More and more companies are going out on a limb

PMR team

January 29, 2019

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An increasing number of companies at risk of insolvency are attempting to recover, according to a 2018 report by international credit insurer Coface.

Although the total number of bankruptcies and restructurings is growing (an increase of 10% in 2018 compared to the previous year), the number of restructurings is also growing significantly compared to previous years. They are also changing – in favor of rescue companies - bankruptcy proportions to arrangements and restructuring (57 and 43 percent, respectively). Since the introduction of the new restructuring law in 2016, the number of bankruptcies companies is still below the level before the changes in the law were introduced – in 2014 it was 701, in 2015 – 650, and in 2018 – 558.

- After three years of the new bankruptcy and restructuring law, we can say that there is a significant increase in the number of companies attempting to save their businesses
– Małgorzata Anisimowicz, President of PMR Restrukturyzacje SA, comments on the Coface results. - The best results are achieved in accelerated arrangement proceedings (the issue of speed of action) and restructuring proceedings (the time needed to implement the measures restructuring and restoring the restructured company opportunities to compete in the market). This indicates that time is an extremely important element in carrying out restructuring and rescuing companies is, next to financial resources, the most important component of success. A prolonged crisis situation does not allow for the implementation of changes, and the faith in the company, among customers, contractors and employees, decreases over time
- adds Malgorzata Anisimowicz.

Even though the number company bankruptcy in 2018 increased compared to the previous year (from 537 to 558), it is still significantly below the level from the period before the new bankruptcy and restructuring law came into force in January 2016. As many as 417 companies attempted restructuring in 2018, a significant increase from 348 in 2017.

Companies most often applied to the courts for accelerated arrangement proceedings – 259 (an increase of 24 percent compared to the previous year). The most dynamic growth was observed in the number of restructuring proceedings – 88 (an increase of 30% compared to 2017).
Industries with the biggest problems in 2018.

Although both trade and manufacturing saw a 7% increase in bankruptcies in 2018 compared to 2017, the situation in these industries is stabilizing. The same is true for construction, which saw a 4% increase, but the situation of many companies, especially those directly involved in the production or sale of building materials, has improved significantly. The industry experiencing the deepest crisis is transport, with a 40% increase in the number of company bankruptcy transport indicates that most companies are experiencing a deep crisis.

– The accumulation of negative business factors resulting from both EU regulations and internal difficulties in finding employees, increasing labor costs and decreasing profitability, as well as payment delays that plague the industry, means that we have been observing a significant decline in the last few months. increase in the number of bankruptcies and restructuring of companies transport
– says Małgorzata Anisimowicz. - Unfortunately, we expect this trend to continue in the coming months. It is also clear that the structure of company sizes is changing significantly in favor of large companies that have larger liquidity reserves.
- he adds restructuring advisor.