European Distressed Info: Insolvency Regimes, Foreclosures and Lease Info

The Gorj Group, LLC (“TGG”)Information on European Insolvency and RE ForeclosuresFeb. 2015www.thegorjgroup.com

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1. Insolvency Regimes across Europe

2. Real Estate Foreclosure Times across Europe

3. CRE Lease Structures across Europe

Feb-15

Insolvency Regimes across Europe Characteristics of Insolvency Regime

France Spain

Procedure and/or Operative Statue and Associated Documents

Book VI of the French commercial code provides for certain restructuring options: 1: Safeguard, 2: Accelerated Financial Safeguard (applies only to “financial creditors” (i.e. those having extended credit to the debtor, including bondholders, other than suppliers); 3: Judicial Reorganization; and 4: Judicial Liquidation

Spanish Insolvency Act (Ley Concursal)

Purpose of Insolvency Regime Rehabilitation or liquidation Rehabilitation and/or liquidation.

Specialized Court for Hearing InsolvencyProceedings

Bankruptcy court with specialized judges of the commercial court Commercial Courts

Party that Initiates Insolvency Proceedings (Voluntary or Involuntary)

Debtor for voluntary proceedings and the bankruptcy court, creditors or public prosecutor for involuntary proceedings.

Debtor or creditor;Broadly, voluntary if initiated by the debtor and involuntary if initiated by a creditor.

Conditions to Initiation of Insolvency Proceedings

Safeguard (“Sauvegarde”) proceedings: the debtor is not insolvent and faces difficulties which he cannot overcome. Accelerated financial Safeguard: a debtor must (i) have a minimum revenue of € 20 million, (ii) employ 150 employees minimum, (iii) have a balance sheet of € 25 million minimum or (iv) a balance sheet of €10 million minimum if it controls a company meeting one of the criteria mentioned in (i) through (iii) above). A debtor must also not be insolvent and have prepared a plan for the continued operation of the business as a going concern which is likely to receive the support of at least 2/3 of its financial creditors (bank and bond debt within a maximum of 2 months).Judicial reorganization proceedings: the debtor must be insolvent and be seeking preservation of thebusiness as a going concern in order to safeguard jobs and discharge liabilities.Judicial liquidation: the debtor must be insolvent and rehabilitation of the company must be impossible.

The debtor must be insolvent.

Conditions that Require the Initiation of Insolvency Proceedings

Insolvency of the debtor. Management is required to file within 45 days of insolvency and is liable forany increase in ultimately unpaid liabilities resulting from failure to comply with that deadline.

Imminent or actual insolvency.

Definition of Insolvency The debtor is unable to meet its liabilities that are due and payable from its cash (or cash equivalent)assets.

Inability for the debtor to regularly meet its payment obligations upon their maturity

Management Preserved During Proceedings and its Role

n Safeguard and Accelerated Financial Safeguard proceedings, management remains in place with ajudicial administrator that supervises or is co-responsible for management.In Judicial Reorganization proceedings, management may remain in place with the addition of a judicialadministrator that is appointed that is co-responsible for management and may also replacemanagement.

In the case of voluntary insolvency proceedings, the debtor maintains the managing faculties under the supervision of an appointed receiver (administrador concursal).In the case of an involuntary insolvency proceeding, the receiver will fully manage the debtor’s assets and activities.

Feb-15 3Source: Latham & Watkins. 2014


France Spain




Appointment of an Insolvency Administrator or Other Similar Entity

In Judicial Liquidation proceedings, the judicial liquidator replaces management.In Safeguard, Accelerated Financial Safeguard and Judicial Reorganization proceedings, managementhas a role in the preparation of the plan that will be submitted to creditor approval.

Potential for Criminal Liability for Management for Failure to Initiate Insolvency Proceedings, Wrongful Trading Activity or Otherwise

No criminal liability for failure to initiate insolvency proceedings. Criminal liability for continuing to tradewhile insolvent provided there is evidence of intentional wrongdoing (examples of intentionalwrongdoing include misuse or misappropriation of corporate assets or an attempt to avoid/delay theproceeding by using ruinous means to procure funds). There is also a potential for criminal liabilityonce the proceedings are initiated for a violation of certain essential rules including, among others,payment violating the automatic stay or the terms of payment decreed by the plan.

