Trade credit insurer Atradius is setting up a specialist task force to analyse UK channel companies that have a high debt-to-assets ratio or have VC backing in the wake of recent high-profile and costly failures.
As world + dog knows, High Street giant Comet hit the wall in December owing creditors £257m, costing the UK government £49.4m in redundancy payments, lost VAT and payroll taxes.
Credit insurers by their very nature are a twitchy bunch at the best of times, and high-level company failures hardly soothe their nerves. A spokeswoman at Atradius said the company had embarked on a fact-finding mission.
"It is work in progress," she said, "because of the various insolvencies, not just in IT but everywhere in the last 18 months [it is a cause of interest]."
The company is assembling a crack team under the guidance of Marc Henstridge, the credit insurer's head of risk for the UK and Ireland, but Henstridge was unavailable to comment further at this point.
The team will be looking at the debt profile of the firms whose debts they underwrite, the size of interest repayments - more than £20m a year in the case of 2e2 - and banking covenants.
VC-backed businesses can be notoriously reluctant to cough regular management updates or detail business plans, but such an attitude could now lead to credit lines being reviewed and potentially chopped.
Jon Bunyard, director of Ingram Micro's UK value business, said the "close scrutiny" from credit insurers came as "no surprise".
"In the run-up to the credit crunch, average debt ratios to EBIT nearly doubled from approximately seven times in the early 2000 to 12 times," he said.
"Today's lending environment is far less liberal and as 2e2 [showed], bond, refinancing or rolling over debt at such high gearing levels is going to be very problematic," he said.
2e2 had long-term debts of £270m that sucked up annual profits and more, pushing the firm into a loss-making position.
A source at one distributor said smaller organisations in the channel tended to be lumped together and "generic" credit rules applied.
"They don't get the attention they warrant," he said. "This constrains growth. If insurers take a better look at the sector, evaluate companies and their merits, that is a good thing".
Sources voiced surprise that 2e2 had continued to enjoy credit insurance - albeit pared back - until it went bust.
Other insurers are expected to follow suit and assemble similar crack teams to pore over the books of insured firms across the UK economy. ®