Successful reorganisation depends on fresh money

23 dec 2009 Ziarul Financiar

Consultants in the field hope that the high number of voluntary insolvencies will result in an increase in the number of successful streamlining processes.
"The most important factor for a company that went insolvent is to find streams of financing - fresh money, to be able to hope for a successful reorganisation. This can happen by finding an investment fund, a financial institution or by selling part of the assets. An insolvent company cannot survive on its core business alone, because if it could, it would not have filed for insolvency in the first place. Companies need to continue operations but at the same time show how they will pay their debt," said Arin Stanescu, managing partner of Stanescu MIlos Dumitru si Asociatii and chairman of the National Union of Insolvency Practitioners of Romania (UNPIR).
The low number of reorganisation cases accepted by creditors, about 450 out of more than 20,000 pending in courts by mid this year, cast a bad image on companies covered by Law 85/2006 (regulating insolvency), with the procedure associated in most cases with bankruptcy.
Things have changed somewhat this year, however, so that many companies are resorting to this step as a temporary protection measure against creditor pressure.
"We hope to see the percentage of successful reorganisation processes increase. The signal we are getting now is that companies are really trying it, and I mean big companies here. Reorganisation, however, depends on other factors, as well, such as the state of the economy. Because of this, investors are still reluctant, despite the fact that some businesses seem promising," says Geanina Oancea, senior manager of BDO Conti Insolvency, involved in such cases as Mivan Kier construction company or Cuprom.
Major companies with thousands of employees and hundreds of millions of euros in business such as Leonardo, SPAR, Flanco, Flamingo, PIC, Mondex and many other real estate and construction companies have filed for insolvency on their own this year after they failed to pay their credits and could not reach an agreement for an amicable solution.