By Nelson Bocanegra
BOGOTA (Reuters) – The number of companies filing for protection under Colombia’s insolvency law could nearly double in the coming months because of fall-out from its coronavirus lockdown, the head of the country’s companies regulator said.
The Superintendency of Companies has modified insolvency rules, which allow debtors to renegotiate their obligations with creditors so they can continue operating and avoid bankruptcy.
The regulator has reduced negotiating time between companies and their lenders by 85%, will facilitate the sale of assets to pay debts, give tax breaks and suspend some regulations, all in a bid to improve firms’ cash flow and avoid mass job losses, superintendency head Juan Pablo Lievano said.
“This is a symbiosis, a substantial and indivisible union where in order to keep employment we need to keep the companies,” Lievano told Reuters in a phone interview over the weekend.
President Ivan Duque has declared a state of emergency in the Andean country and earmarked billions of dollars in aid and credit guarantees for businesses and welfare programs. A nearly five-week nationwide quarantine is set to end April 27.
Business leaders say the funding is not arriving quickly enough and that they are worried about being able to pay salaries and keep people employed as sales have collapsed.
The regulator had some 2,700 bankruptcy proceedings in process last year, Lievano said, involving approximate total assets of $12.3 billion and nearly 121,000 employees.
If Colombia’s economy contracts 1.9% this year because of COVID-19, the figure could nearly double, with a 2,676 additional companies at risk of insolvency, he said.
“It’s a rough patch, where we have to sound things out, fix the lack of cash flow and income for the next two or three months and the slow recovery to normal levels of income,” Lievano said. “This has a cost for each company and for the entire economy.”
“We anticipate a significant increase in reorganization requests because of the economic crisis derived from coronavirus,” he said.
The rule changes will be applicable to companies that are currently in insolvency processes, Lievano said.
Government measures are meant to keep companies functioning, Lievano said, and are enough to ease the crisis.
“This isn’t an earthquake, buildings haven’t fallen down, factories are not destroyed, it’s just simply that we can’t go out to work. The assets are there,” he said. “This is a bad joke, no one expected it.”
(Reporting by Nelson Bocanegra; Writing by Julia Symmes Cobb; Editing by Steve Orlofsky)
