Bad credits on the rise (see Novinite)

"The Bulgarian National Bank (BNB) has estimated that up until the end of February 2009, the number of unpaid credit installments soared 116,8 % year on year.

According to the BNB, producers have the greatest share in that figure as they owe BGN 1,65 B. The average monthly rise was 23,44 % or BGN 314 M. Thus, end-February, the share of bad credits reached 3,41 % of the entire credit volume, increasing from1,99 % a year earlier.

Firms' bad credits are increasing the fastest. By the end of February they had swollen by 152 % to BGN 918 M. February alone saw a 33,1 % expansion of the bad debt volume, or BGN 228 M in unpaid installments." Novinite 26.3.2009

This is of course not a surprise. There has to be a time lag between the start of the crisis and the delays in the payment of the installement. The problem is in the way the credit managers will react. In most cases, in the first phase, they will trust the customers who will tell them that it is only a temporary issue, then they will get nervous, then the credit committee (risk management team) will get nervous and finally they will build up a recovery team to get their money back. This will take at least another 6 months, providing you can find the people with the right skills in Bulgaria (the reason being that this is the first capitalistic economic crisis). The requested skills are a mix of understanding for the legal issues related to credits and of deep understanding of the organisation of the production customers.

What has to be analysed in a hurry is do the customers have a chance to survive, how much credit can they service and how to move from today's situation to an acceptable solution. I know from personal experience that it is very difficult to find credit managers will a deep understanding of the customers' organisation. I would suggest that the best and easiest way is to outsource the business analysis to external consulting companies. That is what we did for production companies while I was working for the workout department at UBS.

Trust & Value OOD provides the right skill set and would be more than willing to engage in this activity.

The essence is: do not lose time, each month costs a huge amount in unpaid interests.