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The number of bankruptcies has decreased by 43 %

28. May 2008

Research having been conducted by AS Krediidiinfo already the eighth time, has shown that though the number of enterprises in Estonia has been quickly growing during the recent years, the number of bankruptcies has shown a tendency to decrease for four years in a row. 

Last year in Estonia 202 enterprises have been plead insolvent, i.e. comparing with the year 2006 the number of bankruptcies has decreased by 43%. In 2007, 0.18 % of all enterprises, or every 565th enterprise went bankrupt, AS Krediidiinfo has informed. 

As the bankruptcy process is rather long and complicated, economy cooling has not affected the 2007 statistics of bankruptcies. However, it is possible to note a growth in number of bankruptcies in the first four months 0f the year 2008, when 120 enterprises were plead insolvent. It means that it is possible to predict some increase in the number of bankruptcies in the current year, but the rate of the enterprises gone bankrupt will not possibly exceed the level of 2006. 

The typical bankrupt enterprise is a company without own capital, with rather a low turnover, operating at a great loss. Such companies can be characterized by long-term debts to the Board of Revenue: approximately half of the companies which went bankrupt in 2007 had had tax arrears for the period of time more than one year prior to the bankruptcy announcement was made. 

The results of the analysis testify to a connection between probable bankruptcy and AS Krediidiinfo rating, i.e. bankruptcy of an enterprise can be predicted based on its rating. For example, 86 % of the enterprises which went bankrupt last year, were given low rating by AS Krediidiinfo, based on their the reports given for the previous economic year. Among the bankrupt enterprises there were no companies with very high rating at all, and the percentage of the enterprises with high rating was only 4%. 

The region with the greatest number of bankruptcies still remains Ida-Virumaa, where a chance to go bankrupt for an enterprise is almost two and a half time higher, than on average across Estonia. The highest probability of bankruptcy have companies operating in the sphere of manufacture and public catering, where 3.8 enterprises of every 1000 declare bankruptcy. 

Comparing to the other European countries, the rate of bankruptcies in Estonia is much less – 18 bankruptcies per 10 000 enterprises. The lowest rate of bankruptcies is in Poland – there is only 1 bankrupt per 10 000 enterprises. The highest rate of bankruptcies is in Luxembourg, where there are 256 bankruptcies per each 10 000 enterprises. In Latvia and Lithuania this rate is accordingly 128 and 252 per 10 000 enterprises.