Dr. Dimitrios K. Roussis
Adjunct Lecturer Law School DUTh
In year 2010 Greek State entered the IMF-EU Support Mechanism. The State's financial inability was rapidly turned to a private sector's distress.
Large and small market entities faced transactions' fall, loss of profits, irreparable damages, insolvency issues. Individuals lost most of the half of their revenues.
Eventually, all banking and financial institutions operating in Greece confront the collapse of their financial figures and are obliged to fulfill new capital requirements to absorb losses.
Within the frame of a general economic decline almost all property owners are forced to transfer their assets to reduce expenses and tax burdens and prevent greater fall of their assets' value.
Instead, almost eight years after the initiation of austerity measures very few of the transferable assets have been placed and sold. The largest owners (State, Banks) seem too reserved to transfer their property, i.e. shares, stake holdings, loan portfolios.
The inevitable question is raised: what is the actual cause of this costly delay?
Let's try to sum up the crucial factors that affect to our opinion the negative status.
Management Fear
In most of the cases, the existing managers and shareholders are afraid to proceed to an aggressive sell off the assets that the controlled entities hold. Not only, as there still is a bonding between the debtor and his all-time creditor, but mainly, because the pricing is formed into a totally negative environment. Liability issues may be raised, and no banker/stakeholder is willing to take such a risk without strong legal immunity.
The Buyer Reluctance
Buyers, investors, hedge or vulture funds or other bidders are not confident of the true and fair value of the assets to be transferred and of their future return. This approach is of course related to the general economic uncertainty (country risk), but also to the loose and not coherent legal framework.
The Drama of the Legal Framework
Greek legal framework with respect the assets/loans transfer process is not uniformly regulated in both voluntary and compulsory grounds. The respective codifications provide of differentiated types of process. In all cases, basic transaction terms and legal preconditions are not yet finalized.
Enforcement measures
Code of Civil Procedure suffered of several successive reforms and is still under reconstruction. Just within the last reform secured creditors (State or Private entities) are granted with a full general privilege after the payment of the employees' claims of the last six months and property taxation, but only with respect new credit agreements to be denounced. Furthermore, auction process seems to be in a de facto standstill status rather due to political than legal reasons.
Pre-Insolvency process
Transfers of business within an arrangement agreement and debt to equity swap still need in fact the debtor's consent despite last reforms.
Assets liquidation process
In case of financial institutions or legal entities under special liquidation, administration or bankruptcy process, transfer of assets depends on public auction procedures and strict legal formalities.
NPEs acquisition
Non-performing loans portfolios may be transferred under certain prerequisites that do not ease the potential investors. The parallel application of the debtor friendly process, which is provided in the Banking Code of Conduct, the restrictions of the data protection law and VAT encumbrance are the most deterrent factors.
State assets privatization
The transfer of the State participation into large public entities to investors has been significantly delayed. Numerous public participations companies are provided by various laws but none of them has managed and placed public assets in a material way.
The above reflected key factors explain the tardiness of the asset transfer process in the Greek market and the negative impact on owners’ efforts to adequately manage and use their property. At the same time, assets’ depreciation continues and affects future placement and pricing in favor of the potential purchasers.
Overall it may be said that even though important reforms have already been issued, more rapid and radical steps shall take place to achieve the complete harmonization of the Greek (market and legal) environment to the economic decline era.
