The restructuring market in Romania reaches maturity. EUR 1 billion, the value of assets of companies under arrangement with creditors


The number of companies accessing the Government Ordinance 6/2019 for reorganization of budget liabilities is increasing

Based on an analysis performed by CITR, the leader of the Romanian market for insolvency and restructuring, the Romanian companies are increasingly resorting to prevention mechanisms, like the arrangement with creditors and Government Ordinance 6/2019. The Romanian restructuring market is on a growing path: in 2020, the amount of fixed assets of companies who accessed the option for arrangement with creditors increased to EUR 1 billion, from EUR 15 million in 2019, and it accounts for more than 71% of the total value of assets of companies that applied for insolvency and restructuring facilities during last year. At the same time, the economically-significant turnover of companies that concluded arrangements with creditors, including CFR Marfă and Blue Air, increased to EUR 693 million and it amounts to almost two thirds of the value of companies that applied for insolvency and restructuring.

The business sectors of companies resorting to arrangements with creditors in 2020 are: transports, industry, hospitality, services and real estate, which are also among the industries that were most heavily affected by the pandemic.

As per CITR, such data show that the large players on the Romanian market understood the importance of early decisions to save the business and decided adopt restructuring measures rather than insolvency procedures, which are applicable from the very first signs of distress. Thus, when deciding to take timely actions, these companies chose to prevent insolvency and to redress before the financial problems worsened and the operative business of the company came to a stop.

This is also the case of some large publicly-owned companies, that last year took significant measures for restructuring of their business.

Vasile Godîncă-Herlea, Managing Partner CITR and Head of Business Development Impetum Group, sharing his thoughts concerning the decision of managers and entrepreneurs to access restructuring measures: ”We notice a change in mentality of large Romanian companies, as they start to have a prevention-oriented thinking in business. The fact that an increasing number of companies indispensable for economy select the restructuring option, shows us that they are confident in the efficiency of our measures, and this is a good sign for the market. We expect that, upon transposition of the European Directive on preventive restructuring frameworks, in July this year, the increasing trend on restructuring market would intensify, and that the number of companies resorting to prevention mechanisms would increase. Transposition of this Directive will generate the framework required for renunciation to obsolete practices on postponement of insolvency and restructuring practices, and it will support us in saving as many as possible businesses on the market.”

The arrangement with creditors is an increasingly popular method of restructuring, known to be quick and efficient, and available to any company faced with difficult situations. This procedure allows the company to have amicable negotiations with its creditors holding no less than 75% of the value of confirmed receivables, eliminating the risk of foreclosure while allowing the company to apply a turnaround plan that would save the company in time, before running out of resources.

Government Ordinance 6/2019 is an opportunity for companies to recover based on rescheduling of budget liabilities. Government Ordinance 6 allows waiver of interests and penalties, and rescheduling of principal liabilities to ANAF. In certain conditions, a reduction of up to 50% may be provided. 

These measures provide an additional option for an efficient turnaround of companies, preventing insolvency, and it provides additional decision freedom and time to the management.

Status of the business environment and impact of rescheduling

Based on a CITR survey, launched at the end of last year, 57% of the affected companies in insolvency delay, in average, by 3 years the accessing of restructuring options, leading to an average decrease of the turnover by 50%, and an average increase of liabilities by 30%. Most of the times, delayed accessing of restructuring mechanisms reduces the efficiency of these procedures in the turnaround of the company. Other 23% companies delayed, in average, by one year the restructuring decision, with other damaging effects on the company, on jobs and on the business environment.

“Our experience of more than 20 years in working with companies faced with financial difficulties proved that any delay in restructuring leads to an increasing number of delayed deadlines, accrued debts, denials from providers and, in certain cases, foreclosure decisions. Many of these circumstances can be avoided. A survey performed by CITR shows that the timely use of restructuring mechanisms could save, in three years, 400,000 jobs in 12,000 companies in difficult situations. Aurel Podariu, Senior Partner in CITR and Business Development Manager in Impetum Group.

Together with implementation of the new European Directive in the field of restructuring and prevention of insolvency in Romanian and European legislation, a project where CITR plays an important role of national consultant, it is expected that the number of prevention procedures in business accessed by companies would increase, and the efficiency of restructuring companies would be significantly improved. At the same time, this new legislation will contribute to the setup of a preventive mindset in business.