The Airef alert that the GDP will fall to 25% in the first half of the year and the debt will go to 124%of The economy in the aftermath of the coronavirus: the subsidence of GDP and employment, rapid recovery and changes in the consumoFélix Revolt (Naturhouse): “In France and Italy we did know how to prepare for open; here, not”
The restrictions imposed to combat the coronavirus have caused serious hardship to hundreds of thousands of businesses across the country, immersed in the search for formulas that allow them to overcome the crisis that comes over them as a result of the brutal drop in their income . The break in dry of the activity started in mid-march has hit with a vengeance in the tissue business which, in just two months, has lost it’s 142,000 companies and nearly one million of employed persons. A gloomy picture that requires immediate solutions to avoid the dreaded ghost of the bankruptcy mass.
“The effort to achieve and maintain the liquidity has become one of the top priorities in all companies, in which they had a financial problem before the start of the pandemic in the who were healthy and with cash on its balance sheet,” says Paul Simon , responsible for Restructuring and Advice on Debt from BDO. As he explains, in a first period of time, “the obsession of the companies has been to implement quick actions of obtaining liquidity, that is to say, has managed the urgent, through the execution of ERTEs, management of suppliers and critical customers, renegotiation of leases and of debt, extending maturity dates and renewing items have already granted”.
At the present time, he says, have tried to gain time through on all of the guarantees of the Official Credit Institute (ICO), although this door is not open to all . “There are companies that need more liquidity, but probably would not have been able to still access the ICO lines, as in most of the cases, banks are giving priority to their customers or more amounts, those where the banks have a high position”.
For this reason, Simon warns that “there will be many companies that, by their risk profile or their high levels of debt prior to the Covid-19 to be left out”, with consequent negative effects in terms of viability in the medium term, and risk of disappearance . In this sense, she highlights that in recent days companies have begun to think in the medium term, and are in a phase of updating and continuous measurement of its position current cash and of the cash-flow forecasts for the next 12 to 18 months . “It is key to define possible adverse scenarios as the bud in the autumn and, therefore, new partial closures or total of their activity”, he adds. If it is a major challenge to survive the blow of the coronavirus, do it with a skyline full of doubts , without knowing how long the truce of the pandemic, exaggerating the difficulties.
William Prada, a partner of PradaGayoso, signature specialist in financial restructuring, believes that the companies that were well before the alarm status and access to liquidity capearán the temporary, while for those that were in a weak position, the outbreak places them in a complex , although “now premium a spirit of trying to resolve the discrepancies in a collaborative way”.
“In the last days the companies have started to think in the medium term,”
Borja Oria, partner-director of investment banking of Arcane, notes that “companies, in general, have found a lot of support on the part of financial institutions, but before the disease had a balance sheet structure a little tight, n ecesitarán a refinancing or a restructuring “. Ensures that these processes are growing and, above all, will increase in the coming months because, during these eight weeks, companies have been focused on the financing endorsed by the ICO.
“once past this phase, there will be companies, or their situation prior to the Covid-19 or by the anticipation of how it will affect them, that funding, even including the new line of the ICO, is not sufficient to face the future and have to refinance,” he stresses. And what this means? “You can include to reach new agreements with their banks today or gambling of new avenues of funding, either with other banks or with funds of debt (mezzanine, unitranche, and hybrids), or even, in the medium term, market of issuance of the bonds. We are working in many situations and will encounter many more in the coming months,” he summarizes. Wave of contests
And is that the government guarantees put in place by the Government are still scarce. The employers of small and medium-sized enterprises (Cepyme) estimates that Spanish companies would need an additional funding of 200,000 million euros to meet the needs of short-term liquidity and warns that the measures taken are not commensurate to the economic impact that the crisis may have in Spain. Reality unleashed by the health emergency has turned on all the alarms, including a potential wave of competitions . During 2019, the procedures presented by company, totaled 4.464, which represents an increase of 3% compared to the figure of 2018 and by 4.8% if compared with that of 2017. The fear is that, given the difficult economic situation, companies that could be viable in the general conditions of the market are not able to now cope with their payments.
Aware of the dire consequences of an avalanche of contests, both by the collapse of the Commercial Courts, as by the destruction of the productive fabric and job work, the Government has relaxed the law on bankruptcy to offer more time to the companies that, as a result of the Covid-19, are placed in a state of insolvency. In this way, is delayed until December 31 the obligation of the debtor to declare the contest (the rules required to do so within the two months following the date on which it would have known of the insolvency). In addition, the courts will not admit to procedure the contests required, that is to say, those presented by a creditor.
Cepyme warns that the measures taken by the Government are not commensurate to the economic impact that the crisis may have in Spain
The experts consulted agree that these changes will contain the number of procedures in 2020 (in April have registered a 41, all time low, according to a study by Informa D&B, a subsidiary of Cesce), but doubt about whether it really will serve to dissolve less societies the next year . “As we do not know how long they are going to be losses, if the economy is going to recover a lot or a little, we have no idea if this is something reasonable or it is bread for today and hunger for tomorrow”, says Eduardo Valpuesta , professor of commercial law at the University of Navarra. And he continues: “right Now, this decree allows you to not make any hasty decisions based on something that you don’t know how it will happen, therefore, the assessment is positive”. Now, alert that “the crisis is so brutal, that the company worsen even more and that, in the end, this is detrimental to the creditors. It’s a commitment to save what could be saved even at the cost that it may entail a worsening of some companies.”
Francisco J. Bauzá , managing partner of Lexpal Lawyers, insists that the amendment of the standard by itself is not enough: “In parallel, you have to inject money into the companies to be able to get out of the crisis. Loans with guarantee from the ICO you are signing with a condition precedent for a period of one month until officials review all documentation and give the approval, with which that money of time does not reach the companies.”
The Royal Decree-law 16/2020, April 28, it also retrieves the figure of the reconvenio . Thus, during the following year counting from the declaration of a state of alarm, the debtor may submit a proposal of amendment to the convention that is in compliance period.
a Few beneficiaries
This item has awakened voices is interpreted as a kind of toast to the sun for part of the Executive. “The convention is a solution, very nice, but unrealistic . When did the Bankruptcy Law, we thought it was going to be the salvation of the competition, but it has been shown that the vast majority do not end in agreement, but in liquidation”, warns Valpuesta. In fact, just 5.7% of the contests dealt with ended up in convention , according to data from the Yearbook of Bankruptcy 2018, the latest available, produced by the Association of Registrars of Spain.
Regarding the agreements refinancing , the legal text allows you to modify the agreement that was in force, or to reach another new, even though not a year has elapsed since the previous application for approval while that in normal circumstances any of the creditors could encourage the competition necessary to a breach. An array of changes that are intended to act as an oxygen pump for the corporations… time will tell if it really has served its purpose.
Updated Date: 11 May 2020, 09:43