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Circular indebtedness expands in 2010

The level of circular indebtedness increased last year although the financial crisis has made companies more cautious, credit insurance company Coface Hungary said in a statement.

Payment deadlines have been extended, delays in claim settlements have become longer and more claimants go legal over outstanding receivables. Commerce, building industry and agriculture are the worst affected. Although parties involved want to shorten payment deadlines, many with great purchase and lobby power are interested in extending them to have interest-free credits, said Gábor Kárpáti, managing director of Coface Hungary law firm.
Multinational chains calculate their cash-flow with 120 day payment deadline causing further delays in the supplier chain. Often suppliers at the end of the chain receive payment with 180 days delay. In industry, deadlines are shorter and payments of deposits are frequent. Agribusinesses are more debt-stricken, but most manage to stay afloat thanks to state and EU funds, said András Bagyura, head of commerce.
Though many credit insurance and debt collecting companies have statistics of the rate of indebtedness in Hungary, there is no overall data currently available. (BBJ)