013 was consistent with the annual number across the period.