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Coface expects 3.5% of Hungarian companies to go bust in 2006

More than 3.5% of Hungarian businesses could go bust this year, with the proportion in the building and trade sectors exceeding 5%-6%, according to Mikael C. Szabo, who heads the Hungarian unit of French credit insurance company Coface.

In January-September, the number of bankruptcy procedures increased 18% over the same period a year earlier. The number of liquidation procedures requested by creditors rose 20% and the number started by business owners themselves was up 16%. The textile industry continued to show the highest insolvency ratio, with 4.52 businesses in a hundred going bust. Bankruptcies in the construction and trade sectors accounted for 46% of all bankruptcies in January-September.
Szabo said the government's austerity measures, the weakening forint and higher taxes were partly at fault for the high proportion of bankruptcies, but he also blamed legislators' failure to make it more difficult for owners of bankrupt companies to start up new businesses. He noted that just 14 bankruptcy protection procedures had been started in January-September, showing most owners of troubled companies opt to take the easy way out, rather than undertake a more difficult restructuring. By taking out credit insurances, companies could reduce their exposure to non-payment by 15%-20%, Szabo said.