Toronto, December 11, 2007 – The number of restructurings in Canada should rise in 2008 due to the serious tightening of the credit market, according to Ogilvy Renault. The tighter market means that when companies have problems and look for money to solve them, they won’t find financing as easily as they have in the past.

“The last 7 to 8 years has seen an unprecedented amount of liquidity in the market,” says Derrick Tay, senior partner at Ogilvy Renault and leader of the firm’s insolvency and restructuring practice. “This meant that troubled companies could easily finance their way out of it—without dealing with their underlying problems. But those days have come to an end.”

In a tight credit market, lenders will have less of an appetite to extend more funding to troubled businesses. Instead of just throwing money at problems, companies will have to deal with them. This should lead to a greater number of insolvencies and restructurings in the coming years as companies adapt to the new market reality.

There may be a bit of a time lag before this begins. Many businesses still have money from their last financing—the days of unprecedented liquidity have only recently started coming to an end. Some troubled companies may also be in denial for a time, unwilling to admit that their operations need a serious overhaul. This is a mistake, however.

“In restructurings, the sooner companies confront the issues, the better. The earlier they plan for a restructuring, the more flexibility and options they have,” says Tay. “If companies wait until they’re close to hitting the wall, then the creditors are in charge.”