After the problems of liquidity, the business fabric faces the specter of insolvency and, for the most serious cases, settlement of business. He Bank of Spain estimates that between the 6 and 10% of the companies will be unviable due to the impact of the Covid-19 crisis.
That is, they are doomed to closure Because, in addition to not being able to pay interest now, they will not be profitable in the coming years. This range is based on simulations supported by the balance sheets and income statements in 2019 of 380,000 companies, under a more benign scenario (with a temporary impact on long-term results) and a more pessimistic one (incorporating persistent damage to the account results).
“Significant increase” in solvency problems
In general, the supervisor foresees that, due to the pandemic, there will be “a significant increase” in 2020 in companies that cannot repay debt “with the current results of the year”. Specifically, it calculates that these difficulties will affect 40% of companies, compared to 15% who were in that situation of high financial pressure in 2019. Financial problems present a great sectoral disparity, highlights the body led by Pablo Hernández de Cos. Thus, in the case of hospitality, it exceeds 70%.
Furthermore, the percentage of insolvent companies –Those with insufficient future results to face the debt– ranges between 14.5% and 18.7%. In the less optimistic scenario, the proportion of businesses with insolvency problems practically doubles since in 2019 they accounted for 10.5% of the total.
The study by the Bank of Spain, published this Tuesday, differentiates between unviable companies and insolvent but viable companies – which will obtain benefits but need a debt restructuring through write-offs or conversion into shares. This last group of businesses will represent between 8% and 9% of the total number of companies. The financial pressure and the difficulties in maintaining solvency have a lot to do with the results recorded in recent months. According to the survey of the central quarterly balance sheet, until the end of September the pandemic has caused a drop in activity and a 70% reduction in net ordinary profit compared to the previous year.
The General Director of Economics and Statistics of the Bank of Spain, Óscar Arce, highlighted that the economic policies applied to shore up the liquidity of companies have been “remarkably effective” and that now “pressure on solvency constitutes one of the main challenges for the authorities ”.