(Corrects first names in the second sentence: Karsten, not Daniel Lafrenz)
Munich (Reuters) – German companies weathered the Corona crisis better than the 2008/09 financial crisis – but restructuring experts believe that many of them are still facing the acid test.
“Most companies do not go bankrupt during a crisis, but afterwards when they start up business again,” says Karsten Lafrenz from the restructuring consulting firm AlixPartners in an interview with the Reuters news agency. Government aid programs have increased the debt of German companies by 200 billion euros. “Losses were financed with new debts,” explains Lafrenz. At the same time, another 60 billion euros in working capital flowed out. “These balance sheet holes have to be closed first.”
According to a survey by AlixPartners among restructuring experts, 96 percent of consultants, bankers and lawyers assume that their customers will still have to struggle with the consequences of the corona pandemic this year. Many of them may not have the strength to reduce their new debt and build up capital at the same time, says Lafrenz. The feared wave of insolvencies has largely failed to materialize in Germany during the Corona crisis. “Now everything depends on the question of whether you can get the Delta variant under control quickly,” says Axel Schulte, Co-Head of Turnaround and Restructuring Consulting at AlixPartners. “If it prevails, it will be more difficult – because the liquidity is not infinite.”
In addition to airlines, other industries that depend on business travel are likely to come under pressure. “Short business trips will continue to have question marks,” says Lafrenz. Tourism, on the other hand, is recovering strongly. The trend towards home offices is causing the real estate industry a headache. “We can already see that some financing is risky,” says Schulte. “You will need fewer offices and less retail space, but perhaps more storage space – and larger apartments that also have space for a desk.”
56 percent of the surveyed restructuring experts from Europe and the USA agree that the companies coped with the corona crisis better than the financial crisis. But while almost half of the company managers attribute this to their own interventions in the operational business, more than half of the restructuring experts see concessions by banks on loans and extensive state aid as the reason. “The availability of government funds was unprecedented – and the aid was also effective,” emphasizes Schulte. Lafrenz also praised the managers: “After a brief phase of uncertainty, the companies pulled out all the levers they could pull.” Thanks to short-time work, major job cuts have been avoided.
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