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Business Insolvency Worldwide

Economic Outlookno. 1200-1201october-november 2013

www.eulerhermes.com

Economic Research

Patching things upFewer insolvencies, except in Europe

Economic Outlook no 1200-1201oct.– nov. 2013 | Business Insolvency Worldwide Euler Hermes

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Economic Research Euler Hermes Group

Economic Outlookno 1200-1201 Business Insolvency Worldwide

Contents

The Economic Outlook is a monthly publi-cation by the Economic Research Departmentof Euler Hermes. This publication is for theclients of Euler Hermes and available on sub-scription for other businesses and organisa-tions. Reproduction is authorised, so long asmention of source is made. Contact the Eco-nomic Research Department Publication Director and Chief Economist:Ludovic Subran Macroeconomic Research and CountryRisk: Silvia Pepino (Head), Andrew Atkinson,Ana Boata, Mahamoud Islam, Dan North,Manfred Stamer (Country Economists), NicolasBargas, Rémy Carasse and Clémentine Caza-lets (Research Assistants) Sector and Insolvency Research: MaximeLemerle (Head), Bruno Goutard, Yann Lacroix,Marc Livinec, Didier Moizo (Sector Advisors) Editor: Martine Benhadj Graphic Design: Claire Mabille Support: Laetitia Giordanella For further information, contact the Eco-nomic Research Department of Euler Hermesat 1, place des Saisons 92048 Paris La DéfenseCedex – Tel.: +33 (0) 1 84 11 41 15 – e-mail:research@eulerhermes.com > Euler Hermesis a limited company with a Directoire andSupervisory Board, with a capital of14 468 072,64 EUR, RCS Paris B 388 236 853 Photoengraving: Évreux Compo France –Permit October-November 2013; issn 1 162– 2 881 ◾ November29, 2013 ◾

3 EDITORIAL

4 OVERVIEWPatching things upFewer insolvencies, except in Europe

7 Sectorial focus Western Europe: Virtual stabilization in services, deceleration in construction andacceleration in manufacturing… with hugedisparities between countries

8 Business insolvency outlook worldwide42 countries, Overview 2013, forecasts 2014

10 MAIN STATISTICS

11 NORTH AMERICAAnother two years of falling insolvencies

11 United States: Economic upturn and fall ininsolvencies, despite uncertaincies

12 LATIN AMERICAUpturn in bankruptcies against the backdrop of resurgent vulnerabilities

12 Brazil: 28% increase two years, or 370 morebankruptcies

13 WESTERN EUROPEDisparate situations directly linked to cyclical differences

13 Austria and Switzerland:Along with Germany and the United Kingdom, amongthe good news

14 France-Germany: The big divide15 Benelux; Belgium, Netherlands and

Luxembourg: Three new bankruptcyrecords in 2013

16 Southern Europe; Italy, Spain, Portugal and Greece: In 2014 the recovery will be toolimited to prevent a further fall insolvencies

17 United-Kingdom and Irland:A continued fall in insolvencies

18 Nordic countries; Sweden, Norway, Denmark and Finland: The outlook isimproving with an expected upturn inforeign trade

19 Central and Eastern Europe:A very high overall level of corporateinsolvencies

19 Russia: Insolvencies up +5% in 2014 after a positive surprise in 2013Turkey:A particulary turbulent year in 2013

20 Poland and Hungary: Light at the end ofthe tunnel?

21 Other Central and Eastern EuropeanCountries: 2013 (a little) better, except forthe Czech Republic and Slovakia

22 Africa and Middle EastEconomic and institutional disparities

22 Morocco: Corporate insolvencies set to rise(+10% in 2014), timely budgetaryadjustment at a cost

23 ASIA-PACIFICFurther fall in corporate insolvencies despite already low levels

23 Taïwan, Hong Kongand Singapore:New record low in liquidation proceedings

24 China, Japan: Two positives scorecards fortwo different situations in 2013

25 South Korea, Australia and New Zealand:Continuation of trends: falling insolvencies in South Korea and New Zealand and amoderate rise in Australia

26 MAJOR INSOLVENCIES WORLDWIDEIN 2013

28 ECONOMIC OUTLOOK SERIES

29 OTHER AVAILABLE PUBLICATIONS

30 SUBSIDIARIES

Euler Hermes Bulletin économique N° 1200 | Défaillances dans le monde

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EDITORIAL

Watch out for the zombie companies!LUDOVIC SUBRAN

No, it’s not just “in [our] head” as the Irish group The Cran-berries sings in the song Zombie, it’s a reality. In this specialHalloween issue we have chosen to focus on the 351,300businesses that will close shop in 2014, and this figureconcerns only those in our panel of 42 countries. In additionto these insolvencies, millions of other businesses will be atdeath’s door. The Moroccans have a very useful metaphorfor these ‘walking dead’ businesses: they call them “on hold”businesses. To summarize, this report on the one handdelivers some good news in that the total number of insol-vencies is forecast to be slightly lower in 2014, (1% less thanin 2013) thanks to a faint spark of recovery on the horizon(growth forecast of 3% versus 2.3% in 2013). The lull inEurope, a spurt of growth in the United States and strongprospects of outlets in the new emerging countries (theNext-18 as we call them in our Economic Outlook specialreport on the new trade routes) should begin healing thescars of the longest period of economic lethargy since theearly 20th century. But why are we not seeing a strongerdecline in insolvencies? Undoubtedly because of the newrisks for the private sector, particularly financing risk (foreignexchange risk and risk of a credit crunch) linked to the endof accommodating monetary policies. This risk will affectdeveloped countries as well as fast-growing emerging coun-tries (Brazil, India, Turkey and South Africa). On the other

hand, the bad news is that the economy is now 24% moreturbulent than before the crisis. The consequences areweaker value chains and industrial fabrics and, consequently,millions of businesses whose profitability and solvency arebalancing on a fine line (under threat from a customer’sfailure to pay or from non-renewal of bank financing). Thecauses underlying these chronicles of death foretold lie inthe zombie economy. Businesses, without closing shop,remain mired in a demand that fails to materialize, battlingagainst ever-greater pressure on margins (particularly de-flationary pressure) and destabilized by the disappearanceof the subsidies that had kept them afloat up to now. Thebusinesses are still alive, but with their arms out and eyesclosed, like ghosts wandering from one financial year to thenext. How can we protect ourselves against these zombiecompanies? Brandishing garlic or crucifixes works onlyagainst vampires. The only solution is to live alongside themand just make sure they can’t bite too deeply into your tradereceivables.

Euler Hermes Economic Outlook no 1200-1201 oct.-nov. 2013 | Business Insolvency Worldwide

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OVERVIEW

Patching things upFewer insolvencies, except in Europe

MAXIME LEMERLE

Corporate insolvencies confirmed the generally expected risein 2013 (+2%) due to the slowdown in the global economy.This increase, following three consecutive years of decline,nevertheless masks two significant but opposite trends: on theone hand, the continued decline in insolvencies in NorthAmerica (-11%) and Asia (-4%); on the other hand, a rise inLatin American insolvencies (+10%) – albeit from a low level –and particularly in Central and Eastern Europe (+6%) andWestern Europe (+9%), where the number of insolvenciescontinues to rise in manufacturing (+3%) and construction(+1%), with the exception of Germany and the UK. These twocontrasting trends are expected to moderate in 2014 whenthe slowdown in emerging economies should be offset by thebetter outlook in the more advanced countries. Countriesexperiencing a decline in insolvencies will become themajority in our sample but our Global Insolvencies Index willonly show a slight decline (-1%) and nearly 7 out of 10countries show a higher level of insolvencies in 2014 thanbefore the 2008 crisis.

-14 -13 -13

-20 -25 -23 -25 -24

-11 -6

-23 -23

-17 -21

-25

28 29 29

22 17 19 17 18

31 36

19 19

25 21

17

-30

-20

-10

0

10

20

30

40

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Net balance

Countries with insolvencies stabilized /on the up side Coutries with insolvencies on the downside

forecasts

-20-15-10

-505

1015202530

Global Insolvency Index (l)

Real GDP growth (r)

141312111009080706050403020100

forecasts

5

4

3

2

1

0

-1

-2

-3

Annual changes of insolvencies, in number of countries Worldwide insolvencies and world GDP

Sources: national figures, Euler Hermes forecasts Sources: national figures, Euler Hermes forecasts

Economic Outlook no 1200-1201 oct.-nov. 2013 | Business Insolvency Worldwide Euler Hermes


5

Although still provisional, the insolvenciessummary for 2013 clearly shows the marksof the extended weakness in the globaleconomy, but also – and more particularly– its tensions and disparities. Over the year as a whole, the global economyshed 0.3 percentage points of growth (to +2.3%)and trade barely stabilized at its 2012 low pace,but our Global Insolvencies Index (see themethodology note on page 30) is expected toshow a 2% increase. This increase, followingthree years of limited decline (-12% in aggregateterms) compared to the sharp hike during thecrisis of 2008-2009 (+49% between 2007 and2009), indicates that corporate insolvencies re-main at a historically high level and the GlobalIndex stands 25% above its pre-crisis average(2000-2007).These overall figures, however, mask two op-posing trends. One provides confirmation of adecline in insolvencies in the world’s two mostimportant economic regions: principally in NorthAmerica (-11%), both in the United States wherethe economy has demonstrated its resilience,and in Canada, but also in the Asia-Pacific region(-4%) where the slowdown in growth has provedto be too limited – in part thanks to Japan andthe support provided by Abenomics – to preventcorporate insolvencies from reaching new lowsin all countries other than Australia. The secondtrend was the continuing rise in insolvencies inthe three other major regions: primarily LatinAmerica (+10% after +13% in 2012), in thewake of weaker than expected economic growthand financial volatility, notably in Brazil; then in

