1,644 companies went insolvent in Q1 2023, a number similar to the one in Q1 2022, when 1,610 insolvent companies were registered. 23 of these are impactful companies (as compared to 17 in Q1 2022), totalling over 1,950 employees, holding fixed assets worth over RON 589 billion and a total turnover of RON 805 million, as shown in the analysis by CITR, the insolvency and restructuring market leader in Romania.
“The evolution in the number of insolvent companies will be strictly influenced by the effect that increased interests or inflation can have on certain types of businesses, unless a profound change occurs, wither in the State’s approach to fiscal debts, or in how banks are dealing with the credit situation. We will probably see an increase in the number of applications for insolvency, mostly generated by an increase of debts and the creditors’ pressure to recover their receivables”, said Paul Dieter Cîrlănaru, CITR CEO.
Globally, one of the main solutions to pandemic-generated challenges and to the issues on financial markets was aimed towards the areas of fiscal credit and of increasing tax facilities to the companies’ benefit. Such facilities were manifested, first and foremost, in the accrual of additional debt, therefore the companies’ issues were not solved, but merely postponed. The main risk noted by CITR specialists is that, once such facilities diminish or even disappear, the respective companies will be facing a heavy financial pressure, as the accrued volume of debts would be very difficult to manage and impossible to space out on a short term.
What does the restructuring market look like in 2023?
In Q1 2023, five preventive composition agreement (ro. concordat preventiv) projects were admitted by the Courts for impactful companies, with assets exceeding EUR 1 million.
“Whereas in early 2022 a significant number of impactful companies were financeable, they have deteriorated their position throughout the year, and have registered ANAF debts, on the rise from RON 264 million, in June 2022, to RON 786 million by the end of the year. These numbers stand for a 197% increase in just 6 months. For these companies, restructuring is the solution. We can say we are seeing increased interest in new restructuring mechanisms, mainly the preventive composition agreement (ro. concordatul preventiv), which existed in our legislation before, albeit in a much less efficient form. We are happy that our efforts to promote restructuring solutions in the business environment are showing results”, added Paul Dieter Cîrlănaru, CITR CEO.
Considering the rising inflation, the increase interest rates, the incapacity to finance existing credits and to face future terms, companies will have to call upon the new restructuring mechanisms to become efficient or to save themselves.
The new restructuring mechanisms, namely the restructuring agreement and the arrangement with creditors, are both aimed at saving the company and to develop businesses.
Throughout the restructuring process, the entrepreneur maintains control of their business and, additionally, will enjoy the support of the restructuring specialist to create and implement the measures proposed in the restructuring plan, which can be most relevant and varied.