Bankruptcy proceedings break records in February and pressure Calviño to extend his moratorium

Despite being a month with fewer business days, February set a record in the bankruptcy record since the coronavirus pandemic broke out in March 2020. A total of 532 companies they declared themselves in a situation of insolvency as they were unable to pay back their debts with creditors or suppliers, which represents an increase of 18% compared to the same month of the previous year.

The sharp increase in tenders increases the pressure on the Government to nine days before the expiration of the shield approved by the Executive last year to protect companies in financial distress. This mechanism allows a company not to file for bankruptcy even though it is aware of its insolvency -as established by the bankruptcy law- and prevents its creditors from forcing a compulsory bankruptcy to obtain the reimbursement of their credits.

The Vice President of Economic Affairs, Nadia Calviño, So far it has not ruled on the possibility of extending this anti-bankruptcy shield, although sources close to its ministry explain that this is scheduled to take place in the next few days without specifying how long the new extension would be.

The rise in competitions illustrates the exhaustion of many companies just one year after the declaration of the State of Alarm and the confinement of the population. Many companies have managed to survive to this date based on credits to reinforce their liquidity and other aid such as ERTE, but the extension of health restrictions over time greatly complicates their future and ends up leading them to throw in the towel.

The February data reflect the strong impact on the hospitality sector, which dominates the number of bankruptcy proceedings with a total of 138 applications so far this year. That is to say, counting only the business days, each day three restoration companies in Spain have applied for the contest, although this does not include the closures of bars and small restaurants that do not have to take advantage of this judicial figure by not having debts. The figure represents an increase of 94% compared to the first two months of 2020, when the impact of the coronavirus seemed reduced to Asia and the Government ruled out a notable incidence in Spain.

Statistics compiled by Axesor it also shows how the bankruptcy virus is gradually spreading to other economic activities that, in principle, were not as hit by the pandemic as in the case of tourism. Companies with professional and technical activities, or linked to education and health, are also beginning to register increases.

By autonomous communities, Cataluña, with an increase of 37% in bad debts in February, it continues to be the region where the most bankruptcies were declared, both in February (136), and in the accumulated of the year (236). Catalonia is followed by the Community of Madrid, with 104 more insolvencies in the second month of the year, representing an increase of 35.06%, and a total of 153, while the Canary Islands registered 73 , 33% more procedures in February, which in absolute terms translates to 26.

The increase in insolvencies is also taking place in the midst of internal debate within the Government about whether or not to give direct aid to companies. Sánchez announced a stimulus plan of 11,000 million euros, but for now no details are known about its implementation.

Calvià ± o’s initial idea was to focus the package on improving the solvency of companies by enabling debt restructurings in the ICO financing lines, which provoked a strong rejection on the part of the banks that participated in these operations. The second idea is to “reinforce” the role of the Autonomous Communities so that they are the ones that grant direct subsidies to the businesses hardest hit by the crisis, which would entail a new transfer of funds to the autonomous entities.