Distress funds preying on troubled firms

Distress funds, private equity funds and hedge funds are circling over more than 30 Greek listed companies like vultures, preparing to make a profit on the firms with capitalization between 20 and 80 million euros that are found in a difficult position due to their excessive borrowing and the lack of cash flow.

These funds are looking to obtain the share control of companies that have prospects for a rebound and are promising to other shareholders that in the future they may reap some gains. Among the sectors interesting these foreign funds are telecommunications, energy, consumer commodities, retail commerce, manufacturing and construction materials.

Most of these funds have already identified their targets, which are companies with satisfactory marketability, i.e. their owner does not hold a stake that exceeds 51 percent, the rest of the shares are widespread in the market and the firm has targeted its expansion abroad, not being affected by the drop in domestic consumption.

The buyout of a company by a distress fund usually leads to its complete restructuring, including the concession of activities and assets, and major staff cuts.

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