▶

0

50

100

150

200

250

300

Euro zone Index

Asia-Pacific Index

Africa & Middle East Index

Central & Eastern Europe Index

Western Europe Index

Latin America Index

North America Index

Global Insolvency Index

141312111009080706050403020100

forecasts

Regional indices of insolvencies, yearly levels, basis 100: 2000

Sources: national figures, Euler Hermes forecasts

forecasts

-30%

-20%

-10%

0%

10%

20%

30%

05 06 07 08 09 10 11 12 13 14

North America Index

Asia-Pacific Index

Africa & Middle East Index

Central & Eastern Europe Index

Western Europe Index

Latin America Index

Global Insolvency Index

Contribution of regional indices to changes in the Global Insolvency Index



6

-40 -35 -30 -25 -20 -15 -10 -5 0 5 10 15 20 25 30 35Hungary

IrelandTaiwan

United KingdomSouth Korea

SingaporeUnited StatesNew Zealand

AustriaLatvia

South AfricaJapan

PortugalDenmark

Hong KongGermany

RussiaCanada

ChinaRomania

SwitzerlandChile

EstoniaFrance

AustraliaLuxembourg

SwedenPoland

LithuaniaFinland

MoroccoCzech Republic

GreeceItaly

NetherlandsColumbia

BelgiumTurkey

BrazilNorway

SpainSlovakia

-3%-4%-4%-5%-6%-6%-7%-7%-8%-8%-8%-9%

-11%-11%-13%-13%-14%-15%-20%-37%

35%25%14%12%12%12%11%10%10%10%10%8%5%5%5%5%4%3%2%1%1%0%

-15 -12 -9 -6 -3 0 3 6 9 1Romania

IrelandEstonia

South KoreaTaiwan

New ZealandGermany

United StatesSingaporeLithuania

United KingdomJapan

HungaryAustria

South AfricaNorway

ChileHong Kong

PortugalSweden

SwitzerlandLatvia

DenmarkCanadaFrance

ColombiaNetherlands

ItalyBrazil

FinlandAustralia

ChinaPolandGreeceTurkey

SpainBelgium

LuxembourgRussia

SlovakiaCzech Republic

Morocco

-1%-2%-2%-2%-3%-3%-3%-4%-4%-4%-4%-4%-4%-4%-5%-5%-5%-6%-6%-6%-6%-7%-8%-8%

-14%

10%10%6%5%5%4%4%4%3%3%2%2%1%1%0%0%0%

Central and Eastern Europe (+6% after +8% in2012), for the same reasons and their greaterdependency on Western Europe; and lastly inWestern Europe itself (+9%), for the third con-secutive year, where the insolvency trends bycountry show fairly clearly the disparity – or thechange – in their economies, with a decline in alimited number of countries centred on Germanyand the UK but a continuing rise in insolvenciesin most countries, particularly in the south (Italy,Spain, Greece) and center (France, Netherlands,Belgium) of the region. Overall, the trends seen in 2013 reflected thedifferences seen in insolvency levels: comparedto the average insolvency rate observed beforethe crisis (2002-2007), the position is particularlyfavorable for Asia-Pacific and Latin America andclose to the average for North America, but at avery high level in Central and Eastern Europeand a new record level in Western Europe. Un-surprisingly, it is in this latter region that mostcountries in our large sample are located (25out of a total of 42) which at end-2013 show alevel of corporate insolvencies above the averageseen in 2008-2009.

In 2014, the number of countries showinga decline in insolvencies are expected tobecome the majority, but the fall in ourGlobal Insolvencies Index (-1%) neverthelessremains limited, reflecting the persistentdifficulties experienced by companies andthe high level of insolvencies, particularlyin Europe.Our 2014 insolvencies forecasts is marginallymore optimistic than previously, with the forecastGlobal Index showing a slight decline (-1%against +2% published initially). This changederives partly from the base effect – the revised2013 estimates and some methodology changes– but more fundamentally from adjustmentsto our macroeconomic scenario – see our Eco-nomic Outlook no. 1199. The outlook de factoremains more or less unchanged for NorthAmerica, where the firmer growth outlook, de-spite budgetary consolidation, should help toextend the downturn in insolvencies (-5%). Asia-Pacific is expected to remain the second regionto show a decline in insolvencies, but the pacemay be attenuated (-1%) given the stabilizationof growth and the low level of insolvencies re-ported in 2013. For the other regions, otherthan Africa and the Middle East, the trend isquite simply less unfavorable than in 2013: theremaining vulnerabilities in Latin America areexpected to hold back growth and prevent anyclear improvement in terms of insolvencies(+0%), and Central and Eastern Europe (+3%)will continue to suffer from the too slow pace

Insolvencies in 2013 (annual change in%) Insolvencies in 2014 (annual change in%)

Sources: national figures, Euler Hermes Sources: national figures, Euler Hermes

of recovery in Western Europe, where insolvencylevels are struggling to stabilize (+1%) due tothe continuing difficult conditions in severalsignificant countries (Italy, Spain, the Netherlandsand Belgium). Overall, and for the first timesince 2011, countries showing a decline in in-solvencies (25) are expected to be more nu-merous in 2014 than those showing an increase(17), even though for 69% of the countries inour sample (29 out of 42) the overall positionat end-2014 looks as if it will remain higherthan prior to the global crisis triggered by theinsolvency of the US bank Lehman Brothers.

▶


7

▶

Western Europe: virtual stabilizationin services, deceleration inconstruction and acceleration inmanufacturing…with huge disparities between countries

MAXIME LEMERLE

The 2013 sector data available for WesternEurope, generally to the end of September,do not overall show a more positive situation.In the services sector, insolvencies have de-clined slightly (-0.4% year on year) but onlyin relatively few countries and the sector stillaccounts for 69% of insolvencies. In con-struction, which accounts for 21%, insolvenciesshow only a slight deceleration (+0.9% after+1.3% in 2012) with an equal balance be-tween countries showing declines and thoseshowing increases, as is the case in manu-facturing where, in contrast, the pace of in-solvencies is rising once again (+2.7% after

SECTORIALFOCUS

+1.6% in 2012). Overall, compared with theaverage observed in 2008-2009, although afew countries are experiencing more manu-facturing insolvencies in 2103, in most coun-tries the number of insolvencies is higher inthe services and construction sectors. Onlythree countries stand out for positive reasonsin all three sectors - the United Kingdom,Germany and Austria – whereas four countriesstand out for negative reasons: Italy, Belgium,the Netherlands and Spain.

-50

0

50

100

150

200

Unite

d Ki

ngdo

m

Germ

any

Denm

ark

Irela

nd

Aust

ria

Fran

ce

Finla

nd

Norw

ay

Swed

enItaly

Belg

ium

Spai

n

Neth

erla

nds

2013 level of insolvenciescompared to 2008-2009 average

-40

-20

0

20

40

60

80

100

120

Unite

d kin

gdom

Germ

any

Aust

ria

Swed

en

Norw

ay

Fran

ce

Finla

nd

Denm

ark

Belg

ium

Neth

erla

nds

Italy

Irela

nd

Spai

n


-30

-20

-10

0

10

20

30

40

50

60

70

80

Unite

d Ki

ngdo

m

Norw

ay

Swed

en

Germ

any

Aust

ria

Fran

ce

Denm

ark

Irela

nd

Finla

ndItaly

Belg

ium

Neth

erla

nds

Spai

n


2013

LEVE

L (co

mpa

red

to 2

002-

2007

aver

age

leve

l)

Very high

(>50

%)

Q

Western Europe (Eurozone)

High

Africa & Middle EastGlobal Index

Central &

Eastern Europe

Arou

nd th

eav

erag

e →

North America

Faible ¤ Asia-Pacific Latin America

Decrease ¤More or

less stable → Increase Huge increase(>10%) Q

2013 TREND OF REGIONAL INDICES

Sources: national figures, Euler Hermes

2013 Insolvency matrix by region

Insolvencies in Construction (average in%) Insolvencies in Industry (average in%) Insolvencies in Services (average in%)

Sources: national figures, Euler Hermes Sources: national figures, Euler HermesSources: national figures, Euler Hermes

MOZ

AM

B I C

Insolvencies down: more than -2 %

Relatively stable insolvencies: between -2% and +2%

Insolvencies on the rise:between +2 % and +10 %

Strong rise in insolvencies:more than + 10%


8

OVERVIEW2013

After the crisis

25%more

insolvencies

+2%increasein insolvencies

worldwide

Business Insolvency outlook

MOZ

AM

B I C

Insolvencies down:more than -2 %

Relatively stable insolvencies: between -2% and +2%

Insolvencies on the rise:between +2 % and +10 %

Strong rise in insolvencies:more than + 10%


9

FORECASTS2014

-1%decreasein corporateinsolvencies

17 countrieswill register

a rebound of insolvencies

in 2014

worldwide


10

INSOLVENCIES: STATISTICS BY REGION AND BY COUNTRY Forecasts

% worldGDP% of Global

Insolvency Index

2012 Change 2013 Change 2014

Number Change

Global Insolvency Index * 83.1 100 126 -1% 2% -1%

North America Index * 24.4 29.4 105 -16% -11% -5%

United States 21.9 26.4 40,075 -16% -11% -6%

Canada 2.5 3.1 3,236 -11% -4% -2Brazil

Latin America Index * 4.2 5.1 41 13% 10% 0%

Brazil 3.3 4.0 1,495 26% 12% 1%

Colombia 0.5 0.6 288 -10% 11% 0%

Chile 0.4 0.5 129 -3% 1% -4%

Western Europe Index * 22.9 27.6 204 12% 9% 1%

Germany 4.7 5.7 28,297 -6% -6% -6%

France 3.6 4.4 61,086 2% 2% -1%

United-Kingdom 3.4 4.1 30,130 -8% -14% -5%

Italy 2.8 3.4 12,442 2% 10% 0%

Spain 1.9 2.3 7,780 37% 25% 4%

Netherlands 1.1 1.3 8,616 21% 10% 0%

Switzerland 0.9 1.1 4,513 -4% 0% -3%

Sweden 0.7 0.9 7,471 7% 5% -3%

Norway 0.7 0.8 3,814 -12% 14% -4%

Belgium 0.7 0.8 10,587 4% 12% 4%

Austria 0.6 0.7 6,041 3% -9% -4%

Denmark 0.4 0.5 5,456 0% -7% -2%

Finland 0.3 0.4 3,476 1% 5% 1%

Greece 0.3 0.4 1,400 30% 10% 3%

Portugal 0.3 0; 4 6,688 41% -7% -3%

Ireland 0.3 0; 4 1,684 3% -20% -8%

Luxembourg 0.1 0.1 1,053 8% 4% 5%

Central & Eastern Europe Index * 5.6 6.7 256 8% 6% 3%

Russia 2.8 3.4 10,325 1% -5% 5%

Turkey 1.1 1.3 16,063 7% 12% 4%

Poland 0,7 0.9 941 29% 5% 3%

Czech Republic 0.3 0.3 3,764 46% 10% 10%

Romania 0.2 0.3 29,769 31% -3% -14%

Hungary 0.2 0.2 22,389 13% -37% -4%

Slovakia 0.1 0.2 1,054 6% 35% 6%

Lithuania 0.1 0.1 1,400 10% 5% -5%

Latvia 0.0 0.0 881 0% -8% -2%

Estonia 0.0 0.0 506 -19% 1% -8%

Africa & Middle East Index * 0.7 0.8 102 -9% -1% 3%South Africa 0.5 0.6 2,716 -24% -8% -4%

