CreditWorks in the news

CreditWorks' CompanyWatch service featured in the Sunday Star Times on 1 March, 2009, with an interview by Money Editor Rob Stock with CreditWorks' MD, Ronnie Tan. 

Article may be viewed online at www.businessday.co.nz. (Click here)

In recessionary times, a company name change could signal trouble

One agency is offering a company name change alert to its subscribers, Rob Stock reports.

   BEWARE COMPANIES that suddenly change their name - they could be on the short road to bankruptcy.

   Auckland commercial credit reporting agency Credit Works has introduced a service that emails subscribers to its credit-checking database the minute a company they are supplying changes its name.

   Managing director Ronnie Tan said company name changes were correlated with business failures and during recessionary times, creditors needed to keep a close eye on them. “People tend to change their businesses’ names before they go under. We can tell our clients within a minute of a company changing their name.”

   Reasons for name-changing included trying to avoid shame, for example by renaming a familiar company before the bankruptcy notice appeared in the local paper. Changing a name could also preserve a brand for revival at a later date, Tan said.

   There’s a growing need for the service as an increasing number of companies struggle to pay their debts promptly.

   The CreditWorks’ system tracks the payments-records of the customers of around 800 stores around the country, many in suppliers to construction businesses, and Tan said the proportion of debts covered by the system now 90 days or more overdue is 11%, up from around 6.5% in May last year, a very rapid deterioration.

   CreditWorks’ customers are in general better at managing late-payers than the wider business world. It’s a trend that is showing up in the finance companies into which investors have sunk cash, and can quickly erode profitability.

   Rising bad debts and late repayments have more than halved the profit of UDC, the country’s largest finance company. Figures released late last year show the AA-rated finance company would have posted a pre-tax profit of $51 million in the year to September 30, but provisioning for bad debts reduced that to just under $22m.

   On its total gross loans of $2.39 billion, total provision for impaired loans was lifted from $29.3m at the start of the year to $51.2m at the end of the financial year. Total impaired, past due and restructured loans (where the terms have been changed to help the borrower meet repayments) rose from $119m to $211m.

   South Canterbury Finance told the NZX on Friday that pretax profits were down from $24m to $13.2m for the six months to the end of December, with provisioning for bad debts partly to blame, coupled with the high costs of holding over $320m of cash in a bid to bolster the company in the run-up to its next credit rating review in April.

   All of the big three finance companies UDC, Marac and South Canterbury are due to be re-rated by Standard & Poor’s in the next three months. Currently, UDC is rated AA, and Marac and South Canterbury are rated BBB-, the lowest “investment grade” rating.