The failure of major international companies doubles .. and the impact of dominoes cut “small”


Credit insurer Euler Hermes said yesterday that the number of cases of failure of major international companies has doubled on an annual basis in the second quarter of the year, with a risk of the impact of dominoes in small companies.
The company identified 147 stumbling cases in the past quarter, compared to 73 cases in the second quarter of 2019.
From a legal point of view, the company or any legal unit is in bankruptcy from the moment, when a judicial remedy procedure is opened against it. This procedure occurs when the company is in a state of non-payment, that is, it is no longer able to fulfill its obligations due to its available assets. As for the default, it reflects a state of default and the company running normally, a situation that has not yet reached the stage of bankruptcy.
There is also a difference between the concepts of defaulting and stopping, stopping is the complete cessation of the company’s economic activity, but not all stumbling situations lead to bankruptcy or stoppage. For example, the ruling to open legal default procedures for a company does not necessarily lead to bankruptcy or liquidation. Not all insolvencies resulted in bankruptcy, interruption or liquidation, but it is a precursor to the three cases.
Meanwhile, the total business volume of large nonperforming companies increased 138 percent between the two periods to 106.9 billion euros, the Swiss subsidiary said in a note.
Euler Hermes, a credit insurer that provides a wide range of bond, collateral and collection services to manage commercial receivables between companies, said that in France, for example, 20 major default cases were registered between April and June, which is more With 16 cases, compared to the same period last year, the cumulative balance reached 4.4 billion euros, compared to 650 million euros in the spring of 2019.
“The bulk of the stuttering wave will not reach until the second half of 2020 in France and around the world, but for the major companies it is clear that they have already arrived,” she says.
This is due to the fact that some sectors are more affected by the global health crisis than others, and also because “the shock of activity associated with the crisis has played – and continues to play – a role in accelerating the structural fragility of many large companies, which, if sustained, leads to bankruptcy risk or Stop”.
Finally, “the provisional support measures that the authorities have put in place are not sufficient to prevent them from faltering,” he explains to “The Economist” Maxim Limerl, director of sectoral research at Euler Hermes.
Globally, distribution was the hardest hit sector, with 37 major companies stumbling in the second quarter, followed by services (24), energy (17), cars (13), and textiles and clothing.
Among these sectors, the report says: “Debt levels in the global auto sector are on the rise, which should encourage many companies to sell assets and restructure.”
In contrast, “the pharmaceutical sector and, to a lesser extent, the agri-food and information and communications technology are the most resilient sectors” in resisting Covid-19 damages. As for the latter sector, Euler Hermes identifies its risks by “strengthening regulations to ensure better protection of consumer data”, as well. On “trade war” that could “exacerbate supply problems”.
The most affected geographical region is Europe, which suffers 64 cases of major corporate default, followed by North America 52. The company expected the number of default cases worldwide to see a third increase by 2021, compared to 2019, or equivalent to a decrease when compared to 2020 Corporate “despite public financial support measures”.
Among the developed economies, the United States is expected to be particularly affected by a 43 percent increase in default rates, and 37 percent is also expected to grow in Britain, 24 percent in Japan, 21 percent in France and 12 percent in Germany, according to these. Expectations.
Emerging countries will not survive the expected increase, reaching 50 percent in Turkey and 44 percent in Brazil, where a “low tourism revenue” will be the major influence in these two countries.
Globally, the report predicts a 4.4% decrease in global GDP this year, and also indicates that the sharp rise in economic disasters caused by Covid-19 will be reflected in increased corporate credit risk in the short term (from six to 12 months).


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