There are no special criminal liabilities for debtor’s management included in the Spanish Insolvency Act. The Spanish Criminal Code, however, provides for criminal liability for management under certain causes, such us if insolvency is created or worsened by the conduct of management.

Moratorium or Automatic Stay Yes. In Accelerated Financial Safeguard proceedings, however, the automatic stay only applies to financial creditors.

Yes, but only secured creditors are barred from enforcing their rights through the judicial proceeding and such restrictions are only in place until either (1) a restructuring plan that does not impact the rights of the secured creditor has been approved or (2) one year has elapsed from the initiation of the bankruptcy proceedings.Unsecured creditors, however, may seek to enforce their rights during the proceedings if such creditors initiated such enforcement action prior to the initiation of the bankruptcy proceedings.

Input of Creditors in the Development of the Restructuring Plan

All types of French insolvency proceedings (Safeguard, Accelerated Financial Safeguard and Judicial Reorganization) with the exception of Judicial Liquidation allow for the input of creditors in the development of the any restructuring plan. Creditor involvement may be limited, however, based on the size of the company, whether measured by revenue or number of employees.Any financial creditor or major supplier (a supplier holding a claim greater than or equal to 3% of all claims held by all suppliers) may propose a restructuring plan, but the plan on which the creditors vote is ultimately determined by the debtor and/or the judicial administrator.

Creditors holding at least one-fifth of total claims may submit a restructuring plan.

Availability of Substantive Consolidation Only with respect to entities that are not genuine (i.e. are fictitious) or the assets and liabilities of which are commingled to the point of being undistinguishable.

N/A



France Spain




Creditors Entitled to Vote to Accept or Reject Restructuring Plan and AssociatedDocuments and Associated Voting Thresholds

The French regime provides for the formation of up to three “committees” of creditors for a particular insolvency proceeding, though whether and which committees will be established depend, potentially, on the size of the debtor’s business and on the type of proceeding.The three committees include:1. the committee of credit institutions, including all entities having extended credit to the debtor except suppliers and bondholders;2. the committee of major suppliers; and3. the committee of bondholders, including holders of all bonds/notes irrespective of the currency, place of issue, governing law, listing or number.Accelerated Financial Safeguard proceedings will only have the first and third committees established, and there will be no committee of major suppliers.Creditors then vote to approve or reject of a proposed restructuring plan with their committees, and a committee will approve a restructuring plan with the vote of 2/3 majority in value of debt represented by the committee that also vote.

Creditors are generally entitled to vote during a meeting of the creditors, although creditors holding subordinated claims may not be entitled to vote.The vote of 50% of all creditors, with the exception of subordinated creditors, is required to approve the restructuring plan.

Equity Holders Entitled to Vote to Accept or Reject Restructuring Plan and Associated Documents and Associated Voting Thresholds

No, with the exception of restructuring plans that contemplate a debt for equity swap. In that case, the voting threshold will depend on the debtor’s organizational documents, but the approval of 2/3 of equity attending or represented at the general shareholders meeting is generally required.

No

Division or Composition of Classes of Creditors and Equity Holders Entitled to Vote

See above Creditors are classified as follows:• Special privileged creditors (such as holders of claims based on “debts of the insolvency estate” (as further discussed below), holders of secured debt claims, lessors, or holders of claims based on status as a co-party to an instalment sale agreement);• General privileged creditors (such as holders of wage claims, tax claims or claims for social security);• Ordinary creditors;• Subordinated creditors (such as holders of contractually subordinated claims (other than secured debt) and other types of claims); and• Deeply subordinated creditors (such as holders of claw-back claims).Subordinated creditors and deeply subordinated creditors are not entitled to vote.



