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Press Release: Debts and main indicators not the only warning signs of bankruptcy

15. Feb 2018

Although the share of bankrupt companies among registered commercial undertakings remained at a record low of 0.16% for the second year in a row in 2017, there were some changes in the warning signs of bankruptcy. The bankruptcy panel survey carried out by Creditinfo Eesti AS revealed that determining the risk of bankruptcy according to debts and main indicators is increasingly more difficult.

 It’s noteworthy that as many as 18% of companies had no tax arrears or payment defaults immediately before going bankrupt and the main economic indicators of these companies were satisfactory. The total tax arrears and amounts of payment defaults of the companies that have gone bankrupt have decreased gradually in recent years.

Three of the 10 largest companies that went bankrupt in 2017 operated in wholesale, two in manufacturing industry, two in construction and two in transport and warehousing. The biggest company that went bankrupt, Spratfil AS, was a producer of fish and fish products.

343 commercial undertakings were declared permanently insolvent, which is 2.4% or eight companies more than the year before. Irrespective of the small increase, the level of bankruptcies is still low and the same trend is also likely to continue in 2018.

The bankruptcy proceedings of 199 insolvent commercial undertakings expired due to the lack of assets. Although the 58% share of companies without assets among all bankruptcies seems high, their total turnover only comprised 18% of the total turnover of the companies that went bankrupt.

The average number of companies that went bankrupt in 2017 was 1.6 per thousand. The number of bankruptcies was traditionally higher in the accommodation and food service sector and manufacturing industry, where 4.3 and 3.5 companies per thousand went bankrupt, respectively. The construction sector dropped out of the traditional top three for the first time.

The counties with the highest levels of bankruptcy were Lääne County and Ida-Viru County, with 4 and 2.5 bankruptcies per thousand companies, respectively, and the counties with the lowest levels of bankruptcy were Lääne-Viru County, Rapla County and Järva County, where 0.3, 0.5 and 0.6 companies, respectively, went bankrupt.

The average company that went bankrupt in 2017 was a small company with two employees, sales revenues of 0.2 million euros and almost non-existent equity that operated with a loss. Almost 97% of companies that went bankrupt received a low Creditinfo Rating (BB, B, C, U) in their last year of active operations.

You can read the survey on our website: Bankruptcies in Estonia in 2017

Creditinfo Eesti AS is the largest and most experienced company in the Estonian credit information sector whose principal activity is the management of the financial risks of Estonian companies. Creditinfo has carried out bankruptcy surveys of Estonian companies since 2000.

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