As the number of state-owned enterprises is going down and the economy is growing, company liquidators are having a hard time finding work. In 2002, for the first time in the past four years, there were fewer companies that defaulted on their debts and that had to be handed over to liquidators, for restructuring or asset resolution.
The market of business liquidation and restructuring dropped to $70-75 million last year, down from $75-85 million in 2002, according to estimates released by the National Union of Restructuring and Liquidation Agents (UNPRL). The market value is given by the assets that are valued by the liquidators and the receivables they manage to collect, but the debts that need to be covered are generally up to four times higher. Hence, in the past four years, the value of transactions closed by liquidators has revolved around $300 million, but the receivables that had to be paid amounted to $1.2 billion. Bankrupt state-owned enterprises had run up most of these debts.
"In the last four years, the liquidation of state-owned enterprises has accounted for two thirds of the total liquidated assets," said Emilian Radu, chairman of UNPRL. The biggest companies that had to be liquidated were pig farm Comtim and shipping company Navrom. "Most of the cleaning has already been done and, from now on, liquidation will follow the natural mechanisms," Emilian Radu added.
There were also fewer companies that filed for bankruptcy last year - 15,233, down 40% from 2002. Moreover, there were even fewer cases when the bankruptcy procedures were actually completed - 8,205 (down 50% from 2002).
As fewer companies are filing for bankruptcy, liquidators are watching their results shrink - revenues amounted to 363 billion ROL ($11 million) last year, down from the 392 billion ROL ($12 million) logged in 2002.
Among the insolvent companies, very few are trying to get back on track and even fewer succeed. Only 15-20% of those companies that are unable to pay their debts enter a restructuring programme. Liquidators say that only 10% of the restructuring plans work, which points to the economy's immaturity. In other words, only 1-2% of the insolvent businesses manage to successfully apply a restructuring programme.
The insolvency rate in the Romanian economy (given by the companies having filed for bankruptcy or applying a restructuring plan) amounted to 1.63% last year, which places Romania in the middle of a world ranking. Austria and Luxembourg, for instance, have logged an insolvency rate of 2%, whereas Italy, Spain, Portugal and Greece have all reported insolvency rates below 0.3%. "The high number of bankruptcies occurs in the healthy economies, where the 'diseased economic tissue' is rapidly eliminated," Emilian Radu claims. On the other hand, Radu explains, the smaller numbers of bankrupt enterprises in the Romanian economy help to gauge the performance of economic reforms.
vlad.nicolaescu@zf.ro
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