Morocco 0.1 0.2 6,172 20% 8% 10%

Asia-Pacific Index * 25.2 30.4 62 -6% -4% -1%China 11.5 13.8 2,650 -13% -4% 2%

Japan 8.3 10.0 12,124 -5% -8% -4%

Australia 2.2 2.6 10,632 1% 3% 2%

South Korea 1.6 1.9 1,228 -10% -13% -7%

Taiwan 0.7 0.8 254 -1% -15% -6%

Singapore 0.4 0.5 151 34% -13% -5%

Hong Kong 0.4 0.4 312 -6% -6% -4%

New Zealand 0.2 0.3 2,348 -7% -11% -6%

(*) Basis 100: 2000; The column “number” corresponds to the level of the index


Main statistics


11

UNITED STATES2013 major insolvencies*▶ Exide Technologies▶ RDA Holding Co.▶ Cengage Learning, Inc.▶ Central European Distribution Corp.▶ Supermedia, Inc.▶ Dex One Corporation▶ Furniture Brands International, Inc.▶ School Specialty, Inc.▶ Geokinetics, Inc.▶ Ormet Corporation(*) as of end of October, by decreasing levelof turnover

In 2013, economic activity re-mained resilient enough for cor-porate insolvencies to begin afourth consecutive year of decline. Economic growth remained slug-gish in Q1, particularly due to publicspending cuts, weak investmentand a poor export performance,but picked up momentum in Q2,while companies maintained veryhigh profit margins, according tothe national accounts. In this positiveenvironment, the downward trendin corporate insolvencies slowedonly slightly over the first ninemonths of the year and the finalscorecard for 2013 should show

another significant fall (-11%), especially as the three-week shut-down may have slightly depressedthe end-of-year statistics.The macroeconomic outlook for2014 seems more positive, par-ticularly due to the expected re-bound in investment and exports. The economic upturn in the euro-zone and the strong performanceof other trading partners (Canada,Mexico, China and Japan) point tosharp growth in foreign demand(+8% for exports in 2014). Manyfactors argue in favor of an industrialupturn: increased productivity, lowenergy costs, the absence of anytax increases and the continuouseasing of credit conditions suggestthat investment will make a solidrecovery. Admittedly, economic ac-tivity may be held back by numerousuncertainties, particularly those relating to monetary policy (taperingof the Fed's quantitative easing pro-

gram expected in H1 2014) andfiscal policy (the suspending of thepublic debt ceiling will only be validuntil February); the strength of thereal estate market recovery (whichhas been a large contributor togrowth since the start of the year),which has been weakened by therecent rise in interest rates (due tofears that QE will be brought to anend); and the level of householdconfidence, which continues to bedictated by the climate of uncer-tainty and the scope of structuralunemployment, such that privateconsumption is resilient but stillless buoyant than before the crisis.Ultimately, economic growth shouldstill reach +2.9% in 2014, sustainingthe downward trend in insolvencies(-6% forecast).

Chapter 13

Chapter 12

Chapter 11

Chapter 7

67%

8%

1%

24%

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Canada (r)United States (l)

14131211100908070605040302010099989796959493929190

forecasts

United States Economic upturn and fall in insolvencies,despite uncertainties

CLÉMENTINE CAZALETS

North America Another two years of falling insolvencies

The North American economies should record higher growth rates in 2014 (+2.9% in the United Statesand +2.5% in Canada) than in 2013 (+1.7% and +1.8% respectively), particularly thanks to resilientprivate consumption, the upturn in investment and a large rise in exports. Against this backdrop,corporate bankruptcies should continue on their downward trend, which began in 2010 in the US and in1996 in Canada. The volume of US corporate insolvencies should fall again in 2014 (-6%) after an -11%decrease in 2013 (which is more than the previous estimate of -7%). In Canada, corporate insolvenciesshould continue to fall (-4% in 2013 and -2% in 2014), at a more moderate rate than in previous years butin line with historic lows and the slowdown of business start-ups.

Corporate Insolvencies (yearly numbers)

Sources: US Court, Office of the Superintendant of Bankruptcy, Euler Hermes

Business bankruptcies by chapter in 2013 (until Q3)

Source: Administrative Office of US Court


12

2013 has continued along thesame vein as 2012, at least interms of corporate insolvencies. The spectacular downtrend recordedover the previous decade (2000-2010), with the number of bank-ruptcies falling from 5,100 in 2000to 1,300 in 2010, no longer applies.Compared with 2011, 2012 alreadysaw a marked +26% upturn in in-solvencies as the Brazilian economyslowed abruptly, with a 1.8 pp lossof GDP growth in one year (from+2.7% to +0.9%) under the effectof a slowdown in exports and a severe monetary policy tightening.2013 has been something of a pos-itive surprise from the viewpoint of

macroeconomic performances(+2.2%), both in terms of domesticdemand – with buoyant investment– and exports. However, not all com-panies have benefited. Corporateinsolvencies, in the sense of court-ordered bankruptcies (falências dec-retadas) and judicial recoveries (recuperações judiciais deferidas),have not stopped rising and are ex-pected to reach a total of 1,680cases (+12%), which is a fairly lowlevel in comparison with the 2000sbut nevertheless constitutes amarked upturn in the recent period.Three reasons combine: first, theeffect of growth in business creation(+65% over the past decade); second, the rise in some costs(wages, taxes); and third, the year’smany financial disturbances (ex-change rate, capital flows, interestrates). In addition, there is the likelydomino effect of the very recentbankruptcy of one of the country’smost iconic companies, OGX, whichmay have been thought to be shel-tered from the crisis given its posi-tioning in the energy sector. In 2014,Brazil, with as many weaknesses as

strengths, given the soccer worldcup and presidential elections whichought to favor economic stimulusmeasures, should see its level of in-solvencies stabilize.

BRAZIL2013 major insolvencies*▶ OGX Petroleo e Gas Participacoes▶ Mabe Brasil Eletrodomésticos Ltda▶ V Brasil Distribuidora Ltda▶ Industrial Rex Ltda▶ Araujo Maia Comércio de Equipamentos Eletronicos Ltda▶ RCM Tubos e Conexões Ltda(*) as of end of October, by decreasing level ofturnover

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Large companies

Medium-size companies

Small companies

2012-20132007-2008

0

2000

4000

6000

8000Brazil(l)

14131211100908070605040302010099989796959493929190

forecasts

0

100

200

300

400

500Colombia (r)Chile (r)

1

Brazil 28% increase two years, or 370 more bankruptcies

MARC LIVINEC

Latin AmericaUpturn in bankruptcies against the backdrop of resurgent vulnerabilities

While economic performances on the whole have been mixed – albeit respectable – Latin America has seen apersistent slowdown in growth since 2012, which has not been without consequence for its companies. After aglowing +4.2% in 2011, the region’s GDP slowed to +2.7% in 2012 and is unlikely to fare much better in 2013.Growth for this year is expected at +2.9%, under the effect of capital outflows and persistent structural weaknesses– in other words, under the effect of the old economic demons of its two largest economies: Brazil, a high current-account deficit; and Argentina, rampant inflation once again. The business environment has been quick to feel therepercussions: corporate insolvencies, which had reached lows in Brazil and Chile despite the 2008-2009 crisis, orwhich had started to recede in Colombia, initiated a new upward trend. For the region as a whole, the increase inour index – in which Brazil is predominant – will be around +10% in 2013 (after +13% already in 2012). The slighteconomic upturn expected in 2014 (+2.9%) is unlikely to lead to a decrease in the number of insolvencies.


