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Court decision on property auctions prompts intervention from official sector creditors

According to Business Daily sources, official sector creditors have asked all debt management companies for detailed information on the impact on business plans and revenue flow from recoveries due to the legal obstacle that has emerged, as well as estimates on the impact on payment culture and the desire from debtors to move ahead with restructuring of debt.

Conflicting decisions from the Supreme Court on property auctions blocking enforcement measures adopted by claims management companies has prompted the intervention of Greece’s official sector creditors.

According to Business Daily sources, official sector creditors have asked all debt management companies for detailed information on the impact on business plans and revenue flow from recoveries due to the legal obstacle that has emerged, as well as estimates on the impact on payment culture and the desire from debtors to move ahead with restructuring of debt.

The issue of auctions has agitated and mobilized the government and, despite the refusal  by Finance Minister, Christos Staikouras, to proceed with relevant legislation to solve the problem, government officials recognize the seriousness of the issue and the wider impact it may have on efforts by lenders to clean up their balance sheets, the Hercules plan and the country’s goal of recovering investment grade. The damage to the country's credibility should not be underestimated either, as this new problem strengthens the argument regarding the country's lack of credibility and constant changing of rules to serve short-term political - client goals.

Government sources stress to BD that this is a serious issue that should be resolved as soon as possible and express their optimism that this will happen soon. The same sources note that the prescribed procedures should be followed and that every malfunction that arises cannot be dealt with by legislative intervention.

Sources indicate that steps are being taken by the Plenary of the Supreme Court so that the competent body of the supreme court can rule on the matter. The aim is to have the issue dealt with over a period of weeks rather than months.

What is the problem?

The problem lies in the questioning of the right of servicers to proceed with judicial collections and the enforcement actions for claims from bank loans and credits that have been acquired by special purpose companies, the management of which has been undertaken by servicers. At the same time, there has also been criticism of the way in which certain securitizations by banks were structured.

The interest shown by official sector creditors in the matter reflects its seriousness, which has also raised concerns at the Bank of Greece and, of course, lenders.

There is a sense that governments, for political reasons, have been hiding behind the dysfunction of auctions. It is characteristic that since 2008, when the suspension of auctions was imposed for the first time by the K. Karamanlis government (for debts up to 300,000 euros) in various ways and reasons (from the Katseli law to the non-functioning of the courts due to the pandemic), forced property sales have yet to return to normal.

According to the business plans of loan servicers, revenues achieved through liquidations correspond to 20% to 40% of the total revenues, depending on the securitization. In addition, the risk of auction and loss of assets, functions decisively in achieving debt settlements.

YIANNIS PAPADOGIANNIS

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