After 2007, until 2014, reorganization tripled from 1.41% to 5.55%, Vasile Godincă-Herlea, CITR associate, said Thursday at a seminar organized by Ziarul Financiar.
He said the rate of reorganization among insolvency businesses remains low because businesses resort to the procedure too late. He said 60% of companies with turnovers of more than EUR1.5 million are in difficulty and for 14% insolvency is imminent and they still don’t resort to the procedure, which makes reorganization very difficult.
He said another reason is there are few specialists capable of coming up with feasible reorganization plans that match creditors’ divergent interests.
“But the most important factor is the lack of financing for businesses under insolvency,” said Herlea, adding interest in financing such businesses is very low because they carry a high risk of bankruptcy.
“According to central bank regulations, a new loan must come with a provision of up to 90%. Moreover, bankers are trying to maximize recovery not raise their exposure, therefore the granting of new financing is completely blocked,” Herea explained.
The number of insolvencies in Romania dropped 23% last year, to 21,000 new cases.
According to insolvency practitioner CITR, 11,988 insolvency cases were closed last year, of which 98% had no assets, which explains the large number of bankruptcies.
On the other hand, Arin Stanescu, head of the National Union of Insolvency Practitioners, said that out of 20,000 insolvency cases 5,000 businesses are bankrupt and have no assets, leaving 15,000 cases of which 1,500 move on to reorganization, meaning the reorganization rate has reached 10%.