Information technology firms feeling acutely the ill effects of massive debt

With some groups in immediate threat of bankruptcy, rapid downsizing seems to be the only remedy

By Fotis Kollias - Kathimerini

The high borrowing requirements of Greece’s largest information technology firms and the inability of some of them to meet their obligations is developing into a major problem for the country’s banking system, according to sources. On the basis of nine-month results, the debt liabilities of 14 listed IT groups (including Intracom, which is mainly active in the manufacturing of telecommunications equipment, but also develops software) approach 2 billion euros. The capital value of the 14 totaled 1.33 billion euros at the end of September — about half of what it was three years ago.

It is noted that the debt liabilities of the listed IT groups have increased despite their announcements at various times in the last two years of efforts to restructure and limit them. Banking officials point out that even strong groups in the sector have exhausted their armory for meeting their high debt obligations — such as bond and syndicated loans — and are now having difficulty repaying, given a still rather stagnant demand in the private sector and project delays in the public sector.

For this reason, the banks are pressing IT groups to sell subsidiaries in order to repay debts. (Altec, for instance, apart from high debts of its own, has suffered large losses with its retailing subsidiary Microland.) However, given the overall sluggishness, no one seems interested in such investments.

Several such subsidiaries, most of which were bought three or four years ago with a view to being listed on the bourse, were later divested of their senior staff (their former owners had already been quite well compensated) and are now loss-makers. One such example of ill-conceived moves is that of the Ideal group, the basic shareholders of which (the David family) announced last week that they will proceed to a share capital increase, as equity capital now stands at slightly over 2.7 million euros and losses at 17 million.

IT market sources have expressed fear of a domino effect should one of the large groups collapse. In the case that Altec, for instance, ends up bankrupt, it is argued that it is bound to drag with it a series of smaller subcontracting companies. The only solution seems to be a speedy downsizing of the groups to reverse the excessive, unplanned growth and diversification that began four years ago.