Breakdown of insolvencies par size of companies

Sources: Serasa Experian, Superintendencia de Quiebras,Superintendencia de Sociedades, Euler Hermes

Sources: Serasa Experian, Euler Hermes


13

Austria and Switzerland are amongthe positive exceptions in WesternEurope. First, in 2013 their GDP growth rateis positive, despite a slowdown inAustria to +0.4% (+1.7% for Switzerland). Second, because ofthe trend in the number of corporateinsolvencies in these countries,which shows a pronounced declinein Austria over the full year (-9%after +3% in 2012) and relative sta-bility in Switzerland – with an ex-ception made for bankruptcies under Art. 731 CO, which are not,strictly speaking, caused by insol-vency related to activity or prof-

itability problems. While Switzerlandbenefits from powerful, large exporting multinationals (Nestlé inagri-foods, Roche in pharmaceuti-cals), it has suffered the effects ofthe strength of its national currency,as a safe haven, relative to othercurrencies while – in particular –the financial markets took the timeto factor in the role of the ECB asan unwavering backstop. Since then,the downward trend in the Swissfranc against the euro has benefitednational companies in terms of ex-ternal demand, while domestic de-mand, and consumption in partic-ular, has held up well. Against thisbackdrop, and based on a favorablemacroeconomic outlook, we expectinsolvencies in Switzerland to de-cline in 2014 (-3%). Meanwhile,Austria, because of its eurozonemembership, partially suffered thereverse of its Swiss neighbor, as theeuro’s appreciation until 2012 hurtexporting companies. However,

Austria and SwitzerlandAlong with Germany and the UnitedKingdom, among the good news

MARC LIVINEC

-9 -7

-4

-7 -7

-10

-13

-10

-2 0

-9 -7

-5 -7

-10

8 10

13

10 10

7

4

7

15 17

8 10

12 10

7

-15

-10

-5

0

5

10

15

20

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Net balance

forecasts

Countries with insolvencies stabilized/on the upside Coutries with insolvencies on the downside

0

2,000

4,000

6,000

8,000SwitzerlandAustria

14131211100908070605040302010099989796959493929190

forecasts

AUSTRIA2013 major insolvencies*▶ Alpine Group▶ TAP dayli Vertriebs GmbH▶ Niedermeyer GmbH▶ Anafta Produktion GmbH▶ Doubrava Gesellschaft m.b.H(*) as of end of October, by decreasing levelof turnover

Western EuropeDisparate situations directly linked to cyclical differences

The overall picture for corporate insolvencies in Western Europe is poor, with another rise in 2013 (+9%) for thethird consecutive year to a new record high (24% higher than the 2009 level). These figures alone illustrate theextent of the problems the region has faced since the US subprime crisis triggered the financial crisis.Nevertheless, they also mask significant disparities. Indeed, most countries are struggling to emerge from theirrelapse into recession in 2012 or from a period of prolonged sluggishness, often because of stalling domesticdemand (due to the public and private deleveraging process and the lack of investment): corporate insolvenciesin these countries continue to escalate, and in some cases to record levels. But besides the particular case ofGermany, brighter economic conditions in recent quarters have also borne visible fruit on the insolvency front ina few other countries, such as the United Kingdom, and should spread to others in 2014. The pace of economicrecovery, in particular in the eurozone, may nevertheless not be enough to reverse the upward trend inbankruptcies for the region as a whole (+1%).

Annual changes of insolvencies, in number of countries



Sources: OFS, Creditreform, KSV, Euler Hermes

Austria benefits above all from itsproximity to the bright lights of theGerman economy, with positivespin-off effects for its own industrialfabric, and, through a domino effect,on the other sectors of its economy.Insolvencies, which declined in allmajor sectors during the first threequarters of 2013 (industry, con-struction, transport and commu-nications, services, accommodationand catering), are expected to continue to fall in 2014 (-4%).

France-GermanyThe big divide

MARC LIVINEC

2013 major insolvencies*GERMANY▶ Baumarkt Praktiker Deutschland GmbH▶ Baumarkt Max Bahr GmbH & Co. KG▶ FlexStrom AG▶ Alpine Bau Deutschland AG▶ IT-Distribution Abwicklungs AGFRANCE▶ Mory-Ducros▶ FagorBrandt▶ Kem One▶ GAD sas▶ Groupe Partouche(*) as of end of October, by decreasing level ofturnover

Insolvencies by sector in 2013

Germany * France **

sectors Number Change *** Number Change***Agriculture/forestry/fishing &mining/quarrying 173 -1.7% 1,281 6.8%

Industry 2,250 -0.2% 4,416 Energy

Energy & utilities 207 2.5% 182 13.8%

Construction 4,622 -3.2% 15,425 5.2%

Trade 5,604 -2.6% 13,994 8.2%

Transports 2,149 -0.6% 1,871 -2.0%

Information & communication 906 1.1% 1,572 0.1%

Hotels & restaurants 3,244 -4.1% 6,940 16.0%

Finance & real estate 1,990 -3.1% 3,622 4.6%

Business services 5,727 0.7% 7,234 10.3%

Personnal services 2,099 -1,3% 5,252 7.2%

Others 657 3.6% 531 -72.8%

Total 29,628 -1.6% 62,320 4.8%

* cumulative 12 months as of end of September; ** cumulative 12 months as of end ofJune; *** compared to the 12 previous months - Sources: DeStatis, Euler Hermes

The contrast between Germanyand France is a good illustration ofthe disparities in Western Europe and, in particular, within the euro-zone. Neither of the two countrieshas been spared by the region’s fluc-tuating fortunes and difficulties, buttheir abilities to weather the storm– and bounce back – as well as thatof their companies differ markedly.With regard to corporate insolvencies,in both countries the dependenceon the cycle has decreased in therecent period, for two reasons: lessgrowth is neededto stabilize thetrend in bankrupt-cies and growthshocks generatesmaller jolts in thenumber of bank-ruptcies, which isgood news and reflects progress and experience inbusiness leaders’ ability to manageadverse conditions. But this improve-ment is much more pronounced inGermany, which is widening the gap

between the two countries: only0.5% of growth on average is neededin Germany to stabilize insolvencies,compared with 1% for France. In Germany, the downward trendin insolvencies should continue in2014. GDP growth weakened again in2013 (+0.5% compared with +0.9%in 2012) after a brisk performancein 2011 (+3.3%). Nonetheless, ithas remained sufficient to sustainthe ongoing decline in bankruptciessince 2010 despite the dip in oper-

ating profits and profit margins ascalculated in the national accounts,and despite some significant sectorevents such as (i) the resoundinginsolvencies in retailing in 2012(Schlecker, which employed morethan 30,000 staff, and Neckerman);and (ii) the collapse of its solarsector (typified by the insolvencyof Q-Cells), an industry into whichGermany had plunged headlong,if only to meet the requirementsof the country’s new energy policy.The fall in insolvencies was pro-nounced in mid-2013, when thelast available official figures werereleased, and quite evenly spreadamong the different sectors – withthe well-known exception of energyand business services. It is expectedto come in at -6% for the full year

2013 and continue through 2014as GDP recovers, with around 25,000insolvencies – a record low since1996. France may see only a slight declinein insolvencies in 2014 (-1%) aftera new rise in 2013 (+2%), signallinga high level of bankruptcies. The ongoing rise in corporate insol-vencies since mid-2012 has contin-ued in 2013, with the third quarter(+4.5%) more than confirming thepoor performance in the first half(+2.1%). Besides the bankruptcy of

the Mory-Ducros group in November,the year will end on a negative note:a toll of 62,500 insolvencies (+2%),the detailed figures for which provideno comfort in the very short term,

as they indicate the rise in bank-ruptcies has spread to most sectors,most regions and all company sizes,especially SMEs and very small enterprises, while the largest com-panies continue to be stretched andtheir number of insolvencies teeterson a knife edge. The underwhelmingGDP growth outlook for 2014(+0.6%) and the persistent uncer-tainty weighing on the investmentdecisions of business leaders do notpoint to a clear improvement onthe insolvency front (-1%).

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Number of cases (l)

0.0

0.5

1.0

1.5

2.0

2.5

Insolvency rate (in %, r)

14131211100908070605040302010099989796959493929190

62,000

62,500

61,086

05,000

10,00015,00020,00025,00030,00035,00040,00045,000

Number of cases (l)25

,000

26,500

28,297

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4Insolvency rate (in %, r)

14131211100908070605040302010099989796959493929190

France Germany

Source: Euler Hermes Source: Euler Hermes


14

2013 is another bleak year for com-panies in the Benelux. None of the three countries will seean improvement in corporate in-solvencies. On the contrary, all threewill post a new record high. Theirmacroeconomic situation has nevertheless improved markedly inrecent quarters, although in 2013the pace of this recovery is still tooslow (GDP growth of +0.1% in theNetherlands and +0.3% in Belgiumin the third quarter) to wipe theslate clean of the difficulties thatarose during the crisis. The insolvency outlook in Belgiumpoints to a relative deterioration. While macroeconomic forecastshave picked up (+1.0% for GDP in2014 after +0.1% in 2013), they restprimarily on private consumptionand companies, in addition to this,will continue to suffer from a com-petitiveness handicap as a result ofboth wages, which are increasingfaster than productivity, and a not-very-attractive tax regime (forBelgian companies). There was apronounced rise in the number ofbankruptcies in 2013 (+12%) for

the seventh consecutive year, withan all-time high of 11,860 insolven-cies. Industry (+7%), construction(+15%) and the retail sector (+13%)were the notable contributors tothis increase, which looks set to extend into 2014 (+4%) with arecord high of 12,400 insolvencies.The prognosis is hardly more fa-vorable for Luxembourg.

