Düsseldorf Despite the tightening of filing requirements for insolvency, as was the case in pre-Corona times, the number of corporate bankruptcies in Germany has continued to decline: According to calculations by the credit agency Creditreform, only 8,800 companies filed for bankruptcy in the first half of 2021. That is 1.7 percent less than in the same period last year – and as little as it has been for over ten years.
Both the strong balance sheets and the high equity and liquidity ratios meant that among all large and small listed companies, the number of ailing companies even fell slightly in 2020 compared to 2019.
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“I still do not expect a wave of insolvency, as the earnings situation of most companies should improve quickly in the wake of the already heavily scaled back lockdowns,” estimates Dirk Steffen, Head of Capital Market Strategy at Deutsche Bank.
Declining bankruptcies also in Europe
There are fewer corporate insolvencies not only in Germany, but throughout Europe. 15 EU countries plus Norway and Switzerland recorded a total of 119,000 bankruptcies last year. Two years ago it was almost 163,000. The trend continues: thanks to government aid such as loan guarantees, grants and credit moratoriums, the number of bankruptcies in the European Union in the first quarter of 2021 was a good ten percent below the pre-crisis level.
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The moderate risk of insolvency is also reflected in the market for corporate bonds in the euro area: In the case of high-yield bonds – these are promissory notes from risky and endangered companies – the default rate could fall to just over one percent this year, according to Deutsche Bank.
In Germany, there was a decline in insolvencies, particularly among medium-sized and larger companies, while the numbers among very small companies rose. The share of insolvent companies with a turnover of up to EUR 250,000 increased to 54.1 percent (previous year 46.8 percent).
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Large companies with sales of more than 25 million euros a year, on the other hand, only accounted for a fraction of insolvency events (0.9 percent). Here the Adler Modemärkte recently stood out with their almost 150 branches nationwide and 3,600 employees. The retail industry accounted for 21.8 percent of all bankruptcies in the first half of the year – 3.8 percent more than in the previous year.
More than half of all cases concerned the service sector with a share of 58.2 percent. The best known is the major insolvency of the personnel service provider Brillant Group with several subsidiaries and a total of 3,000 employees. On the other hand, bankruptcies in construction and industry declined, particularly noticeable in manufacturing, with a drop of 23.6 percent to just 550 cases.
The procedure of the traditional crane manufacturer Tadano-Demag was opened at the beginning of the year and completed on April 1st. But as in many other cases, the milder form of protective shield proceedings remained. The Zweibrücken and Lauf locations will be retained.
The prerequisites are actually very poor. Those who cannot pay their bills and are therefore insolvent have had to report this to the local courts since October. Until last autumn, bankruptcies of this kind, which usually make up 90 percent of all insolvency cases, had been suspended by the federal government due to the corona pandemic.
Equity remains high
Since April, even over-indebted companies have to report their plight to the local courts again. Experts therefore feared a bankruptcy congestion and the danger of “zombie companies”. These are non-viable companies that simply continue to exist due to the suspended filing obligation in the event of insolvency – but cannot pay their bills and therefore threaten healthy, viable companies.
The crane manufacturer’s insolvency proceedings have now been concluded.
(Photo: dpa)
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But contrary to the expectations of many insolvency experts, the number of bankruptcies continues to decline. On the one hand, this is due to the company’s strong balance sheets. The companies compensated for slumps in sales and profits of up to two thirds in the manufacturing sector with fewer investments and higher liquidity. In this way, the equity remains high despite the slump in earnings.
This was also achieved with the help of the many financial aids decided and expanded by the federal government. Since the beginning of the crisis more than a year ago, according to the latest data from the Ministry of Economic Affairs, more than 110 billion euros in aid have been approved. In addition, there is short-time work allowance of more than 30 billion euros so far. Since November 2020 alone, 24.5 billion euros have been paid out in direct, non-repayable grants.
The federal government recently decided to extend aid for companies and the self-employed until at least the end of September. The prerequisite for bridging aid III – the federal government’s central crisis instrument – is a drop in sales of at least 30 percent. The comparison value is the respective month in the pre-Corona year 2019. This includes subsidies for operational fixed costs such as rents and leases or interest expenses through to expenses for electricity and insurance.
All of this serves the goal formulated by Federal Economics Minister Peter Altmaier (CDU), according to which the German economy should regain the strength it had before the crisis in 2022. At least the 300 or more listed German companies will probably be able to do this this year. This is at least what the previous quarterly reports and the analysts’ projections suggest.
More: 7000 balance sheets – that’s why there is no bankruptcy wave.
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