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Russian companies facing bankruptcy
Published: 10 June, 2010, 17:42
Edited: 16 June, 2010, 08:19
TAGS: Investment, Regional development, Economy
About one third of Russian firms lost money in the first quarter this year. Many are trying to negotiate new loans, but the slow economic recovery means covering interest payments is tough.
Russia's only tin producer, Novosibirsk Integrated Tin Works, declared bankruptcy this week – brought down by $40 million debts. It's part of a growing wave of defaults.
The number of companies filing for bankruptcy rose by 15% last year. It's a growing trend, with no sign of a slowdown this year, says Douglas Dwyer, Managing Director at Moody’s Analytics.
“Default risk occurs across all the sectors of the Russian economy and default risks are relatively high in Russia relative to other nations that we are watching. It’s naturally a natural resources economy so it’s vulnerable to oil prices – changes in oil prices.”
Moody's Analytics, a world provider of risk management, has been monitoring Russia since 2002 – through the fastest growth of modern times.
Since the financial crisis hit, banks have competed to attract quality borrowers – but this is still an area of concern for regulators, says Robert King, Head of EMEA sales at Moody’s Analytics.
“There’s increasing focus from governments and regulators on improving risk management as many of the banks around the world including Russia are looking to improve their risk management practices.”
Compared to western countries Russia has seen rising default rates in the past few years. But analysts, like Douglas Dwyer, say this is a feature common to economies undergoing rapid change.
“Relative to China the default rates are less elevated, but it is an emerging market and we do see default rates are more elevated in emerging markets throughout the world.”
Moody's has constructed a risk calculator for China, which estimates the probability of a company defaulting based on the historical default rate of similar firms. It will release a similar calculator for the Russian market later this year.
10.06.2010, 16:56
Sibur posts FY 2009 net profit of 19.3 billion roublesRussian oil products producer, Sibur, has posted a FY 2009 net profit of 19.3 billion roubles under IFRS. |
11.06.2010, 14:48
MMK posts 1Q 2010 net profit of $94 millionSteel producer, Magnitogorsk Iron & Steel Works, or MMK, has posted a 1Q 2010 net profit $94 million under IFRS. |
Clearly, that incurance companys often help and do back up on failed buisnesses. But on other hand - people in the western countries paying HUGE interset rate to keep their bank accounts and so the companies are paying huge ammount of taxis! I think the better to support economy with lots of private small or medium size buisnesses like food stores, domestic, supermarkets, clothes chains, trading on line, ect. Principal of Mix economy has been used in Germany and I think it is a good economical model and it is helping to keep the flow of money and brings flexiblity too! Maria Kuznetsova
I agree with Bianca. I like RT a lot, but I am afraid that some articles - a minority - here, primarily, those of economic/financial nature are not very well researched and written. Moreover, sometimes they display some kind of reverence and even subservience (very misplaced, I might add) to all things Western. I wonder who has written this particular article? I have the same complaint about another one I just read, the article called "Russia's social largesse in a time of global austerity." It's an interesting topic, but I am sorry to say, whoever wrote it, did not manage to develop the topic at all and at times statements in the article are confusing and contradictory.
Good comments, absolutely Muddies, Stitch & Poor and all the other western fraud raters are really not worth anything, they are just western propaganda and financial elite paid for services. Their worth is zero, quoting them is meaningless. They should make a new one West & Fraud - Triple AAA for any anti-russian orgainisation, Junk rating for any pro-Russian organisation. Hey you don't even need a financial model, just someone who knows the difference between pro and anti and can spot the word Russian. Even the Corruption In Action can manage that one. But there are issues with some companies in Russia. Some were run very poorly, had poor business models .... But others were run well and have excelled, sometimes due to 'friends' other times just due to good management and sound business. The issue is we have an economy and we need stability and sustainability in it, for the sake of people. There should be a natural process where the bad are culled and the good get better. But we can't have it with massive failures and big catastrophic across teh board bust scenarios. So, we did have to support some bad ventures, just to keep stability, but as Maria points out, we still need to move to a diverse range of good SMEs and get the ratio of good to bad much better. This is our task now, to create a sustainable/resilient SME dominant economy, built on better fundamentals and with better management. There needs to be the mega companies, but we need a broad portfolio if we are to create a progressive economy. There are many many people in business in Russia, the environment is flourishing, we just need keep on improving the business skills, create the right opportunities for our people and enable them with the essential ingredient of business blood (cash). Government needs make conditions and regulation to keep the game fair, but only us people can make it work, it is as simple as that - Brains, Environment, Tools, Marketing, Experience and I will win every time