Transport and logistics companies - 18% increase in the number of insolvencies

Trade and construction represent the sectors of activity with the highest number of insolvencies recorded last year, but the largest increase in insolvencies was recorded in the transport and logistics sector, according to the study carried out by CITR, one of the most important companies in the insolvency market and restructuring in our country.

According to the study prepared by CITR, of the 6,650 companies that entered insolvency in 2023, 1,630 are from the wholesale and retail trade, along with the repair of motor vehicles and motorcycles (with the mention that here there is a decrease of 1.15% compared to 2022), 1208 are from construction (sector in which last year there was a 3.6% increase in insolvencies compared to 2022) and 636 companies are from transport and storage (an increase of 18% compared to 2022).

Of the total number of companies entering insolvency in 2023, the cited source states that 89 are impact companies, with assets of over 1 million euros, compared to 67 in the previous year. Regarding the number of restructurings through the preventive arrangement procedure, in 2023 90 applications were registered, of which 60 are currently underway. 14 of the requests come from impact companies.

Paul-Dieter Cîrlănaru, CEO of CITR, said: "These figures reflect the results of European and national policies aimed at keeping companies alive in times of economic difficulty through various support mechanisms. But the hidden cost that companies pay is their very performance, their ability to generate long-term profit. Debts increase and their performance decreases. In other words, companies are kept alive on infusions, they operate but accumulate debt. The question we constantly ask ourselves is how can we support them to recover and perform on their own in the long term? How do we help them move from treatment to recovery? Undoubtedly, the restructuring solutions provide the prerequisites for a healthy evolution. Further, however, pivoting, innovation, changing the way of doing business are what maintain the results".

According to the study prepared by CITR, the municipality of Bucharest continues to register the highest number of insolvent companies, with an increase from 1,153 in 2022 to 1,289 in 2023. At the same time, an increase in the number of insolvent companies is observed in Bihor county , where the number increased from 545 in 2022, to 599 in 2023, but also a decrease in Argeş county, from 178 insolvencies recorded in 2022, to 120 in 2023, which signals possible improvements in economic conditions or the effectiveness of measures prevention and restructuring implemented.

• The preventive agreement, an increasingly popular solution for companies in difficulty

In 2023, 90 requests to open the preventive composition procedure were registered, of which 60 are ongoing and amount to a turnover of 250 million euros and immobilized assets of over 100 million euros. The companies in the preventive composition procedure are mainly from trade, construction and manufacturing, from counties such as Dolj, Bucharest, Cluj and Mureş.

Of these, 14 are impact companies with assets of over one million euros. They have a cumulative turnover of 120 million euros and together have fixed assets of 78 million euros.

Paul Dieter Cîrlănaru states: "The number of companies that turn to restructuring solutions is increasing, but these procedures are confidential, they are not visible. Even if we cannot have a perspective on restructuring agreements or business restructurings in general, we see increased interest in this area".

Restructuring solutions available to companies are restructuring agreement, preventive arrangement and extra-judicial business restructuring.

Through the restructuring agreement, companies can address issues quickly and tailored to specific needs, in a regulated negotiation framework, allowing them to restructure their business and debts. "Prevention" and "early" are the two essential elements of the philosophy of this procedure and the role of the courts is minimal.

The preventive concordat offers the possibility of temporarily suspending any enforced execution that the entrepreneur can benefit from for the renegotiation with the partners, in a regulated framework, which allows a restructuring of the business and debts and a restoration of balance and perspective in the business. The solutions that can be implemented in such a restructuring mechanism can be adapted to the specifics of each company and can involve measures such as: staggering and adjusting debts, converting debts into shares, business transfer, selling non-core assets, attracting financing, mergers/splits, etc.

While the restructuring agreement and preventive measures agreement are modern restructuring procedures regulated by Law 85/2014 on insolvency prevention and insolvency procedures, companies can in certain situations also resort to extra-judicial restructuring in a consensual manner with its partners. Thus, financial and/or operational restructuring measures can be agreed upon by consensus between the administrators, associates and main creditors of the company. Financial restructuring can aim at changing the company's debt structure but also its capital structure, by bringing in an investor or increasing the share capital. The operational restructuring aims to improve efficiency and profitability by implementing measures to optimize production, distribution, marketing or cost control processes.

The success of a restructuring depends on many factors, but it is essential to start the restructuring process in an early manner, before the problems become acute.