The Russia-Ukraine conflict and the Federal Reserve’s interest rate hikes have resulted in high inflation in the Eurozone. The tightening of market funds has inhibited real economic activities. Many European companies have been hit by multiple impacts, triggering a wave of bankruptcies. Preliminary statistics show that European buyers will account for approximately 80% of the buyer bankruptcy cases accepted in 2022, mainly involving industries such as clothing, handicrafts, and electromechanical products.
The business environment for EU companies has deteriorated
In the fourth quarter of 2022, the number of companies filing for bankruptcy in the EU reached the highest level since 2015, making it particularly difficult for small and medium-sized enterprises to survive.
International observers believe thatthe sanctions against Russia have backfired on the EU economy, coupled with the suspension of government aid measures, the living environment of enterprises has deteriorated, and the development prospects are not optimistic.
Eurostat pointed out that by classification of economic activities, the number of companies filing for bankruptcy in all industries in the fourth quarter of last year was higher than in the previous quarter. Among them, the transportation and warehousing industry (72.2%), accommodation and catering services (39.4%) and education, health and social activities (+29.5%) saw the highest increase in companies filing for bankruptcy. From the perspective of enterprise size, small and medium-sized enterprises are in an even more difficult situation. French business data company Altares said that due to rising energy costs, the number of companies filing for bankruptcy in France last year increased by 50% compared with 2021, while the number of small and medium-sized enterprises in bankruptcy increased by 78% compared with the previous year, and more than 30% of them were in bankruptcy. A formal bankruptcy filing was filed in the fourth quarter.
Observers believe that the increase in the number of bankrupt companies in the EU is closely related to slowing economic growth, soaring operating costs, and reduced government aid.
Since the escalation of the Ukraine crisis, the EU has followed the United States in imposing multiple rounds of sanctions on Russia, and the backlash has become increasingly apparent. Europe is facing dilemmas such as an intensifying energy crisis and unresolved supply chain disruptions, making the external environment for companies increasingly difficult. Looking forward to this year, many experts believe that the business prospects of enterprises are still not optimistic. The trend of increasing number of corporate bankruptcies will not stop in the short term and may continue this year.
China Sinosure has received multiple reports of bankruptcies of European buyers
According to preliminary statistics from China Export & Credit Insurance Corporation Fujian Branch (hereinafter referred to as China Export & Credit Insurance Corporation Fujian Branch), European buyers will account for approximately 80% of the buyer bankruptcy cases accepted in 2022, mainly involving industries such as clothing, handicrafts, and electromechanical products.
Since this year, although the global epidemic has eased and international trade has gradually increased, the risk of bankruptcy in Europe shows no signs of stopping. Sinosure Fujian Branch has also received multiple damage reports against the same French sporting goods company (Groupe Go Sport). The reported damage amount has now exceeded US$1.2 million, involving many provincial export companies in Quanzhou and Fuzhou.
As verified by Sinosure’s overseas channels, Groupe Go Sport has applied for bankruptcy proceedings on January 19, 2023, and has opened a registration channel for bankruptcy claims. The deadline for registration of bankruptcy claims is May 19, 2023.
Groupe Go Sport was founded in the 1980s and is a French national sporting goods brand with more than 2,000 employees. At the end of 2021, Groupe Go Sport was acquired by HPB Group for a symbolic €1, but its operating conditions have not improved. According to the notice of the Grenoble Commercial Court on January 19, 2023, Groupe Go Sport’s liabilities have exceeded 10 million euros and it has entered bankruptcy administration. It will undergo judicial takeover in accordance with the relevant French bankruptcy laws. The judicial department has now appointed two managers and two judicial representatives to conduct a six-month observation and launch an investigation into “misuse of company assets”. According to AFP, investigators believe there are two suspicious accounts in Groupe Go Sport’s cash flow, totaling more than 50 million euros. The first tranche of nearly 18 million euros was suspected to be used by the HPB Group to pay the salaries of employees of CamaÏeu, another brand of the previously bankrupt group. The second tranche, totaling approximately 36 million euros, was suspected to be used to fund the HPB Group’s acquisition of 21 GAP stores.
French clothing companies fall like dominoes
According to observations, the French garment industry is currently in unprecedented trouble. Although during the 2020 epidemic, the French government helped brands survive for a period of time through the State Guaranteed Loan Mechanism (PGE), the loan repayment period has now begun, and more and more brands must seek new financing.
According to reports such as “European Times”, many brands that cannot obtain financing in time have experienced large-scale layoffs or bankruptcy. For example, CamaÏeu (another subsidiary of HPB Group) has been liquidated, Cop.Copine has implemented large-scale layoffs, and Pimkie is about to be sold, KookaÏ announced bankruptcy and reorganization, and C&A closed two of its stores.
The reason why the French garment industry is in trouble is closely related to the overall macroeconomic environment in Europe since last year.
According to S&P Global statistics, the Eurozone’s comprehensive PMI in November 2022 was 47.8. Among them, the manufacturing PMI was 47.3, lower than the boom-bust line for five consecutive months; the service PMI was 48.6, declining for four consecutive months. New orders fell sharply for the fifth consecutive month, and customer demand continued to be weak.
The decline in new orders means companies are relying on existing backlogs to maintain business activity levels, with order backlogs falling for the fifth consecutive month and at the fastest pace in two years. In the long term, due to the impact of sluggish consumption, the outlook for economic activity in the euro area is still not optimistic.
Related risk suggestions
01
It is recommended that relevant export enterprises register claims as soon as possible to avoid missing the registration deadline (see above) and strive for loss reduction opportunities; enterprises that have insured export credit insurance should report losses in a timely manner in accordance with the policy stipulations, and Submit relevant damage report materials.
02
For goods stranded at the port or in transit, if the export company can control the rights to the goods, it is recommended to actively take measures to reduce the loss of the goods; if the original buyer is still willing to receive the goods, be sure to obtain the written consent of the bankruptcy administrator in advance; and have purchased export credit insurance Before disposing of goods, enterprises must submit a cargo handling plan application to China Sinosure in advance.
03
It is recommended that export enterprises pay close attention to the operating conditions of other brand companies under the HPB Group, control the scale of transactions, and make full use of export credit insurance to assess risks in advance.
Export companies can use Sinosure’s buyer credit investigation service to continuously track the credit status of cooperative buyers, so as to “know themselves and their enemies”. For buyers who have experienced equity restructuring events, they should focus on their restructuring background.
There are also many new companies in the EU
Although the number of EU companies declaring bankruptcy increased significantly in the fourth quarter of 2022, the registration of new companies only dropped slightly by 0.2% in the fourth quarter of 2022 compared with the previous quarter. In a new wave of bankruptcies of EU companies There are also new opportunities hidden. And in all four quarters of 2022, the number of business registrations was higher than in the pre-pandemic period of 2015-2019.
Export companies should do a good job in risk management and control during operations, while seizing market growth opportunities and finding new buyers to develop new orders to maintain their competitiveness and stable operations in the EU market.
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