Growth in the number of bankrupt-cies (+8.2% in 2012) has continuedat a rate of +4.5% in 2013 despiteongoing positive GDP growth (+1%after +0.3% in 2012). Even a benev-olent tax regime is far from enoughto quell the negative effects of the

persistent economic crisis in Europe,especially when it affects the financialservices sector. Already in 2012, thenumber of corporate insolvenciesby major sector in Luxembourg re-vealed the carnage for companieslinked to financial intermediation.While the surge in their number ofbankruptcies (+51%) looks unlikelyto repeat, this sector may still spend

2014 licking its woundsas it fuels a further rise ininsolvencies (+5%).In the Netherlands, insol-vencies are expected tostabilize during 2014 onthe back of recoveringglobal trade. In the meantime, theNetherlands looks like thebad pupil of the class, withanother year of strong re-cession in 2013 (-1.0%

after -1.3% in 2012) accompaniedby an ongoing steep rise in corporateinsolvencies (+10% to 9,500 insol-vencies after +21% in 2012), in particular in the devastated con-struction sector, as illustrated by thecollapse, among others, of BVR

Benelux: Belgium, Netherlands and LuxembourgThree new bankruptcy records in 2013

MARC LIVINEC

2013 major insolvencies*BELGIUM▶ Lintor▶ O'Cool▶ Verbinnen Henry▶ V & R Electrics Solar Company▶ AlfacamNETHERLANDS▶ Gaudium B.V.▶ OAD▶ FLORIMEX INTERNATIONAL B.V.▶ VAN LUIN FOOD GROUP B.V.▶ Free Record Shop B.V.(*) as of end of October, by decreasing levelof turnover 0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

0

200

400

600

800

1,000

1,200

1,400Netherlands (r)Belgium(l) Luxembourg (r)

14131211100908070605040302010099989796959493929190

forecasts

-10%

-5%

0%

5%

10%

15%

20%

Belgium: Gross operating surplus(l)Netherlands: Gross operating surplus (l)

36

37

38

39

40

41

42

43

44

45

46

Belgium: Profit share (r)

Netherlands: Profit share (r)

131211100908070605040302010099989796959493929190

Corporate Insolvencies (yearly numbers) Profit share (%) and corporate profits (annual growth, %)

Sources: INS/SPF, Memorial/Statec, CBS, Euler Hermes Sources: National accounts, Euler Hermes

00

20,000

40,000

60,000

80,000

10,0000

12,0000

Services

Hotels and restaur

Trade

Construction

Industry

Agriculture

BelgiumNetherlands

Insolvencies by sector in 2013(cumulative 12 months as of end of September)

Sources: INS/SPF, Memorial/Statec, CBS, Euler Hermes


15

Groep. This is a consequence of itsdependence on the economic per-formances of its eurozone tradingpartners, to which the Netherlandssends more than 60% of its exports.But it also results from the country’slistless domestic demand, due tothe persistence of a high unem-ployment rate and financial debtratio. The pickup in global growthin 2014 should still rapidly benefitthe Netherlands, although the effecton GDP may only just be enoughto stabilize the number of corporateinsolvencies at its high level.


16

2013 major insolvencies*ITALY▶ Exergia spa▶ Seat Pagine Gialle spa▶ Aligrup spa▶ Bentini spa▶ Leali spaSPAIN▶ Fagor▶ Pescanova SA▶ Siliken Manufacturing SL▶ Freiremar▶ 2L Ibérica Componentes Informáti-cos, PORTUGAL▶ GCT on line SA▶ Sweatbusiness LDA▶ Japocar▶ Agro Pecuaria LDA▶ Edifícios Europa(*) as of end of October, by decreasing levelof turnover

2013 will be another year of eco-nomic recession for the four coun-tries, with corporate insolvenciesrising again for three of them. Portuguese bankruptcies should infact fall in 2013 (-7%) despite theeconomy contracting again thisyear (-1.9%), with a negative con-tribution from all growth compo-nents except foreign trade. Thispositive surprise (after an initial es-timate pointing to a +9% rise in in-solvencies) appears to be a correc-tion after seven consecutive yearsof increases, with a historic high ofnearly 6,700 insolvencies in 2012,or more than four times the figurein 2005-2006. However, it is mainlydue to the introduction of a newreorganization procedure for strug-gling companies. In Spain, the rateof corporate insolvencies shouldalso be lower than initially forecast,partly due to the more limited slow-down in economic activity (withGDP growth forecast at -1.4%), but

the increase in bankruptcies remainshigh (+25%) and in 2013 a newrecord will be set with around 9,700insolvencies. In Greece, corporateinsolvencies should rise for the sixthyear running (with a further +10%leap) in keeping with the country'ssixth year of recession (GDP growthforecast at -4.1%). Finally, Italy risksending 2013 with slightly morenegative figures than expected(+10% instead of +7%), in line withthe sharp contraction of activity(GDP down by -1.8% after -2.4% in2012).Despite the introduction of nu-merous reforms, the economicenvironment is still difficult forcompanies in these four countries. Credit to non-financial companieshas been contracting sharply formore than three years in Spain (-19.9% yoy in September 2013), formore than two years in Portugal (-7%) and Greece (-4.9%), and morethan a year in Italy (-4.9%). Although

the pace of fiscal consolidation isslowing, the process should continuein all four countries, and householdspending is still greatly limited bydeleveraging and high unemploy-ment (Q2 unemployment stood at12.1% in Italy, 16.9% in Portugal,25.8% in Spain and 26.6% in Greece).Altogether, the excessive indebt-edness of the public and privatesectors is weighing heavily on do-mestic demand and on the sectorsthat rely on it most, such as con-struction and retailing, which ac-count for a lot of corporate insol-vencies. However, although struc-tural reforms have weighed on in-ternal demand, they have greatlyboosted competitiveness, makingit easier for exports to recover.In 2014, economic activity is ex-pected to be almost stable in thefour economies, accompanied bya smaller increase in corporate in-solvencies, mainly due to the re-covery of exports.

Southern Europe: Italy, Spain, Portugal and Greece In 2014 the recovery will be too limited to prevent a further fall in insolvencies


0

3000

6000

9000

12000

15000

18000ItalySpain

14131211100908070605040302010099989796959493929190

forecasts

0

1000

2000

3000

4000

5000

6000

7000Portugal (l)

14131211100908070605040302010099989796959493929190

forecasts

0

300

600

900

1200

1500

1800Greece(r)

Spain, Italy - Corporate Insolvencies (yearly numbers)

Sources: INE, Istat, Cerved, Infocamere, Euler Hermes

Portugal, Greece - Corporate Insolvencies (yearly numbers)

Sources: COSEC, INE, EYSE, Euler Hermes

In Spain, the economy should returnto tepid growth (+0.5% in 2014)while insolvencies should increaseat a much slower rate (+4%). InGreece, most growth componentsshould contribute positively, butthe continued fiscal consolidation(public spending expected to con-tract by 4.5%) should prevent a re-turn to economic growth (-0.3%).This prolonged recession risks fu-eling a continued rise in insolvenciesin 2014, although at a more mod-erate rate (+3%). In Italy, the veryslight increase in GDP forecast(+0.3%) thanks to buoyant foreigntrade (the only component expectedto contribute positively), could resultin the stabilization of insolvencies.Only Portugal should see a furtherslight fall in insolvencies (-3%),alongside a slight uptick in economicgrowth (+0.4%), also based on arebound by exports.


17

The fall in the insolvency rate ofBritish and Irish companies hasbeen well under way since mid-2012, helped by the gradual im-provement in economic activity. In the UK, the 2013 scorecard willbe more positive than expected,with GDP growth of +1.3%, partic-ularly driven by resilient consump-tion (+1.6%) and more buoyant exports (+2.8%). Despite a slightrebound in Q2, corporate insolven-cies will therefore remain on theirdownward trend and fall by -14%over the full year 2013. In Ireland,economic growth should be slightlynegative in 2013, due to the difficultstart to the year (sharp fall in house-hold spending, investment and ex-ports in Q1 2013), partly offset byan upturn in private consumptionand foreign trade in Q2. That said,corporate insolvencies will havedropped significantly in 2013, witha -20% decrease. This is down totwo reasons: a strong base effectafter the figure had soared for fiveyears (in 2013 the number of in-solvencies is still three times higherthan before the crisis) and the verycautious behavior of companies interms of solvency, as shown by thediverging trends in operating profits

at macroeconomic level (constantrise over the past two years) andinvestment (fall since 2008, with -9.9% forecast for 2013).In the United Kingdom, the strongsupport from the monetary andfiscal authorities will contributeto an overall improvement in com-panies' health.In the 2013 budget, many measuresdesigned to stimulate growth wereannounced, particularly for a fewstrategic sectors such as the auto-motive, aerospace and energy in-dustries (GBP 1.6 billion to be paidout over 10 years). The constructionsector (which accounted for 17%of insolvencies in the first half of2013) will benefit from increasesin infrastructure spending and thesupport for the real estate market.Companies will also benefit fromthe future corporate tax cut to arate of 20% in April 2015. Finally,the monetary authorities shouldcontinue with their accommodatingpolicy, keeping the base rate low(currently 0.5%) and maintainingthe asset-buying program, andabove all extending the Fundingfor Lending Scheme until 2015 andeasing credit conditions for SMEs.

The downward trend in corporateinsolvencies should continue in2014 as the economic figures im-prove. In the UK, growth should reach+2.1%, particularly driven by therecovery of investment (+3.4% versus -3.2% in 2013), public spend-

ing and buoyant exports. Irishgrowth (+1.4% in 2014) should bedriven by a sharp upturn in privateconsumption (after three consec-utive years of decline), the recoveryof investment and above all strongforeign trade momentum (whichshould contribute 1.3 pps togrowth). This level of economicperformance points to a further fallin corporate bankruptcies in 2014in both countries (-5% in the UKand -8% in Ireland respectively).

