The government will take one more step tomorrow to stop job losses that have accompanied our economic crisis. This is not the first measure since a new bankruptcy law was approved in 2011. The law tried to keep failing companies from filing for a formal bankruptcy.
Three years later and after many changes, all of which had the same purpose, nearly 90% of the companies that filed for bankruptcy are now defunct. Now, the Refinancing and Restructuring of Commercial Debt Law aims to force company owners to accept refinancing deals with their creditors, whether those are banks or any kind of investment fund. This implies accepting loan forgiveness or selling debt. The latter option would allow creditors to take ownership of companies even though they may not want to. Everyone is thinking about all the real estate companies that have collapsed and the pre-bankruptcy hearings that Pescanova, La Seda and Codere went through, because these would be affected by a new law. If creditors buy companies, then their balance sheets will get cleaned up and debt markets will heal.
The measure could also impact jobs by keeping entire, or at least some, staffs intact. Still, letting creditors in the door could leave companies holding the bag. Codere is a recent example. Its owners resorted to a pre-bankruptcy in order to keep some ownership and control. A new law would strip decision-making power from companies and give too much control to the creditors.