Leading corporate debt experts warned this weekend that
companies and lenders in central and eastern Europe (CEE) were
in danger of repeating the mistakes they made during the
Karsten Heilemann, director in restructuring at KPMG in
Russia and the CIS, told Emerging Markets that
international bank lenders were rushing back to woo companies
that a year ago were having to restructure their debt.
Lessons have not been learned and it is the same as
before, Heilemann said, adding that even during
restructuring processes he had witnessed banks not
behaving as hard as they should, with future funding
business in mind.
In Russia, two of the major debt companies involved in debt
restructurings with foreign lenders last year aluminium
producer Rusal and metals and mining group Mechel are
already eyeing the both the bond and loan markets
Addressing a seminar on corporate revival in the region,
Heilemann also stressed that banks, smelling big
business, were sometimes providing money with no
security, and in the knowledge that corporate governance
principle were often wanting. They have done it before,
they will do it again, he said.
But Brendan Massan, executive director in JPMorgans
CEE leveraged and liability management team, said he believed
that banks had learned some lessons, and were more wary of
lending than before. He agreed that appetite from bond
investors for Russian and emerging market debt was as strong as
ever. The market is back, he said.
He added that there was a much bigger focus on the function
of companies chief financial officers (CFOs), and a
greater emphasis on good management. There is
a vast divergence between companies that have Western-style CFO
functions and those that dont, he added.
But while Massan described corporate restructurings as
last years story, Heilemann told Emerging
Markets that there were still many happening under the
radar in Russia. These include amendments to restructurings
completed in 2009.
Kamen Zahariev, corporate recovery director at the EBRD,
with responsibility for its portfolio of impaired assets in CEE
and the CIS, said there had been some behavioural changes on
companies part, in that they were now queuing up for
long term loans from the EBRD.
A combination of short term borrowing for long term capex
projects, amounting to problems of asset liability management,
had been one of the biggest triggers of many companies
downfall in the last two years, Zahariev added. But he said
that in the long term there were regulatory issues to be ironed
out, including creating better tax and insolvency systems and
good corporate governance.
Worries also surfaced that companies, completely unprepared
for it the first time, had not fully recovered from the
financial crisis, with several officials echoing the view that
borrowers had gone for squeeze and stretch
solutions to their debt problems, rather than radically
changing their mode of operation.
Restructuring debt is not the final solution, and
its sometimes a case of buying time until the economy
picks up, warned Zelko Peric, chief executive officer of
Croatian company Caper.