United Kingdom and Ireland A continued fall in insolvencies


2013 major insolvencies*UNITED KINGDOM▶ Balli Group Plc▶ HMV Group Plc▶ Juniper (N°) Ltd▶ 2E2 UK Ltd▶ Broomco (3 958) LtdIRLAND▶ Irish Bank Resolution Corporation▶ Xtravision▶ B & Q Ireland Limited▶ Tougher Oil Distributors Limited▶ Homebase House & Garden Ltd.(*) as of end of October, by decreasing levelof turnover

0

10,000

20,000

30,000

40,000

50,000

60,000

Number of insolvencies (l)

141312111009080706050403020100999897969594939291900.2

0.4

0.6

0.8

1Insolvency rate (in %, r)

30,130

26,000

24,800

0200400600800

1,0001,2001,4001,6001,800


141312111009080706050403020100999897969594939291900.0

0.2

0.4

0.6

0.8

1.0Insolvency rate (in %, r) 1,684

1,35

01,24

0

United KingdomCorporate Insolvencies (yearly numbers)

Sources: DTI, Euler Hermes

IrelandCorporate Insolvencies (yearly numbers)


-30 -25 -20 -15 -10 -5 0

Change in insolvencies by sector in 2013 (%)

Financial intermediationOther business servicesConstructionTransports, storage and communicationTotalTradeHousehold servicesHotels and restaurantsManufacturingElectricity, Gas & Water supplyAgriculture

United-Kingdom - Change in insolvencies by sector in 2013 (%) July'11-June'13/July'11'-June'12



18

In 2013, the green shoots of aneconomic recovery will not beenough to result in a real improve-ment in corporate insolvencies.Trends in the macroeconomic en-vironment have been fairly similaramong the four countries: after astart to the year that was as difficultas the end of 2012, economicgrowth picked up only gradually,particularly driven by an upturn inexports (Norway and Denmark) orby the contribution of foreign trade(Finland), with the result that, atthe end of 2013, annual growthfigures will once more be negative(Finland) or low (Denmark, Swedenand Norway). The scorecard is moremixed when it comes to insolven-cies, but is not very positive in thishardly-favorable environment forcompanies to make profit. In Denmark, the trend in the annualnumber of bankruptcies is a pleasantsurprise for 2013 (-7%), but this ismitigated by their continued veryhigh level. In the other three coun-tries, corporate insolvencies con-tinued to rise in 2013. In Sweden,the increase in bankruptcies has

been revised downwards, particu-larly due to the sharp fall in Q3, butthe figure will nevertheless rise overthe year (+5% versus +10% previ-

ously forecast). In Finland, corporateinsolvencies will increase slightlymore than forecast (+5% versus+3% previously) and bankruptciesin Norway should rebound consid-erably (+14%), after falling sharplyfor three consecutive years (-24%between 2009 and 2012).Corporate bankruptcies are stillunevenly distributed between sec-tors, but those that are the mostdependent on domestic markets– that is, most companies – arethe most vulnerable. This is particularly the case for theconstruction sector, which account-ed for 14% of insolvencies (overthe last 12 months) in Denmark,16% in Sweden, 24% in Finland and26% in Norway. Retail activity hasalso been strongly affected: 17% ofthe bankruptcies in Denmark overthe last 12 months were in this sec-tor, with 18% in Finland, 19.5% inSweden and 23% in Norway. In almost all of the four countries,leading indicators for these twosectors remain at very low levels,suggesting that this trend should

continue. The recovery of globaldemand should lead to greater re-silience in most export sectors (com-modities, paper, pharmaceuticals

and electronics).

In these very openeconomies, the recoveryin exports should driveeconomic growth up-wards and corporate in-solvencies downwards. The region's main trad-ing partners (Germany,

Netherlands, the UK and the US)should record satisfactory economicperformances in 2014. In Sweden,the economy should expand by+2.3% in 2014, buoyed by exportsand the increase in fiscal stimulus(election year), producing a reduc-tion in corporate bankruptcies (-3%) after three consecutive yearsof increases. Insolvencies in Norwayshould track the trend in exports,which are forecast to fall by -1.5%in 2013, largely explaining the sharpgrowth in insolvencies, but pick upin 2014 (particularly in the oil in-dustry), resulting in a return to

Nordic Countries: Sweden, Norway, Denmark and FinlandThe outlook is improving with an expected upturn in foreign trade


2013 major insolvencies*SWEDEN▶ Enverigo AB▶ Arkivator AB▶ Jms Mediasystem AB▶ Transportledet AB▶ Congrex (Sweden) ABDENMARK▶ Dp Clean Tech Europe A/S▶ P/F Landingarmidstød Føroya▶ Eurotrucking A/S▶ Aktieselskabet af 12. April 1989▶ Bornpoultry A/S(*) as of end of October, by decreasing levelof turnover 0

1000

2000

3000

4000

5000

6000

7000

8000DenmarkNorwayFinland

14131312111110090908070706050504030302010100999998979796959594939392919190

forecasts

Sources: SSB, DST, Statistics Finland, Euler Hermes


fewer bankruptcies (-4%). In Denmark, all growth componentsshould contribute to a moderateupturn in economic activity in 2014and the downward trend in insol-vencies should continue (-2%), buttheir number in absolute terms willremain far above the long-term av-erage. Only Finland should continueto see a rise in its corporate insol-vencies, which should increase forthe 4th consecutive year (+2%) asforeign trade is unlikely to reboundenough to offset lackluster domesticdemand.

5,000

9,000

13,000

17,000

21,000

25,000Number of insolvencies (l)

141312111009080706050403020100999897969594939291900

1

2

3

4

5Insolvency rate (in %, r)

7,47

17,70

07,47

0

Sweden - Corporate Insolvencies (yearly numbers)

Sources: SCB, Euler Hermes


19

Russian economic activity is ex-pected to slow further in 2013(+1.5% compared with +3.4% in2012), under the effect in particularof a deceleration in domestic demand (main growth driver) andexports (the eurozone accounts for30% of Russian exports). Neverthe-less, companies have held up rela-tively well judging by the numberof insolvencies1, which has declinedmarkedly and almost continuouslysince its 2006 peak despite theslowing growth trend. This declinein bankruptcies in 2013 (-5%) shouldnevertheless be put into perspectiveby the quality of the statistics – seefootnote – and the weak growth inbusiness creation in the country.Against this backdrop, insolvenciesare expected to increase in 2014(+5%), reflecting, with a lag, listlesseconomic growth in 2013 despitea minor upturn in 2014 (+3.0%).Retailing (28% of insolvencies atend-October 2013) and construc-tion (16%) appear to remain thesectors most concerned by insol-vencies

The trend in company shutdowns2

(+22% per year on average between2000 and 2012) is a reflection ofsubstantial macroeconomic diffi-culties and external vulnerability.In this respect, 2013 has been adifficult year (+12%) in the wakeof the jolts that fueled aversion onthe part of international investors(political and geopolitical trouble,severe financial tensions). Turkeyhas been one of the most vulnerablecountries to the recent tensions inemerging markets following theFed's announcement back in May

of a future slowdown in its ultra-accommodating policy: capital outflows and the resulting verysteep depreciation of the Turkishlira hurt companies with debt de-nominated in foreign currency,while exporting companies felt theeffects of the slowdown in activityin the euro zone. In 2014, althoughthe risk of a real monetary crisisstill seems distant, the number ofcompany shutdowns should con-tinue to rise (+4%) in a persistentlyfragile macroeconomic environ-ment.

RussiaInsolvencies up +5% in 2014 after apositive surprise in 2013

REMY CARASSE

TurkeyA particulary turbulent year in 2013

REMY CARASSE

0

10000

20000

30000

40000

50000

60000

70000

80000

90000Russia (l)

14131312111110090908070706050504030302010100999998979796

forecasts

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000Turkey(r)

-1

-3

-1

-6 -7

-5 -5

-7 -6

-1

-4 -5

-1

-4 -5

9

7

9

4 3

5 5

3 4

9

6 5

9

6 5

-8

-6

-4

-2

0

2

4

6

8

10

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

forecasts

Net BalanceCountries with insolvencies stabilization /on the upside Countries with insolvencies on the downside

Central and Eastern EuropeA very high overall level of corporateinsolvencies

In Central and Eastern Europe, the overall trend in corporate insolvencies reflects theseverity of both cyclical and structural problems. As economic growth in the region hasonce again disappointed in 2013 (+1.5% for regional GDP after a slowdown in 2012 to+2.1%), and after having been severely hit by the crisis, corporate insolvencies quicklyresumed their upward trajectory (+6% in 2013 after +8% in 2012) in most sectors, atrend which looks set to continue through 2014 (+3%) despite a certain upturn inactivity on the back of recovering domestic and external demand.




Sources: Supreme Arbitration Court of the RussianFederation, TOBB, Euler Hermes

1 Our series covers decisions toinitiate bankruptcy proceedings.The break in the series between2002 and 2003 is due to a changein Russian legislation (manyshort-lived companies werepreviously included in thestatistics) and the level in 2006can be explained by much closergovernment monitoring and theinclusion in the statistics of theshutdown of inactive entities.

2 Given the availability of thestatistics, the data selectedrecord company shutdowns (endof operations and companiesstruck off the company register).


20

In Poland, the official number ofcorporate insolvencies1 remainsrelatively low in light of the coun-try’s economy and its business de-mography, although it has risencontinuously since 2008 ,as activity has suffered under theeffect of a severe slowdown in do-mestic demand (average annualgrowth of +1.8% between 2009and 2012 compared with +6% between 2005 and 2008) combinedwith deteriorating external demand(the eurozone accounts for nearlyhalf of Polish exports, Germanyone-quarter).In this respect, 2009and 2012 were particularly difficultyears, with soaring insolvencies(+58% and +29% respectively) whiledomestic demand failed to makeheadway (-1.1% and +0.1%) as didexports (-6.8% and +2.4%). The2013 scorecard promises to be lessnegative, albeit still showing an in-

crease (+5%), as insolvencies declineslightly in construction – which re-mains the sector most affected byinsolvencies after having benefitedfrom investment for the Euro 2012– but increase in the other majorsectors, namely manufacturing industry (+11% year-to-date at end-October), services (+7%) and es-pecially retailing (+24%).In Hungary, the number of insol-vencies is among the region’s high-est, having grown at an average annualrate of +16.2% between 2000 and2012. The Hungarian economy re-mains very fragile after also beinghit heavily by the crisis (fall of morethan -10% in domestic demand andexports in 2009; and respectively -3.7% and +2.0% in 2012). The re-sulting contraction in the economy(average annual rate of -1.4% between 2008 and 2012) also sawa surge in insolvencies: +17.5% atan annual average. 2013 has re-mained difficult, with sluggish eco-nomic growth (+0.4%) and corpo-rate profits and margins in decline.Against this backdrop, more than14,000 insolvency cases are expect-

Poland and HungaryLight at the end of the tunnel?

