The Central Bank recently published an analysis on the frequently discussed composition developments. The analysis stated that composition requests are being made by risky companies even before monetary tightening. It was emphasized that these companies have a low weight in the economy. The Central Bank of the Republic of Turkey’s (CBRT) blog page “Center Diary” released an analysis titled “A Close Look at Composition Developments.” According to the analysis, the composition requests made this year are concentrated in firms that can be categorized as risky even before monetary tightening and have relatively low weight in the economy. The analysis was prepared by Chief Adviser Halil İbrahim Aydın, Assistant Expert Kadir Gürci, and Director of Structural Economic Research Ünal Seven. It was mentioned that financially stressed firms can request composition to obtain payment relief while continuing their activities. The analysis indicated that the purpose of the provisions in the Execution and Bankruptcy Law concerning composition is to extend the debtor’s debt, reduce the debt, or avoid a possible bankruptcy. It was conveyed in the analysis that companies’ indebtedness, debt repayment capacity, and liquidity status are determinants in composition processes. “COMPANIES WITH HIGH DEBT LEVELS” The analysis highlighted that the general indebtedness level of composition firms is higher compared to other firms, and their liquidity levels are significantly lower. The analysis stated, “While the ratio of their commercial debts to total assets is 36%, this ratio is around 11% in other firms.” The analysis also reported that the median ratio of cash and bank accounts, referred to as readily available value, to short-term obligations of composition firms is approximately 2%, compared to around 8% for other firms. “THEY HAVE FINANCIAL ISSUES” The findings suggested that companies applying for composition in recent times already had financial problems before monetary tightening. As of June 2023, when monetary tightening began, 41% of firms declaring composition in 2024 were in default, 61% had high debts, and 26% had low liquidity. “OFFERS DEFERRAL OF PAYMENTS” It was noted that the composition process allows firms to postpone their payments to suppliers. According to the analysis, firms that requested composition in 2024 and were granted temporary respite accounted for 0.38% of the total cash commercial credit balance, 0.07% of total employment, 0.16% of total sales, and 0.18% of total foreign sales. On the other hand, the suppliers of composition firms account for 0.23% of the total cash commercial credit balance, 0.12% of total employment, 0.21% of total sales, and 0.14% of total foreign sales.