ECONOMY

Banks are pushing indebted companies to restructure

Banks are assuming an increasingly active role in company restructuring in order to prevent the emergence of bankrupt companies, as happened in the early 1980s. A high level of indebtedness, the inability of companies to pay back their loans, combined with the fallout from the crisis in the domestic and international markets, bring to the fore the mismanagement of many of those companies and the need to take immediate measures. The banking sector, being in a position to be fully informed of the companies’ financial situation and their prospects, is taking the initiative and is pressuring for the restructuring of the indebted companies. At the same time, banks are giving those companies time to sort out their finances because they do not want to cause their immediate collapse. According to sources, banks are putting pressure on some enterprises to change their management and manner of operating to drastically cut costs and sell some of their property, if necessary, to reduce their level of debt. The banks consider that the companies’ present woes reflect «strategic mistakes in the past» and insist that restructuring is a necessary precondition for most of these companies to stay afloat. For their part, the banks undertake to restructure the company’s debt by providing new loans, usually syndicated, and, in most cases, with more favorable terms, such as lower interest and longer repayment periods. Top bankers say that the relatively low cost of money allows them to make such moves to support indebted companies. However, this, by itself, is not enough; the companies must also do their part to reform. A recent example of such cooperation is passenger shipping company ANEK. Its new management has renegotiated its loans in exchange for a complete short-term restructuring program to be drawn up by the company and a hired financial consultant. Bankers said that the success of this program will determine whether the company continues operating. Another prominent example is that of plastic pipe manufacturer Petzetakis, a company once proudly proclaiming itself the first Greek multinational, now facing severe liquidity problems due to excessive borrowing. Sources say that the company is having difficulties repaying a 12-billion-drachma (35.2-milllion-euro) syndicated loan. The same sources say that the company’s main shareholder and chief executive officer, Giorgos Petzetakis, is having problems repaying a personal loan and that banks have already tied up his house – worth 11.7 million euros – in a northern Athens suburb. Despite the pressure they exert, banks are determined not to let these companies go bankrupt. This would dramatically increase their provisions of bad debts at a time of rapidly falling profits. Their intention is to give these companies a two-year reprieve to see if they can benefit in some way from the additional growth that the Athens Olympics and EU fund inflows will create.