Assets worth 1.5 billion kuna do not attract buyers
Bankruptcy trustees face difficulties in selling the assets of companies in longsta
nding bankruptcy
PICTURE: Srdan Simac, President of the High Commercial Court points out that large bankruptcies are over and anything attractive has already been sold.
The sale of real estate and other assets in bankruptcy is stagnating, states for Poslovni Dnevnik the President of the High Commercial Court Srdan Simac, and more and more bankruptcy trustees are losing a lucrative business.
"Big bankruptcies are mostly finished so the most attractive assets are already sold" says Simac. Even the internet is not helping the failed companies, whose bankruptcy procedure is lasting for years, to find buyers. According to the information of the High Commercial Court's web page "Web Bankruptcy", several hundred bankrupt companies have assets which are (nominally) worth over 1.5 billion kuna, but bankruptcy trustees cannot sell them on the market because real estate is mostly in unattractive locations for which the investors are not interested. On the list of bankrupt companies with asset value estimated in millions (which is not sold although public auctions have been organized several times or the deadline for submitting purchase offers run out) are, for instance, Pomgrad from Split, Pamucna industrija Duga Resa, Veterinaria from Bjelovar, Labinkomerc, Nova modna konfekcija from Nova Gradiska, Trgocentar from Cakovec, Agroposavlje from Velika Gorica...There is a small number of investors today who decide to buy the property of failed companies, warns Marinko Paic, bankruptcy trustee and the President of the Croatian Bankruptcy Trustee Association who holds the record in managed (and finalized) bankruptcy procedures. He managed more than 500 and over 100 were successfully completed. In his words, the companies which are bought today are regularly submitted to change of their economic activity by the buyers - who build new facilities or residential-business buildings and only in about 10% of failed companies the new owner decides to keep the previous economic activity. "Zagreb is now the largest construction site in the country, but the construction is happening on property bought outside of bankruptcy procedures. At the Commercial Court in Zagreb during the workshop for bankruptcy trustees they gave us the estimate that in 2008 in Zagreb around 300 companies will go bankrupt, but 95% of those are expected to happen in small companies which are established as limited liability companies. So, Zagreb continues to function as the largest bankruptcy center in the country which covers more than 30% of bankruptcies, but it mostly concerns the bankruptcies of so called secondary companies which are of no interest to investors and their creditors are not in favor of ad hoc solutions with which to speed up the end of bankruptcy procedure", says Paic.
The pronounced decline of interest for investments in bankruptcies is a sign that the market is not reacting to the majority of assets publicly displayed in a bankruptcy procedure, although all conditions for public sale are fulfilled, which leads to legal lowering of prices in the amount allowed by the creditors (even up to five percent). The problem of more efficient sale of bankruptcy assets for the purpose of faster satisfaction of creditors was not solved as it was expected by internet publishing of auctions and information on the assets offered on the market. "Increased information availability did not encourage investors to buy bankruptcy assets", explains Paic who gives an example where only in the fourteenth auction he sold the company Brusena near village Hrasce because, he says, he knows that the person who bought it did not find out about it on the internet, but from newspapers. On the other hand, the sale of bankruptcy assets is crucially influenced by factors such as the attractiveness of the location where the property is situated, points out bankruptcy trustee Paic. He also mentions that this includes a question whether the property is located in the construction zone and the level of arrangement of the object of sale, while the price is allegedly less important.
When selling bankruptcy properties which are located in attractive positions, I've achieved much bigger prices than those estimated by court experts and the established starting price at the court hearing", says Paic. Varazdin based attorney and bankruptcy trustee Marko Lapaine says that bankruptcy is an investment opportunity which is profitable if with minimal investments you can purchase a company with relatively rich assets and by recapitalizing such an acquisition a successful new brand is created. "Many private investors used the initial phase of bankruptcies because in the 90's large companies which the state did not know how to prepare for production with small investments went bankrupt. Unlike bankruptcies from the tycoon phase, current bankruptcies are very poor: companies which go under today are worth less and have larger debts. There are numerous examples where the state gives up its claims, the tax payers' money, in favor of the buyers just to solve the case", says Lapaine. According to the proposal of some experts, market would be more active if investors who want to take over the facilities or undertakings of the companies in trouble would provoke their bankruptcy by buying at bagatelle prices the claims of individual creditors and beforehand solve the problem of mortgaged or fiduciary property by favorable purchase of insured claims.
Poslovni dnevnik, 14.08.2008.
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