The collection of due payments have become one of the biggest problems in the last two to three years in Bulgaria. As noted by the manager of the factoring company EOS Matrix, Rayna Mitkova, the deadlines for deferred payments have been reduced significantly. Their average length, for the population, has shrunk from 20 to 13 days. The reason for this is the still lower liquidity suffered by the companies. In fact, this is explicitly stated in the study of the Bulgarian market, which was made by the company. About 33 percent of companies indicated that irregular payments have led to a decrease in profits, while a quarter of them say that the overdue receivables have created a liquidity problem. Significant proportion of surveyed companies expect these threats to be preserved in the future, says the analysis of EOS Matrix.
Some experts say the data EOS Matrix refer to only the functioning firms. Others are already up against the wall
and deep in the swamp of financial problems,
and these companies are generally taken for dead by customers, suppliers and creditors. This view is confirmed by an older survey of the factoring company Kofas. It notes that in 2012 the country had 1339 companies declared bankrupt. Noteworthy is that this is the number of legally bankrupt firms and not to of those against which enforcement proceedings or proceedings for bankruptcy have were initiated. A further worrying fact is that compared to 2011, the number of insolvent companies rose nearly 3.5-fold, which is frightening. Even more alarming are the findings in the report saying that in 2013 and 2014 the number of bankruptcies is expected to further increase. If we take the data published by the Chamber of Private Enforcement Agents, this prediction will be confirmed. They show clearly that from mid-September to mid-October 2013
there are 4,600 auctions the scheduled
for the sale of seized movable and immovable property. These are not just apartments, houses and cars. Bailiffs are looking, on behalf of creditors, for new owners of 21 petrol filling stations (one may wonder how come the sale of fuel may turn into a losing enterprise), 160 industrial properties, 115 commercial properties, 24 hotels, 15 factories and 71 warehouses. Apart from that, bids were announced for 68 entertainment establishments, 147 offices and 219 stores. This is not a problem solely for small and medium businesses. Although it should be not a very a small business, when in order to repay its credit to DSK, for sale has been announced an entire holiday resort in northeastern Bulgaria, with an initial price over 14.4 million levs. It is true that the crisis has hit hardest the construction industry after a few years of excessive profits. Therefore sales of corporate property now, especially for the repayment of debts to banks, seem commonplace.
The bad thing is that the process does not only affect the construction industry. For sales have been placed entire factories like the one in Sevlievo, owned by Dynamo Ltd., for which the sellers ask 2.8 million levs to repay the debt to the DSK Bank, or an industrial land of City Auto Centre in Varna whose initial price has been set to 2.4 million levs to cover the repayment of the firm’s obligation to UniCredit Bulbank.
Even gas stations have already been auctioned. In Silistra Cars Com Ltd has announced a tender for a nearly one-million-lev station in order to be able to repay the loan to CIBANK . For another establishment of the kind, in the village of Kran. near Kazanlak, the bailiff is looking for a buyer willing to give at least 600,000 levs to cover a mortgage to Alpha Bank.
So much attention has been paid to the sale of property of bank debtors and probably many people could take this as further evidence about how credit institutions ruthlessly press businesses and do not let them breathe. But this is not exactly the situation. Many
companies are forced to sell property
of their troubled contractors. This once again confirms the finding that not credit, but namely the inter-company indebtedness is the greatest evil for businesses now. Evidence can again be found on the website of the Chamber of Private Bailiffs.
According to the analysis of experts in some banks, the delayed payments between firms is increasingly growing to alarming proportions. In an attempt to keep their business partners alive, many companies provide increasingly longer deferral periods (as opposed to those for citizens) who buy their products or use their services. This is confirmed by the data reported by companies collecting receivables. Such a policy reduces the volume of reported overdue payments, but this is only temporary and carries purely accounting effects for companies that have claims.
This so-called netting of debts, however, can be used in very limited cases. And it is a partial solution to the problem for all companies involved in the transaction because it saves them costs but is not pouring fresh money into them. For such transactions a decade ago bankers said that in Bulgaria there were business transactions, but only accounting moves. These grim findings on the state of the business climate are to some extent still valid today.
The BANKER
