Financial crisis engulfs Turkish companies
In a challenging financial climate, a surge in companies declaring bankruptcy or nearing it due to financial constraints has become evident. Two sectors hit hardest are textile and healthcare.
From January to September this year, a staggering 18,481 companies shuttered, while applications for liquidation hit the 20,000 mark. Alarmingly, even with an average cost of 3 million liras, 288 firms sought temporary relief through the concordat process. Of these, 281 faced rejections, and 41 were declared bankrupt. The textile industry tops the list with 35 companies seeking relief, followed closely by the construction sector at 29. The healthcare sector saw 12 entities, and the medical equipment and products segment recorded eight firms reaching out for such decisions.
Merve Yigitcan of Ekonomim reports that the current year has been dynamic regarding enforcement and bankruptcy file decisions. Over the past nine months, the execution offices recorded over 11 million enforcement and bankruptcy filings. Coupled with ongoing cases, the total number of files is a mind-boggling 21.7 million.
Dr. Turkay Ozdemir, a lecturer at Istanbul University and an experienced concordat commissioner and lawyer, shared his views on the rising trend of concordat applications. "There's a noticeable uptick in companies exploring the concordat process, rather than just increasing court filings. Many are actively considering this option," he remarked.
He added that successful concordat stories are piquing companies' interest. In his observation, sole proprietorships might see a rise in applications. Ozdemir emphasized the silver lining: those navigating the concordat process successfully see vast opportunities. "About 60% of the total applications receive concordat approval. Almost half of these succeed in the process," he explained. Further, he highlighted an emerging trend: "Companies are viewing public offerings as an alternative to concordat. Once rumored to be on the brink of bankruptcy, some firms have managed to stay afloat through public offerings."
At its core, a concordat is a 'bankruptcy agreement.' It's a legal understanding between debtors and their creditors to restructure the former's debts and avert bankruptcy. This compromise involves creditors offering a discount or providing extended payment terms to assist the debtor in repaying overdue amounts or impending debts they might struggle with. The goal is to prevent a full-blown bankruptcy.