Raziskava o zadolženosti slovenskih podjetij, vplivu na njihovo poslovanje in implikacijah za finančno prestrukturiranje, objavljena v EBRD Working Paper, WP 168.

Slovenia is facing the worst financial crisis in recent history characterised by severe corporate financial distress that is deteriorating further due to prolonged economic recession. Financial leverage turns out to be a critical factor constraining firm performance and impeding economic recovery. As Slovenia gradually recovers from a second deep recession since the financial crisis, this study addresses three key issues.

First, it aims to assess the current extent of corporate leverage and range of excessive debt of Slovenian firms. Second, it employs a set of indicators to discriminate between viable and non-viable firms and assesses the extent of non-viable firms and their macroeconomic importance. And finally, it examines how financial health and lack of it affect firm performance in terms of productivity, employment, exports, investment and survival. This serves to emphasise the need for repairing corporate balance sheets and restoring financial health.

The study uses the latest available financial statements and balance sheet data (for 2002–12) for all Slovenian firms. Half of all indebted firms (of those with some non-zero debt and at least one employee) are found to face an unsustainable debt-to-EBITDA leverage ratio beyond 4, accounting for almost 80 per cent of total outstanding debt. Moreover, a good quarter of all firms experience debt-to-EBITDA ratios exceeding 10 and hold almost half of total aggregate net debt.

Based on certain criteria of debt sustainability, the overall debt overhang of the Slovenian corporate sector ranges from €9.6 to €13.2 billion, which corresponds to between 27 and 36 per cent of GDP. Between 10,000 and 13,000 out of 23,000 companies (that is, between 44 and 60 per cent of all companies), are faced with a debt burden that will require some sort of debt restructuring. The intermediate figure assumes 11,651 companies holding €11.5 billion of debt overhang corresponding to a third of GDP.

Excessive debt is concentrated in six industries and the 300 most indebted companies. Yet, corporate debt distress is a broader phenomenon than has to date been acknowledged by the Slovenian authorities. Even though the top 300 debtor companies account for 70 per cent of total corporate debt overhang, they contribute only about 14 per cent to aggregate value added, 12 per cent to employment, and 16 per cent to aggregate exports. A quarter of all remaining firms that are in dire need of debt restructuring and that comprise one-third of aggregate debt overhang, account for about 14 per cent of aggregate value added, 19 per cent of employment and 12 per cent of exports. In other words, by restructuring the top 300 major debtor companies relatively little macroeconomic impact will be achieved. There are 15,000 firms that also need substantial debt restructuring, which will have an impact on about one sixth of the overall aggregate figures. High leverage is a general problem of Slovenian companies, with one quarter of the companies confronting unsustainable financial distress. Hence, a more transparent and comprehensive (across-the-board) mass restructuring plan is needed that will benefit the majority of companies in the corporate sector and ensure a bigger macroeconomic impact.

The experiences with major financial crises in east Asia highlight that comprehensive corporate debt restructuring strategies need to address the issue of expediting the exit of non-viable firms (through strengthened bankruptcy laws and improved insolvency procedures) in the first place, followed by a timely restructuring of viable firms. Using a set of indicators to discriminate between viable and non-viable firms, more than 3,000 companies (14 per cent of the sample) were identified in 2012 as being in danger of default. Letting all of them fail, corresponds to a loss of 13 per cent of aggregate value added, 14 per cent of employment and 7 per cent of aggregate exports. The indirect effects, however, can be much bigger as bankruptcy of these firms may affect a number of downstream suppliers and upstream businesses. By disregarding the group of nine “too big to fail” companies, which are of strategic interest for any government, these figures reduce to the potential adverse macroeconomic effects in the amount of 7 per cent of aggregate value added, 9 per cent of employment and 4 per cent of exports.

Finally, in the empirical account of the importance of financial health, the paper examines firm performance before and during the crisis in order to determine the effects of financial health on firm performance both in times of abundant and scarce liquidity. The paper finds that, while less important during the good times (pre-recession period), lack of firms’ financial soundness during the period of financial distress becomes a critical factor constraining firm performance. The extent of financial leverage and ability to service the outstanding debt are shown to inhibit firms’ productivity growth as well as the dynamics of exports, employment and investment. Micro and small firms are found to suffer relatively more than larger firms from high leverage in terms of export and employment performance during the recession period. This implies weaker power of smaller firms in negotiating debt restructuring with banks and receiving short-term liquidity for financing current operations, forcing them more likely to undertake lay-offs and reduce exports.

The most intriguing results, however, are found for firm survival. High financial leverage is found not to facilitate firm bankruptcy at all. This is equally true for all firm sizes. One reason for that may be found in complex and inefficient past insolvency procedures that were determined on protecting rights of firm owners over the rights of major creditors. In late 2013, a legal reform was introduced focusing on improving insolvency procedures and strengthening collective rights of majority creditors to initiate restructuring.

The findings therefore imply that restructuring corporate debt and restoring financial soundness may significantly improve firms’ performance. In particular small and medium-sized firms seem to benefit from the prospective debt restructuring the most. 

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Celotna raziskava je dostopna tukaj.