JUST UNDER 60 per cent of the value of all secured commercial loans to Irish businesses are held by companies deemed to be at high risk of failure, according to an analysis undertaken by business information and risk agency Vision-net.ie.

A sample of 4,200 commercial loans totalling €8.2 billion was analysed for the study. It found that three in 10 of those companies with an outstanding mortgage or charge had a high risk of failure.

However, these companies held a disproportionately high percentage of loans, accounting for 57 per cent, or €4.8 billion of the overall value of the loan sample.

The sample was taken from a register of all companies registered in the State, including property and development companies which may have transferred their loans to the National Asset Management Agency. It also includes smaller commercial entities.

Nama is buying €73 billion worth of property-related loans owed to five institutions – Anglo Irish Bank, Irish Nationwide, AIB, Bank of Ireland and EBS – at a discount likely to be about half the debts’ original value. Seventy-one per cent of all Nama loans are non-performing.

Vision-net used an algorithm which looked at key performance indicators to assess the viability and projected future performance of the companies, including financial performance, loan profile and the size and scale of court judgments against them.

A total of €4.8 billion of the 4,200 loans analysed in the study were to businesses which showed signs that were “consistent with business failures”, according to Vision-net.

Christine Cullen, managing director of Vision-net, said the results highlighted the “conundrum” facing banks in terms of lending to businesses.

“Businesses rightly need finance, but equally the risk of loans going unpaid is substantial. There is a real need for the banks to release credit into the market to get business moving, but the ability to recoup existing finance has been greatly diminished.”

Ms Cullen also said a widespread risk analysis of commercial lending should be undertaken to “inform debate and business behaviour”.

She said that now more than ever, creditors, suppliers and lenders need to have detailed information on client companies to assess whether their clients can honour their debts.

Separately, a recent study by Vision-net found €1 billion of unpaid debt has been left behind so far this year by companies which have gone into liquidation.