Insolvencies down to 10-year low, creditors’ losses at their highest

Georgiana Bendre 31/08/2017 | 13:32

The number of insolvencies in the first half of the year reached the minimum level of the last 10 years, while creditors’ losses reached peak level, according to a study by Coface.

“Although the number of insolvencies in the first semester of 2017 is similar to that of 2016, 4,442 new procedures, the companies with turnovers of over EUR 1 million that entered insolvency during the period surveyed increased by almost 20 percent, reaching 180 firms. The number of insolvencies in the first half of the current year is at the minimum record of the last 10 years. The paradox of a minimum level of insolvencies correlated with a maximum of losses due to the business environment, is explained by the companies’ profile,” says the document.

According to the study, out of the overall insolvent companies in the first semester of this year, 20 firms have revenues higher than EUR 10 million in 2016, out of which 11 with activities in distribution, trade or energy supply.

„These companies have a low level of fixed assets and a high level of debts, which causes creditors significant losses. The debt level of companies that afterwards entered insolvency increased constantly from 72 percent in 2008 to approximately 97 percent in 2016. This dynamic was determined by the losses accumulation, which decreased the level of own equity, the low share of capitalization from the shareholders and the necessity of additional debts to manage the liquidities pressure,” says Coface.

The company says that out of the 4,442 insolvent companies in the first semester of 2017, 2,244 companies submitted the balance sheets for 2016 activity.

According to Coface, one of the main causes that increased the risk of insolvency entry was the accelerated growth of debts over the revenues increase, together with the losses accumulation.

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