Creditor protection is no panacea

As the number of businesses filing for protection from their creditors under Article 99 of the bankruptcy code continues to grow significantly, the prevailing sentiment of pessimism in the Greek economy is compelling even companies that show every sign of being to able to make a recovery to resort to this radical measure.

Business circles inform Kathimerini that one of the obstacles to the efforts of companies that have filed for creditor protection under Article 99 to clean up their finances is credit insurance companies.

A common practice in the market, according to experts, is for credit insurers to refuse coverage to the suppliers of companies that have filed for creditor protection, hurting the relationship between the two but also drastically limiting the alternatives a company in trouble has at its disposal.

Experts say that the problem with the credit insurers stems from a gap in the legislation, which does not include a special clause for companies under creditor protection.

Meanwhile, the situation has become even more complicated recently as banks are refusing to issue letters of guarantee to troubled businesses, closing the door even more firmly on them. The only way out for such companies, therefore, is to take out a loan — at least when this is possible — as their suppliers will be demanding cash in the absence of letters of guarantee.

The next few weeks are expected to be crucial for a number of Greek companies currently negotiating their future, either under Article 99 or outside of it. Specifically, by the end of March, the Athens First Instance Court is due to hear Puma Hellas?s petition for protection.

The management of the sportswear company believes that approval of the application is imperative for the firm to remain in Greece and for it to become viable once more.

Puma Hellas, meanwhile, has acquired new management following revelations of financial misdeeds by minority shareholders and three former members of the board of directors, which aims to fully reorganize the company and bring it back to its feet.

The case for Thrace Papermill Diana SA, whose management has filed for bankruptcy rather than creditor protection, has been pushed back to April 5 from March 8 on the request of the company itself.

The management had said that it wanted time to find a buyer, though this plan does not appear to have borne fruit as yet.

Finally, on April 4 a court is scheduled to hear the bankruptcy petition of Associated Textiles filed by one of the company?s suppliers, while on the same day textile company Ridenco?s board of directors is due to meet in order to discuss the fate of its Cypriot subsidiary, Woodland Design.

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