France’s inter-ministerial committee on industrial restructuring (CIRI) supports companies with more than 400 employees. These are the ones being hardest hit by the Covid-19 crisis. Its secretary general, Louis Margueritte, draws up an initial assessment of the situation.
Leaders League. What are the observed effects of Covid-19 at CIRI?
Louis Margueritte. The number of foreclosures is skyrocketing, but we must distinguish between companies that were in distress before the pandemic and those that find themselves in duress currently. In March, we opened around fifteen new files, many of which were not even intended for restructuring. We have to deal with this first wave, but there will be others.
What is the situation of the companies that come knocking on CIRI’s door?
The common element across all files is the massive cash-flow crisis. The first reflex of business leaders is to ensure staff keep their jobs. The second is to maintain operations to the greatest extent possible. The third is to manage the liquidity crisis, maintaining the payment of wages and suppliers, because it is absolutely vital to preserve the ecosystem. Once these steps have been completed, thoughts turn to preparation for leaving confinement and resuming activity in the future.
In the current context, what are the priorities in the treatment of cases?
Everyday activity has ceased and we have to completely reassess companies’ business plans. We are going to have to wait for the dust to settle before initiating turnaround plans. We prepare them with credible estimates of everyone's needs, but they can only be put in place once businesses have recovered economic activity and regained all of their vital functions. Today we are dealing with a liquidity crisis and quite a few companies will be forced into balance sheet and debt restructurings.
How does that sit with creditors?
Creditors are waiting. In the very short term, they have questions about the ability to preserve industrial tools and, if so, to maintain activity in accordance with sanitary specifications. In the medium term, they are looking out for effects on companies' business plans. We all have to wait for the situation to stabilize and I would therefore call on them to show restraint and not make any hasty decisions. Regarding certain cases, we can already enter into discussions with banks on the use of state guarantees. Unlike 2008, we are not experiencing a situation of credit-access disruption. Financial institutions are committed to participating in the collective effort and the entire restructuring community has an interest in being more flexible in negotiations.
How will CIRI manage the anticipated influx of cases?
The principle of intervention does not change. We represent public authority and work to safeguard sustainable employment and economic activity. But we are obviously adapting to the crisis, first of all in our way of operating has been decentralized due to the lockdown, and we are taking action even more aggressively. The paradigm shift is that we have new tools put in place by the government. This includes loans guaranteed by the state, which are intended to help everyone, including companies in proceedings seeking to prevent bankruptcy.