Since the beginning of January 2024 at the latest, the (insolvency) hammer has been “circling” in Germany: According to Destatis, the number of applications for the opening of regular proceedings (which also include corporate insolvencies) rose by a further 12.3% already in December 2023.
Meanwhile, the IWH-Insolvenztrend reports an increase in corporate insolvencies of almost a quarter for December (both figures compared to the previous year); this was not only the highest figure for a December since the IWH-Insolvenztrend began collecting data in 2016, the figures were also 24% higher than the average for the pre-coronavirus years 2016 to 2016. In addition, the fourth quarter of 2023 was the “strongest quarter for insolvencies” – normally it is the weakest quarter. These reports are in line with Creditreform‘s preliminary annual analysis (again here), which already predicted 18,100 corporate insolvencies in Germany for 2023 in December. There may have been a few more in the year-end sprint.
This trend continued uninterrupted in January 2024, as shown by the latest figures from Destatis, which reports a further 26.2% increase in regular insolvencies (which also include corporate insolvencies) in this period compared to the previous year. Accordingly, the number of corporate insolvencies in November 2023 rose by a further 15.3% compared to the previous year (while consumer insolvency proceedings fell by 1%!). According to the IWH-Insolvenztrend, there are indications that corporate insolvencies in January 2024 will remain at the level of December which will be 40% (!) higher than in January 2023.
Current cases
As expected, department stores’ group Galeria Karstadt Kaufhof filed for insolvency for the third time in a very short space of time in January (here and here), although there are now doubts as to whether the group was actually “bankrupt” when it filed for insolvency (here). At the end of January, “The KaDeWe Group GmbH“, 49% of whose shares still belong to the Benko/Signa empire, filed for insolvency (here). But events are also moving fast well beyond Signa and Galeria: With Wormland (here) and Bree (here), two other traditional German brands from the fashion/retail sector, had to pull the ripcord, which is hardly surprising given a 3.1% decline in retail sales last year (here). The aforementioned brands join an illustrious list of fashion companies that had to file for insolvency in 2023 (here).
This month’s real estate insolvencies are brought to you by Omega AG (here) – no less than 5,500 residential and commercial units – and Elbtower (here, also part of the Signa Group). It was clear that the current cases in this sector, which has been pumped up by “cheap money” in recent years, would not leave property financiers unscathed and One Group (here) was the first prominent victim. The question is whether the Adler Group will be able to save itself in this difficult market after the failure of the restructuring via an English “scheme” (here, see here for the previous proceedings). However, the usual “well-informed circles” reported that Adler had renegotiated the financing terms with the bondholders in the meantime, irrespective of the English decision, and that the forecast for the company’s continued existence had also recently been favourable. Let’s hope that the corresponding press release (here) remains reliable throughout the year.
Following the end of “Easy Money”, the hammer is also circling on the previously successful German start-ups (here), which delivered a record number of insolvencies in 2023 – and things are not expected to get any better in 2024. Accordingly, the current start-up insolvency is presented to you by the removal start-up Movinga (here) . Other companies, such as the IT and software company Softline (here) or Spark (here), are trying to save themselves via a StaRUG procedure (or to crowd-out shareholders?).
Forecasts by others
Insolvency forecasts are correspondingly gloomy at the moment: even the ever-optimistic Handelsblatt considers a 30% increase in corporate insolvencies not to be far-fetched (here). Falkensteg agrees and even predicts an increase of one third (here). The vast majority of experts surveyed for the 23rd Restructuring Barometer published by Finance/SMP also anticipate a (sharp) rise in the number of restructuring cases in the near future (here).
Conclusion: In view of this rather gloomy situation and even gloomier outlook at the end of the German economy’s food chain, the discussion about whether or not we are seeing an insolvency “wave” (coming) seems like a discussion about the emperor’s beard – typically German. But be that as it may, here is my attempt to perhaps bring this discussion forward – if not to a conclusion: According to CRIF (here), the “average since 1999 has been just under 26,200 corporate insolvencies per year, with the previous record year of 2003 totalling 39,320.” According to Creditreform estimates, there was an increase in corporate insolvencies in 2023 to over 18,000 or 23% more compared to 2022. This would mean that the number of corporate insolvencies in 2023 would still be around 8,000 below the long-term average. If you apply this yardstick, you can’t really talk about a wave yet. If an increase similar to that of 2023 is also assumed for 2024 (which does not appear disproportionate, at least statistically), 22,140 companies would file for insolvency this year, around 4,000 more than in 2023 and 8,000 more than in 2021. Relative to 2021, we can then confidently speak of a “wave”. However, compared to the average figure for the last 24 years and the peak figure in 2003, we are still a long way from a “wave”
I do not give too much about this discussion – but think that several pundits still underestimate the severness of the situaion and I hope that the predicted 4,000 more insolvencies this year will be enough and not 6,000 or more, as Falkensteg and the Handelsblatt are forecasting. Finally, I hope that we turnaround managers are able to save as many companies as possible to keep the backbone of the German economy afloat.
Note: most of the links lead to sources in German
Translated with assistane of DeepL.com