Deliberate bankruptcies in Bulgaria have become an international problem. After her recent visit to Sofia in connection with the report on the economic situation of Bulgaria IMF mission leader Catriona Purfield, made an official announcement on October 2, which sent a stern warning against this phenomenon. Retroactive bankruptcies increases risks for all creditors and ultimately lead to higher costs for new borrowers. Changes to the bankruptcy laws so that, inter alia, the state prohibits retroactive bankruptcies would largely solve this problem.
The curious thing is that creditors – be they banks or state companies – are at absolute disadvantage and this is done legally, on large scale through offshore companies.
An example can be given with the
companies of Diana Kishkilova
in the business of water bottling. Mrs. Kishlikova has four companies: Hydrocomp Thorn Spring Ltd., Sidon Metal Ltd, Smart Chemicals JSC and Idimeks LTD. For the four of them insolvency proceedings have been launched. None of them, however, has been declared bankrupt. The reason are the lawsuits that creditors and debtor pursue against one another. Perhaps it is unnecessary to specify that the object of these disputes is the actual date when the bankruptcy occurred.
Claims about BGN3 million have been brought against Hydrocomp Thorn Spring over a loan granted in 2006 from Eurobank EFG Bulgaria. The loan was secured by a mortgage on the bottling of mineral water in a village near Tran, western Bulgaria. The same loan has been secured through another pledge in favour of the bank – property near Stara Zagora, founded by Smart Chemicals. The Tran-based company of Mrs. Kishkilova stopped paying in 2009, and the procedure for declaring it bankrupt was opened by a decision of the Sofia City Court on 11 August 2011.
For the date of insolvency
was accepted Dec. 31, 2009, but Mrs. Kishkilova appealed to the Sofia Appellate Court with the request the date to be brought back to 2003. Her idea is more than transparent. The lady is trying to prove that the loan was granted by obviously unreasonable bank clerks in 2006. If the appeal of Ms. Kishkilova is upheld, all pledges, including those to Eurobank EFG Bulgaria will be canceled. And the bank will be ranked in the list of unsecured creditors. In this list, however, it will neither be the only one nor its claims will be the largest. In this list now are an offshore company from the Seychelles, Maskator, with claims of BGN17 million under a contract for mediation in 2004 . Other creditors with amounts larger than those of the Bank are Mrs. Kishkilova herself and her husband Orlin Kishkilov endash with a total of about BGN8 million. The two other companies of the business lady – Idimeks and Smart Chemicals are also there with claims for BGN12 million.
So when it comes to cancellation of financial securities and pledges, most of the money from the liquidation of the assets of Hydrocomp Thorn Spring may thus get in the hands of the offshore company, the Kishkilov family themselves and their companies rather than secured creditors. In such a development the interests of Eurobank EFG Bulgaria and other creditors such as Commerce Bank, to which the company owes BGN 5.4 million lev, would be seriously undermined.
And this story is not an isolated phenomenon.
