The plight of the construction industry has been a recurring theme in the media recently, as more and more construction companies have run into financial difficulties. This is due to the impact of inflation on material costs, a sharp rise in interest rates, and general economic uncertainty that has led to a lack of buyers for the completed building stock. With no users for the buildings, construction projects have been put on hold.
27.3.2024
A construction boom is just around the corner
Pauliina Tenhunen, Jerker Pitkänen & Elina Pesonen
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In the long run, market and economic troughs are part of the normal fluctuation. The previous crises in the Finnish building sector occurred during the national recession in the 1990s and the financial crisis in the 2000s. In terms of the number of bankruptcies, the current situation is comparable to the latter. During our firm’s long history we have seen many downturns, even recessions, and handled some of Finland’s largest bankruptcies, successful voluntary debt arrangements and restructuring proceedings. That’s why we can confidently say that every downturn is followed by an upturn.
Financial difficulties are better tackled if the situation is assessed early, when there are still options for recovery. In order to reorganise a viable business and rearrange its debts, restructuring proceedings are not always needed. Debts can be voluntarily arranged by agreement with the creditor groups, and business activities can be reorganised, through mergers or divestments, for example. In formal insolvency proceedings, debts are rearranged and unprofitable activities are disposed of. Even bankruptcy is not always the end: the bankruptcy estate can sell the profitable businesses and thereby give the business a fresh start.
Construction booms and peaks in demand usually follow a familiar pattern. The RAKSU Construction Trends Group expects construction to decline by another 3–4% this year, but construction output is forecast to recover, especially in residential construction, as early as next year if demographic developments and the recovery in purchasing power proceed as anticipated.
If interest rates fall as expected and construction costs stop rising, we are likely to see a new construction boom in a couple of years. After two years of slow residential construction, it is likely that there will be a spike in demand for housing and that competition for dwellings will increase significantly. Better times are ahead for the construction sector. To get there, companies need to be wise in their financial management and tackle problems head-on.
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Latest references
Foodiq – Restructuring proceedings
Castrén & Snellman’s Attorney Christer Svartström acted as the administrator in the restructuring proceedings of Foodiq Oy, which began on 11 March 2024. Foodiq is a unique future food focused company that develops and produces plant and milk-based products for both the private and public sectors. The company’s largest shareholder is a Swedish investment company focusing on FoodTec, Nicoya AB. The majority of creditors approved the draft restructuring programme in expedited proceedings after restructuring proceedings that lasted just under a year. The District Court of Helsinki affirmed the restructuring programme including the one-day payment programme on 10 March 2025 and appointed Attorney Christer Svartström as the supervisor of the programme. In cooperation with the parties, they found an effective and quick restructuring solution for the company, avoiding a long-term programme and allowing the company to focus on its core business. The restructuring programme was financed by investments made by the company’s investors. At the same time, the one-day programme provided a better outcome for creditors compared to a longer programme. The implementation of the restructuring programme ended successfully on 28 March 2025.
Case published 6.5.2025
European Battery Technologies – Sale of assets of bankruptcy estate
Our partner Pauliina Tenhunen acts as the administrator of the bankruptcy estate of European Battery Technologies Oy. The bankruptcy estate sold all assets of the bankrupt company, including its battery factory equipment and IP rights related to the operations. The equipment sold was the first of its kind in the 2010s and the factory was the first in Europe to produce LFP batteries. The buyer is Estonia and Germany-based Skeleton Technologies, a global developer and manufacturer of energy storage solutions. The buyer will continue operations in the premises rented by the bankrupt company in Varkaus, Finland. The owner of the premises is Keski-Savon Teollisuuskylä Oy, a company owned by the city of Varkaus. The bankruptcy administration is very pleased with this outcome as the continued operation of the battery factory was a priority also for the bankruptcy estate.
Case published 26.5.2023
Litorina Capital – Merger of Leo’s Lekland and HopLop
We advised Litorina Capital, a Swedish private equity house, in the merger of two leading indoor playground chains in the Nordics, Leo’s Lekland and HopLop. Litorina IV fund, the main owner of Leo’s Lekland, and CapMan Special Situations I, the main owner of HopLop, agreed on an ownership arrangement that will unite Leo’s Lekland and HopLop into Europe’s leading indoor playground group. Both parties will continue their ownership in the new combined group. The HopLop chain continues to operate in Finland under the HopLop brand. The new group will be Europe’s largest family focused activity and exercise company. It has a total of 68 parks in Finland, Sweden, Norway, Denmark and Germany. Leo’s Lekland is the largest indoor playground chain in the Nordic countries, with a total of 50 parks in Sweden, Norway, Denmark, Finland and Germany. There are 7 parks in Finland. HopLop is the largest children’s adventure and indoor playground chain and the most significant family focused activity and exercise company in Finland. There are 17 HopLop parks in Finland and 1 in Germany. Litorina is a private equity investment firm based in Stockholm, Sweden. It was founded in 1998. It invests in niche market leading companies with headquarters in the Nordics. Currently it has 13 portfolio companies.
Case published 2.2.2023
Relacom Finland – Administration of bankruptcy estate
Relacom Finland Oy was declared bankrupt in 2019 upon the company’s own application. Relacom Finland Oy was one of the leading telecommunication services companies in Finland, and it had activities across Finland. The company offered, for example, installation and maintenance of telecommunication networks and power grids. When bankruptcy was declared, the company had around 400 employees. The bankruptcy proceedings were concluded in approximately three years, and the creditors approved the final settlement of accounts in December 2022. Attorney Pekka Jaatinen served as the administrator of the bankruptcy estate. After the beginning of the bankruptcy, the bankruptcy estate examined the company’s unfinished projects and finished them to the extent that was profitable. The rest of the projects were shut down in a controlled manner and handed over to the customer. Some of the projects were also socially important. The bankruptcy estate hired 112 of the company’s employees for fixed-term employment to finish projects and to ensure that the shutdown was carried out in a controlled manner. However, the bankruptcy administration did not continue the company’s business. The company’s fixed assets and inventories consisted of, among other things, various tools, equipment and several vehicles. The bankruptcy estate identified different options for efficient ways to liquidate assets, and selling was carried out in cooperation with an external liquidator. The liquidation result from finishing projects and selling the company’s movable property was significant and higher than the book value. Unsecured creditors accrued approximately 41% disbursements in the bankruptcy.
Case published 11.1.2023