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Will European Reforms put an end to UK Scheme Tourism?

Will European Reforms put an end to UK Scheme Tourism?. Panellists: Stephen Taylor, AlixPartners (London, UK) Matthias Beck, Ernst & Young (Frankfurt, Germany) Céline Domenget Morin, Bremond & Associés (Paris, Fance) Adrián Thery, Garrigues (Madrid, Spain).

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Will European Reforms put an end to UK Scheme Tourism?

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  1. Will European Reforms put an end to UK Scheme Tourism? Panellists: Stephen Taylor, AlixPartners (London, UK) Matthias Beck, Ernst & Young (Frankfurt, Germany) Céline Domenget Morin, Bremond & Associés (Paris, Fance) Adrián Thery, Garrigues (Madrid, Spain)

  2. Outline of recent reforms in France Fast Track Safeguard – the French pre-pack regime Why was reform required? Fast Track Safeguard improves the efficiency of Safeguard proceedings by combining them with Conciliation proceedings thereby creating a true „pre-pack“-regime Effects limited to financial creditors Applies to Conciliation proceedings opened from March 2011 Approval periods for creditors and the court significantly reduced How has the new Safeguard procedure been accepted in practice?

  3. Outline of recent reforms in Spain Why was reform required? Acuerdo de Refinanciación Fast track refinancing tool providing for cram-down features However limited to deferrals (no haircuts) and to unsecured creditors Propuesta Anticipada de Convenio (PAC) Allows for a pre-agreed arrangement to be sanctioned by the court if approved by 51% of the creditors in value Process can be consummated within 3-6 months

  4. Outline of recent reforms in Germany Why was reform required? Insolvency law reform (ESUG) in force since March 2012 with multiple restructuring friendly amendments to the existing regime including Formation of preliminary creditors‘ committee with influence on the selection of the officeholder Debtor in possession status (also during preliminary insolvency proceedings) designed as a general rule rather than exception „Protective Shield Proceedings“ combined with debtor in possession status Impairment of shareholder rights allowing for a debt-to-equity swap Limitation of right of appeal against the insolvency plan Have there been recent situations where the new rules were adopted?

  5. Can European (pre-insolvcency) restructuring tools keep up with a UK Scheme? Feature Pre-insolvency proceeding? Moratorium (automatic stay) available? Debtor in Possession available? Impairment of shareholder rights possible? Cram down available / Required majorities? DIP Financing available? Duration Jurisdiction UK Scheme of Arrangement (SOA) Yes No, unless used in administration proceedings Yes, but excluded in administration proceedings No, only in combination with administration proceedings or the enforcement of share security Yes / 75% in value and for SoA in addition majority in number of each class No, but security can be granted in respect of new money subject to assets being available Minimum of 2-4 months France Procédure de Sauvegarde (accelérée) (PdS / PdSa) and Procédure de Conciliation (PdC) Yes PdS: Yes, for a period of max. 6 months PdC: No, but third party insolvency filings excluded Yes Yes PdS: Yes if > 150 employees and turnover > EUR 20m / consent of 66 2/3 in three classes PdC: No No PdSa: Approval periods limited to 8-15 days (creditors) and 1-2 months (court) Spain Acuerdo de Refinanciación (ARF) and Propuesta Anticipada de Convenio (PAC) No ARF: between 1-2 months PAC: between 3-6 months Yes No, only upon the opening of bankruptcy proceedings Yes, except for compulsory insolvency proceedings initiated by a creditor Yes for ARF: 60% of creditors in value (quorum of 75% of total financial indebtedness) but no cram-down in respect of secured creditors for PAC: 50.1% of creditors in value ARF:50% claim against the estate, 50% generally privileged claim PAC: 100% claim against the estate Germany Insolvency Plan Proceedings (post ESUG-reform) No statutory pre-insolvency proceedings available but “protective shield proceedings” available plus fur-ther restructuring-friendly amendments Yes upon opening of formal insolvency proceedings or after filing per court order No genuine moratorium in “protective shield proceedings” Yes, upon application to the court and post-reform available also during preliminary insolvency and in particular “protective shield proceedings” Yes, shareholders constitute separate class(es) which can be crammed down. Yes / majority in value and number of each class (cram down of classes possible) Yes, upon application of the debtor the court orders that the debtor incurs administrative expenses (Masseverbindlichkeiten). Approx between 3-6 months from start of drafting of the insolvency plan

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