In order to improve new mechanisms for debts deferring and with the aim of increasing assets value for those companies in financial difficulties with overfull debts, the latest Spanish Royal Decree-Law 17/2014 September 30th – on urgent matters for the refinancing and restructuring of corporate debt – introduced a new procedure for restructuring agreements approval and endorsing.
This proceeding, regulated under the Fourth Additional Provision of the Insolvency Act 22/2003 July 9th, involves the application of the following boundaries and requirements:
a) Extension of the possibility of signing this kind of agreements to almost every financial creditor.
b) Excluded: commercial creditors, Public Law creditors and employment creditors.
c) Extension of the effects of the agreement to non intervening creditors, not only regarding the debt wait, but the rest of the terms such as waivers, debt capitalization or assignment for the payment.
d) Possibility of extending the effects of the agreement to certain creditors granted with real guarantee.
e) Conversion of the debt to equity for dissenting creditors or creditors who have not signed the agreement.
f) The application for approval may be filed by the debtor or by any creditor who had signed the refinancing agreement.
Requirements for a restructuring agreement to be endorsed and approved by Commercial Courts:
– The restructuring agreement must be expressly referred to Article 71 bis 1 a), 2 and 3 of letter b) of the Insolvency Act.
– Creditors representing at least 51 % of the financial liabilities must subscribe it.
– Significant increase of the credit available or modification of its obligations that allows the continuity of the company in the short and medium term.
– Certification of an auditor regarding the liabilities adequacy required.
– Validation by a public document.
– If there is a financial pool agreement, creditors supporting the restructuring agreement have to represent at least 75 % of the liabilities represented by the pool.
One of the most recent proceedings on this matter was the recently request filed by a Spanish company and several of its related companies last December 2014.
On January 12th, Barcelona´s Commercial Court no. 10 issued and endorsing order concerning the company´s restructuring agreement on the basis of the reform generated by the Spanish Royal Decree Law 17/14.
The abovementioned validating order recognizes that the company´s request for approving gathered the whole mandatory by law requirements, both technical and factual:
a) The restructuring agreement was one of the planned by article 71.bis1 of Insolvency Act, classifiable by the Court for having discharges and waits minor to 10 years.
b) A Viability Plan complemented the request, previewing continuousness of the group during a middle and short term.
c) There also was an attached Auditor´s Certification recognising enough creditors had supported the restructuring agreement.
Subsequently, and as the Commercial Court Order stated the whole requirements concurred, the restructuring agreement endorsement extended its effects both to supporting and non supporting creditors, not only regarding the debt wait, but the rest of the terms.
The information contained in this note should not be regarded in itself as specific advice on the matter discussed, but only a first approach to the subject. Therefore it is highly recommended that the recipients of this note search professional advice about their particular case before taking specific measures or actions.