CITR Analysis: The number of insolvencies had halved, but the size of the affected business sites is increasing

Over the last year fewer companies went into insolvency, but their impact on the economy is more important by the domino effect created, says an analysis of the CITR specialists, the leader of insolvency market in Romania.

“Looking at the financial situation of companies in Romania that have a request for insolvency filed, I realized that it is about more medium and large companies, companies that generate significant revenues to the state budget, employ more people and are responsible for other businesses horizontally and vertically. Their financial problems or their possible insolvency would affect many companies through the domino effect than the multitude of small companies that became insolvent at the beginning of the financial crisis. Although statistics appear encouraging by the decrease in the number of insolvencies , we believe that the concerns still remain, by their effect size”, says Andreea Cionca-Anghelof, Managing Associate CITR.

During January-July 2015 the number of companies that became insolvent fell by 56.82% over the same period last year, according to NOTR. However, the impact on the local and national economy of the companies in trouble is stronger than a year ago, although the number of companies in insolvency is lower.

227 companies with assets of more than EUR 1 million each had at least one insolvnecy application submitted at the end of August 2015. These companies:
– Had a turnover of 5.4 billion euros in 2014 (about 3.6% of GDP);
– Have a total of about 55,000 employees (equivalent number of employees in the entire Romanian banking system);
– Recorded at the end of 2014, total debts of 4.87 billion (3.2% of GDP), of which 0.35 billion euros to ANAF.

On the other hand, the large taxpayers owed to the state budget 10.5 billion euros at the end of June 2015, about 25% more than a year ago. 1.4 billion euros had not been collected at maturity at the end of July 2015 due to lack of liquidity of the companies that had initiated payment by promissory notes, checks, etc. (refusal debit payment instruments).

The amount not received is by 35% higher compared to the same period last year, although the number of rejected payment transactions fell by 25%. The average amount declined to payment increased by 79%, from 15,100 euros to 27,200 euros. There are companies that do not collect amounts due and do not honor larger amounts compared to the same period last year.

“Over the last year, despite the drop in the number of refusals of payment,  the amounts covered by cash increased, which shows that some companies do not charge excessive increasingly higher, which could raise problems regarding the liquidity on long term. Given the increase of the average payment denials, we conclude that the refusal of payments are made by large companies, therefore they are the ones who do not receive the amounts due. What comes as a further argument for the conclusion of our analysis is that large and medium companies are the ones beginning to experience problems of cash flow, liquidity and, consequently, are facing situations of indebtedness and overindebtedness”, says Andreea Cionca-Anghelof, Associate Coordinator at CITR .

About CITR
CITR, market leader of insolvency in Romania acts as liaison between the debtor and other participants in the proceedings. With a team of over 110 professionals, 40 insolvency practitioners and 12 working teams, CITR handled the insolvency of over 800 companies and is nationally represented. The expertise areas covers the activities such as agriculture, transport, pharmaceuticals, food, wood, footwear, ceramic production, bakery, commercial, mining and processing of oil products, ferrous mineral processing, real estate. CITR is part of CITR Group of companies, specializing in identifying recovery solutions for recovery of companies.

:: The Source:

Ana-Maria Udriște

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