More Romanian companies looking to restructure their business due to financial challenges

A total of 1,644 companies in Romania went insolvent in the first quarter of 2023 (Q1), a number similar to the one in Q1 2022, when 1,610 insolvent companies were registered.

Of the companies that went into insolvency, 23 are impactful companies, totalling over 1,950 employees, fixed assets worth over RON 589 million (EUR 120 mln) and a total turnover of RON 805 million (EUR 163 mln), according to an analysis by CITR, the insolvency and restructuring market leader in Romania.

"The evolution in the number of insolvent companies will be strictly influenced by the effect that increased interests or inflation can have on certain types of businesses unless a profound change occurs in the state's approach to fiscal debts or in how banks are dealing with the credit situation. We will probably see an increase in the number of applications for insolvency, mostly generated by an increase of debts and the creditors' pressure to recover their receivables," said Paul Dieter Cîrlănaru, CITR CEO.

Globally, companies received various forms of support from governments, such as tax facilities, but these have mainly led to the accrual of additional debt, therefore, the companies' issues were not solved but merely postponed. Once such facilities diminish or even disappear, the respective companies will face heavy financial pressure, as the accrued volume of debts would be very difficult to manage and impossible to space out in a short term, according to CITR specialists.

"Whereas in early 2022, a significant number of impactful companies were financeable, they have deteriorated their position throughout the year and have registered ANAF debts, on the rise from RON 264 million, in June 2022, to RON 786 million by the end of the year. These numbers stand for a 197% increase in just 6 months. For these companies, restructuring is the solution," the CITR CEO added.

Considering the rising inflation, the increased interest rates, the incapacity to finance existing credits and to face future terms, companies will have to call upon new restructuring mechanisms to become efficient or to save themselves.

"We are seeing increased interest in new restructuring mechanisms, mainly the preventive composition agreement (ro. concordatul preventiv), which existed in our legislation before, albeit in a much less efficient form. We are happy that our efforts to promote restructuring solutions in the business environment are showing results," concluded Paul Dieter Cîrlănaru.

(Photo source: CITR)