Egypt's bankruptcy law is credit positive for banks

27 Jan 2018

The first-ever bankruptcy law in Egypt is credit positive for banks and will encourage local and foreign investment in the country, according to Moody’s Investors Service.

The law, passed by the parliament, will provide lenders in the most populous Arab country with more options to deal with viable troubled companies, making loan workouts more flexible and faster, the rating agency said in a statement. The legislation will also speed up the liquidation of non-viable companies, which will increase recovery amounts, it added.

Bankruptcy procedures, in the past, were not governed by specific laws and courts handled the maters on a case-by-case basis with debtors facing possible jail terms, Moody’s noted.

“The process was lengthy and bureaucratic, lacked the ability to effect a restructuring or reorganisation of a viable businesses, and was without sufficient out-of-court options for debtors and creditors,” Melina Skouridou, an assistant vice president and Marina Hadjitsangari an associate analyst at Moody’s said in the note released on Thursday.


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