Spanish bankruptcies climb to record high
Firms, individuals under receivership up 5.9 percent at 1,803 in first quarter
The ongoing slump in the property sector and the persistent weakness of the economy after Spain's worst recession in living memory have driven a record number of households and companies to seek protection from creditors.
According to figures released Monday by the National Statistics Institute (INE), the number of individuals and firms in bankruptcy proceedings climbed 5.9 percent in the first quarter of the year from a year earlier to 1,803, the highest figure since the INE began compiling the current series in 2005. The previous high was 1,762 in the second quarter of 2009, when the country was still in the throes of recession.
Spain left behind negative quarterly growth figures at the start of last year but a clear recovery has yet to take root. The Bank of Spain last week estimated GDP was up 0.2 percent in the first quarter, the same pace of growth as in the previous three months, while the INE said the ranks of the unemployed swelled to an unprecedented 4.9 million as the jobless rate hit 21.3 percent.
According to figures released yesterday by the Organization for Economic Cooperation and Development, the Spanish economy looks set to take a renewed turn for the worse. The OECD's composite leading indicators, a forward-looking measure of activity, declined to 103.13 points in March from 103.23 points the previous month.
A breakdown, however, of the INE's latest bankruptcy figures showed that it was the corporate sector whose economic woes increased the most. The number of companies under receivership climbed 8.3 percent to 1,552, while the number of individuals unable to service their debts dropped by 7 percent to 251.
Among the companies, three out of every five in bankruptcy proceedings were small, with annual turnover of undertwo million euros. The real estate sector continued to show the most problematic face of the Spanish economy, accounting for one out of every four bankruptcies. If the construction sector is included, that figure rises to one out of three. After those two sectors, industrial and commercial firms were those most feeling the pinch.
Another feature of the INE report was a jump in the number of compulsory bankruptcies, which jumped almost 20 percent. The INE also said that only 1.6 percent of bankruptcy proceedings initiated in the first quarter were accompanied by a viability program and plan for eventually repaying creditors, suggesting that many companies will eventually be wound up.
How the mighty have fallen
A number of prominent businesses and businessmen have fallen foul of the economic crisis, including Gerardo Díaz Ferrán, who resigned as head of Spain's biggest employer group after his business empire started to flounder.
Díaz Ferrán last year offloaded his ailing travel business Viajes Marsans, which eventually went belly-up and was wound up last month with just enough funds available to cover unpaid wages and Social Security contributions. That left 11,400 creditors out of pocket.
Most of the major companies in the Spanish conglomerate Nueva Rumasa sought protection from creditors in March. Several decades ago, the patriarch of the group, José María Ruiz-Mateos, presided over the old Rumasa, which became the largest failure in Spanish corporate history at the time. Rumasa was taken over by the government in 1983 after a huge hole in its balance sheet was discovered.
Spanish property developer Martinsa Fadesa emerged from receivership earlier this year. Martinsa Fadesa sought protection from its creditors in July 2009 with debts of someseven billion euros, taking over as Spain's biggest corporate failure.
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