REMY CARASSE

2013 major insolvencies*POLAND▶ PBG sa▶ Bomi sa▶ Poldim sa▶ Rabat Service sa▶ Przedsiębiorstwo Napraw InfrastrukturyHUNGARY▶ CAR-INside Ipari ▶ MAL Magyar Alumínium Termelő▶ Déli Fészek▶ PLUSZ TRANZIT-HÚSKER▶ Arzenál-Régió Ipari(*) as of end of October, by decreasing levelof turnover

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2000Poland(l)

14131312111110090908070706050504030302010100999998979796

forecasts

0

6,250

12,500

18,750

25000Hungary (r)

1

Transport, storage, communication

Retail trade

Wholesale

Services

Manufacturing

Construction

27%

26%20%

7%3%

16%


Sources: MSiG, KSH, Euler Hermes

Poland - 2013 Insolvencies by sector (as of end of September)

Sources: Monitor Sadowy i Gospodarczy (MSiG), Euler Hermes

1 Poland’s insolvency statistics do notinclude very small companies.2 Involuntary dissolution is mainlyapplied in the case of shell companieswith no real commercial operations.

ed to be recorded in 2013. Whilethis is a marked decrease (after22,389 cases in 2012), it should beviewed in light of the applicationof a legislative change inMarch 2012: the introduction of“involuntary dissolution”2 in therecords meant that only judicial liq-uidation procedures were includedin the official statistics, which gavea more realistic picture of corporateinsolvencies in the country. In 2014, the trend in insolvenciesis expected to improve for bothcountries: slowdown in Poland(+3.0%) and decline in Hungary(-4.3%). They will in fact benefit from morebuoyant economic activity (+2.2%and +1.0% in 2014, respectively,compared with +1.2% and +0.4%in 2013) underpinned by both therecovery in the eurozone andstronger domestic demand.


21

The Czech Republic and Slovakiaare the two countries whose in-solvency outlook clearly remainsthe most negative out to 2014. For the Czech Republic, 2013 willbe another year of recession (-1%after -1.2% in 2012). Austerity meas-ures taken by the authorities havein fact weighed on household de-mand, and companies have sufferedsignificantly as a result. The nationalaccounts, meanwhile, show profitmargins have fallen to a low notseen for more than a decade (53%).The number of insolvencies, bol-stered by stricter application ofbankruptcy regulations, should endthe year markedly higher (+10%)after surging by an annual averageof +37% between 2009 and 2012.The economic recovery expectedfor 2014 looks set to be too modest(+1.5%) to reverse the upward trendin insolvencies, which are expectedto increase a further +10%. For Slo-vakia, by contrast, the outlook is alittle less bleak. The economy’s up-

turn in 2014 (+2%) after a difficultyet positive 2013 (+1.0%) shouldpave the way for, if not yet a declinein insolvencies, at least a very cleardeceleration (+5.5% after +35% in2012). In terms of the number ofcases, 2014 looks likely to be anotherrecord year for insolvencies.

The forecast is brighter for insol-vencies in the other countries. . All countries in the region were hitheavily by the 2008-2009 crisis and,in many cases, its persistent after-effects spread through a contractionin domestic demand and a slow-down in external demand. Theresult was a surge in insolvencies.But for most of the region’s coun-tries, the number of insolvencies s expected to ease in 2014. In Romania, after soaring by +20%between 2009 and 2012, bankrupt-cies should continue to decline in2014 (-14%) after their expecteddownturn in 2013 (-2.5%). Thecountry appears to be benefiting

from more buoyant economicgrowth (+2.4% compared with+1.9%) thanks once more to thecyclical improvement in Europe anda recovery in domestic demand.Note, however, that Romania is ex-

pected to remain the country withthe highest number of insolvencies(25,000 in 2013 compared with29,769), most of which are con-centrated in retail and construction,the two sectors hit hardest duringthe crisis. As for the three Balticcountries, after also seeing a recordnumber of insolvencies in 2009-2010 following a very severe re-cession (-15.5% in 2009 on average),

Other Central and Eastern European Countries2013 (a little) better, except for the Czech Republic and Slovakia

REMY CARASSE

2013 major insolvencies*CZECH REPUBLIC▶ Plynostav a.s.▶ Novinová a poštovní s.r.o.▶ Agrigal s.r.o. ▶ KTA s.r.o.▶ Fantasy Management a.s.ROMANIA▶ Oltchim sa▶ Mechel Targoviste sa▶ Ductil Steel sa▶ Grup Romet sa▶ Ecoforest saSLOVAKIA▶ RKh Khakresvodokanal GUP▶ Torgovyjj Dom ZIL, ZAO▶ Begokon p.v.o.d.▶ Fenestra Sk s r.o.▶ Etop - Trading a.s.(*) as of end of October, by decreasing level ofturnover 10,000

15,000

20,000

25,000

30,000

35,000Romania (l)

14131312111110090908070706050504030302010100999998979796

forecasts

400

600

800

1,000

1,200

1,400

1,600

1,800Slovakia(r)

0

500

1,000

1,500

2,000

2,500

3,000EstoniaLatviaLithuania

14131211100908070605040302010099989796959493929190

forecasts

Roumania - SlovakiaCorporate Insolvencies (yearly numbers)

Sources: ISR, Ministry of Justice, Euler Hermes

Baltic countriesCorporate Insolvencies (yearly numbers)

Sources: DEBM, Lursoft, Krediid Info, Euler Hermes

in late 2013 their number of bank-ruptcies is relatively low. The down-ward trend will be confirmed in2014 on the back of some of thehighest economic growth rates inthe region (+3.2% on average for

the three Baltic countriesin 2014 compared with+3.0% on average forCentral and Eastern Eu-ropean countries as awhole). Between 2010and 2012, insolvencies inEstonia and Latvia fell by-20% and -15%, respectively. Only Lithua-

nia has posted a further increasein insolvency numbers since 2012,under the effect of slowing activityand operating profits. The trendshould nevertheless reverse in 2014and track that of its two neighbours.

0500

1,0001,5002,0002,5003,0003,5004,0004,5005,000


141312111009080706050403020100999897969594939291900.05

0.10

0.15

0.20

0.25Insolvency rate (in %, r)

3,76

44,14

04,55

0

Czech RepublicCorporate Insolvencies (yearly numbers)

Sources: ISIR, CSO, Euler Hermes


22

The Moroccan economy has suc-ceeded in setting itself apart fromits neighbours by displaying re-silience and responsiveness. Annual growth between 2008 and2012 was +4.5%, despite the globalcrisis and the regional political in-stability. Activity was in fact drivenby strong domestic demand, bol-stered by particularly expansionarymonetary and fiscal policies.Despite relatively sustainedgrowth, companies suffered heav-ily from the succession of crises, in particular the slowdown in activityin Europe (Morocco’s leading eco-nomic and trade partner). Exportsto the eurozone (60% of total ex-ports) grew at an average annualrate of only +4.7% between 2008and 2012, compared with +13.2%between 2003 and 2007; lendingto companies slowed abruptly(+7.4% in August 2013 comparedwith +38% in August 2008); andinternal costs remain high (pricesof commodities, the country’s mainimported goods, and rising unit la-bor costs). The difficulties Moroccan

companies have faced over thepast few years are largely reflectedby a higher number of insolvencies1

(average annual increase of +13.9%between 2008 and 2012) whilebusiness creation has increased byan annual average of only +3.4%over the same period. The increasein insolvencies will slow in 2013(+8%) thanks to brisker activity thanin 2012 (upturn in agricultural pro-duction and stronger domestic de-mand).In 2014, the upward trend in in-solvencies looks likely to continue(+10%),in line with the fiscal tightening

decided by the authorities in orderto correct the now-excessive fiscaldeficit: in the short term, the con-solidation of public finances willactually have repercussions on thecountry’s domestic demand, in-vestment and, especially, growth(stable at 4.5%, also underpinnedby the recovery in Europe). Verysmall companies will remain themost fragile, with risk concerningthe services sector in particular, like

in previous years. Retail activities(in particular car repairs and dis-tribution of household items) willcontinue to post the most insol-vencies (2,097 cases recorded in2012), followed by real estate, leas-ing and business services (morethan 1,285 casesin2012).

MoroccoCorporate insolvenciesset to rise (+10% in 2014), timely budgetaryadjustment at a cost

REMY CARASSE

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000South Africa Morocco

141312111009080706050403020100

forecasts

Insolvencies by sector in 2013

Activity number* change ** share

Trade 2,222 11.2% 34.4%

Real estate and business services 1,245 -1.5% 19.3%

Construction 1,076 19.8% 16.6%

Industry 518 9.7% 8.0%

Transports & Communication 438 6.3% 6.8%

Hotels & Restaurants 314 10.2% 4.9%

Collective services 198 32.9% 3.1%

Education 163 19.9% 2.5%

Agriculture 101 9.8% 1.6%

Finance 85 -29.2% 1.3%

Mining & quarrying 50 177.8% 0.8%

Fishing 20 11.1% 0.3%

Utilities 17 88.9% 0.3%

Health and social 14 -17.6% 0.2%

Personnal services 6 100.0% 0.1%

Total 6,467 10% 100%(*) cumulative 12 months as of October; (**) from the previous12 months - Sources: Inforisk, Euler Hermes

Africa and Middle EastEconomic and institutional disparities

Africa and the Middle East remain characterized by significant economic heterogeneities and sizeableinstitutional problems. In the Middle East, activity remains restricted by the tense geopoliticalenvironment (growth of +2.4% in 2013 and +3.8% in 2014), while growth in Africa is slightly moresustained (+4.0% in 2013 and +4.9% in 2014). In most of the region’s countries, however, a lack oftransparency and data remains an issue, and make it difficult to accurately follow trends in corporateinsolvencies. South Africa nevertheless stands out and is expected to continue to see insolvencies contractin 2013 (-8%) and 2014 (-4%) on the back of an emerging middle class, global demand for commoditiesand inflows of foreign capital. Morocco, meanwhile, continues to face an upward trend in insolvencies,despite its fairly resilient economic growth.


Sources: Inforisk, Statistics South Africa, Euler Hermes

1 The insolvencystatisticspresented considertwo types ofevents: dissolutionfollowingbankruptcy orliquidation of anassociate, andremoval from theregister due tofinancialdifficulties.


23

All three economies have producedpositive surprises in terms of cor-porate insolvencies, with a sharpdrop in insolvencies forecast for2013. The year has proved to beless economically challenging thanpredicted at the start of the year. For instance, in Taiwan, corporateliquidation proceedings (which, at260 cases, seemed to have reacheda floor in 2012) will have decreasedby -13% in 2013, accompanying aslight rise in economic growth (+2%versus +1.3% in 2012) and under-pinned by an upturn in investmentand resilient household spending.Similarly, in Hong Kong, liquidationproceedings will have fallen by -6% in 2013, reaching a new low(292 cases) alongside expandingeconomic activity (+2.8% GDPgrowth in 2013 after 1.4%) drivenby strong private consumption andbuoyant exports. In Singapore, therewill be a sharp decrease in corporate

insolvencies in 2013, with a -13%decline in corporate liquidation pro-ceedings. Economic growth shouldgather considerable pace (after thesharp slowdown in 2012) thanksto strong fiscal stimulus.Corporate liquidation proceedingswill fall again in 2014, at a moremoderate rate. The pick-up in economic growthshould continue in all threeeconomies in 2014, with foreigntrade resuming its role as growthdriver, thanks to the recovery ofglobal demand. Taiwanese GDPgrowth should reach +3% in 2014and corporate liquidations shouldfall by -6%. In Hong Kong, economicactivity is forecast to grow by +3.5%and corporate insolvencies to de-cline by -4%. Finally, Singaporeshould experience economic growthof +3.8%, causing liquidation pro-ceedings to continue their down-ward trend, with a -5% fall in 2014.

-2 -3

-5 -5

-7

-5

-3

-6

-2

-4

-6

-8 -7 -7

-6

7 6

4 4

2

4

6

3

7

5

3

1 2 2

3

-10

-8

-6

-4

-2

0

2

4

6

8

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

forecasts

Net balance

Countries with insolvancies stabilized / on the upside Countries with insolvencies on the down side

0

200

400

600

800

1,000

1,200

1,400Singapore (l)Hong-Kong (l)

14131211100908070605040302010099989796959493929190

forecasts

0

200

400

600

800

1,000

1,200Taiwan (r)

Taïwan, Hong Kong and SingaporeNew record low in liquidation proceedings


Asia-PacificFurther fall in corporate insolvencies despitealready low levels

The Asia-Pacific region is the best performer in terms of official corporate insolvencies,with a forecast fall in bankruptcies in most countries (except in Australia, wherebankruptcies will moderately increase in 2013 and 2014), as well as very low volumes,from an historical perspective and on a relative basis, particularly in China, South Korea,Taiwan, Hong Kong and Singapore. After falling for four years, the insolvency index forthis region should decrease further in 2013 (-4%) and 2014 (-1%) to reach record lows.The region's macroeconomic performance has been a contributing factor. While theregion has not performed so well in 2013, particularly due to the decrease in globaldemand, some countries (Japan, Australia and South Korea) will record moresatisfactory results thanks to fiscal and/or monetary support. In 2014, economic activityis expected to pick up throughout the region, chiefly on the back of exports. TheChinese growth rate will continue to pose a downside risk, however.




Sources: Official Receiver’s Office, Judicial Yuan of the Republicof China, Insolvency and Public Trustee's Office, Euler Hermes


24

The trend in corporate insolvenciesin 2013 was more positive thanexpected at the end of last winterfor both countries, with a fall ininsolvencies in China and in Japan. In China, economic growth slowedfurther in 2013 (+7.6%) as a resultof weak foreign demand and neg-ative growth in private investment,showing the government's deter-mination to steer growth towardsa more sustainable model, withtighter credit controls. Against thisbackdrop, companies have re-mained resilient overall,although the number ofinsolvencies, which hasfallen for the fifth yearrunning (-4%), only in-cludes failing companiesthat have gone throughofficial channels. In Japan,the strong stimulus pro-vided by monetary andfiscal policies, combinedwith resilient consump-tion, has undoubtedlyboosted the buoyancy of economicactivity (+1.8% GDP growth forecast

in 2013). The effectiveness of thepolicy mix adopted by the Abe gov-ernment has greatly bolstered thedownward trend in bankruptciesthat began in 2010 (-8% forecastin 2013).In China, the ongoing rebalancingof growth (to a lower but moresustainable level) should result inan almost stable low level of in-solvencies in 2014. The government is seeking to steergrowth towards a model driven byhousehold consumption rather than

investment. In 2014, the slowdownin private investment should there-

fore continue, but household spend-ing is not yet likely to pick up all ofthe slack. The recovery of foreigndemand should lead to a largercontribution from foreign trade andGDP growth is expected to slowonly very slightly, to +7.5%. Thenew measures announced by thegovernment include support forSMEs and exporters (tax cuts), andfor certain strategic sectors (par-ticularly those linked to renewableenergy and innovative and high-value-added products), but officialcorporate insolvencies, which havefallen to a particularly low level(2,600 bankruptcies, which is lessthan the low reached in 2004),could rise slightly in 2014 (+2%) –note that the business populationcontinues to increase.In 2014, Japanese activity shouldstay resilient thanks to more buoy-ant exports and bankruptcies areexpected to continue to decrease,but at a slower rate.The fiscal and monetary growthstimulus in 2013 should ease in2014, given the need to clean up

01,0002,0003,0004,0005,0006,0007,0008,0009,000


141312111009080706050403020100999897969594939291900.000.020.040.060.080.100.120.140.160.180.20


2,65

02,56

02,60

0

0

5,000

10,000

15,000


141312111009080706050403020100999897969594939291900.0

0.2

0.4

0.6

0.8

1.0

1.21.4


12,124

11,200

10,700

China, JapanTwo positive scorecards for two differentsituations in 2013


ChinaCorporate Insolvencies (yearly numbers)

Source: China Court, Sinotrust, NBS, Euler Hermes

JapanCorporate Insolvencies (yearly numbers)

Sources: TSR, MIC, Euler Hermes

2013 major insolvencies*JAPAN▶ Kabutodekomu▶ ITM Securities▶ West Ones▶ Index(*) à fin octobre, par tailledécroissante de chiffre d'affaires

public finances. To help achieve thisgoal, the consumption tax will beincreased (from 5% to 8%) inApril 2014, which should have astrong impact on household spend-ing. So as to limit the decline in do-mestic demand, the governmenthas announced new stimulus meas-ures, in particular including a re-duction in the tax burden on com-panies. In the end, public spendingwill slow significantly (+0.6% versus+3% in 2013), as will private con-sumption (+1% versus +2.1% in2013). Exports should then becomethe main growth driver thanks tothe upturn in foreign demand, theweak yen and the sharp increasein export orders. GDP growth cantherefore be expected at +1.4% in2014, while the downward trendin insolvencies should continue (-4%).

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

0,000

Other services

Transports and Communication

Finance and Real estate

Retailing

Wholesaling

Industry

Construction

20132012

Sectorial breakdown of insolvencies in Japan in 2012and 2013 (first 3 quarters)

Sources: TSR, Euler Hermes

In 2013, the overall trend in cor-porate insolvencies will be positivein all three countries, with a sharpdrop in payment defaults in SouthKorea and New Zealand and amoderate rise in Australia. Australian corporate insolvencieswill continue their upward trend(which has been almost uninter-rupted since 2002), with a +3% increase in the number of insol-vencies in 2013, alongside economicgrowth which, although resilient(+2.4%), is weaker than previously.This change is largely explained,however, by highly briskgrowth in the number ofbusinesses (more than+4% annual growth) asthe insolvency rate is notrising. In New Zealand,the number of bankrupt-cies will fall more sharplythan forecast (-11% ver-sus a previous estimateof -2%), thanks to strongereconomic growth and re-duced overcapacity. The trend inpayment defaults in South Korea,which is the only proxy availablefor monitoring insolvencies, revealsa sharper fall (-13% in 2013) thanexpected before the macroeco-nomic outlook became more posi-tive, with economic growth firmingup and now estimated at +2.5%(after +2% in 2012). This improve-ment has spread to the three mainsectors: industry (-22%), construction(-33%) and services (-10%).

In 2014, the macroeconomic en-vironment should gather momen-tum, the slowdown in Chinesegrowth being the main downsiderisk.Economic growth should continuein all three countries, mainly thanksto stronger domestic demand, whileforeign trade is expected to remainbuoyant. In Australia, economicgrowth should reach +2.8% in 2014,mainly driven by the recovery ofinvestment. The rise in businessconfidence and accommodatingmonetary policies support this sce-

nario. Growth in New Zealand(+2.8% forecast in 2014) shouldresult from a rise in domestic demand and exports still sustainedby low labor costs. Finally, SouthKorea should see its GDP grow by+3.5%, thanks to considerable mon-etary and fiscal stimulus and buoy-ant private consumption. However,these three economies dependgreatly on Chinese demand (Chinaimports 25% of South Korean andAustralian exports, and 13% of New

Zealand exports) and the rebalanc-ing of Chinese growth could havea negative effect on the contributionof foreign trade to these countries'growth.

In terms of corporate insolvencies,the same trends should continuein 2014. The number of corporate bank-ruptcies in Australia should rise fur-ther, but at a slower rate (+2%),reaching a new high (11,130 bank-ruptcies) while the insolvency rateshould stagnate at around 0.05%.

In New Zealand, insolvencies areexpected to continue their down-ward trend initiated in 2009 (-6%,i.e. 1,980 defaults). Finally, in SouthKorea, corporate defaults shouldonce more fall (by -7%) to reach anew low (only 990 insolvencies).


25

South Korea, Australia and New ZealandContinuation of trends: falling insolvencies in South Korea and New Zealandand a moderate rise in Australia


0

5,000

10,000

patching things up - euler hermes · 2019. 11. 14. · supervisory board, with a capital of 14 468...

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