France Spain




Absolute Consensus Required No, see above No

Cram Down Yes, in the sense that creditors who vote to reject a proposed plan will be forced to accept if 2/3 majority of their respective committee vote to accept the plan.The approval of a restructuring plan by one committee cannot cram down the proposed restructuring plan on either (1) another committee that votes to reject it or (2) equity in the context of a plan that contemplates a debt for equity swap.`

Yes, because a restructuring plan may be approved with consent of 50% of all creditors entitled to vote.A post-petition refinancing arrangement may also be “crammed down” on disapproving creditors, if 75% of the current creditors holding claims based on prepetition financing approve of the refinancing arrangement.

Creditors with Statutory Priority with Potential to Impair Secured Creditors (taxes, employees, fees, etc.)

In a case where the debtor will exit and be reorganized as a going-concern, there is no statutory priority structure as creditors recover as set forth in the restructuring plan. In a liquidation case, however, bankruptcy administrative expenses and certain amounts owed to employees will impair secured creditors.

Yes, claims based on “debts of the insolvency estate” will take statutory priority over other claims asserted in the bankruptcy proceeding.Debts of the insolvency estate generally include, among others, claims originating due to or during the pendency of the insolvency proceedings (e.g., judicial expenses, loan agreements that are reinstated by the court, debts arising from the continuation of the debtor’s business) and wage claims for the 30 days immediately preceding the insolvency filing.

Minimum Protections for Creditors that Vote to Reject the Proposed Restructuring Plan Other Factors that May Impact Creditor Recoveries

The court must only satisfy itself that “the interests of all creditors are sufficiently protected” provided there a 2/3 majority approves the plan. If the business is sold in a Judicial Liquidation or in a Judicial Reorganization, a portion of the sale price is set aside to satisfy the claims of secured creditors whose security interest does not include a right to withhold legal title to the assets until the creditor’s claim is satisfied in full. In practice that portion may be far less than the secured creditors’ claim.

Special privileged creditors are not bound by the terms of a restructuring plan if they vote to reject the plan.

Ability of Debtor to Obtain New Debt During Insolvency Proceedings and Priming Liens

Yes, but the ranking of this post-petition financing is junior to the claims of employees, administrative expenses and to prior secured creditors in the event of subsequent Judicial Liquidation proceedings.

Yes, provided certain requirements are met:• the refinancing must be approved by creditors representing at least 3/5 of the claims asserted in the cases;• the refinancing agreement has to be memorialized in a public document; and• there must be issued a third-party independent expert report in support of the refinancing.Fifty percent of the post-petition financing will qualify for superiority status and will not be subject to the restructuring plan.



France Spain




Limitations on the Transfer of Claims During Insolvency Proceedings

No, but a claims transfer must be formally submitted and noticed to the judicial administrator in order for the creditor to be entitled to vote in Safeguard, Accelerated Financial Safeguard and Judicial Reorganization proceedings.

The claims transferred during the insolvency process lose their voting rights.

Private Proceedings No No (judicial proceeding either for the restructuring or the liquidation processes).

Fixed Deadline to Approve a Restructuring Plan or Other Deal, and Implications of Missing this Deadline

In Safeguard and Judicial Reorganization, a restructuring plan must be approved with 6 months of the commencement of the proceedings. If a restructuring plan is not approved by all three types of committees by that time, the debtor will be required to separately negotiate treatment of claims with each creditor. With respect to those creditors with whom a negotiated settlement cannot be reached, the bankruptcy court will have the authority to impose the same period of a maximum of 10 years by which the debtor must satisfy the claims asserted against it with such claims being repaid in full (including principal and interest, where applicable).In Accelerated Financial Safeguard proceedings, the plan must be approved within 2 months of commencement of the proceedings. If the debtor fails to have a restructuring plan approved during that period, the bankruptcy court will terminate the proceedings.

Generally, 2-3 months depending on the specific procedure, but such estimate is subject to wide variations.

Timing Safeguard and Judicial Reorganization proceeding: 8 months maximum.Accelerated Financial Safeguard Proceedings 2 months maximum.No max time limit for Judicial Liquidation proceedings.

6-12 months subject to circumstances that can extend such process up to one or several years.



Germany


“Ordinary” Insolvency Proceedings Insolvency Plan Proceedings, Sec. 217 InsO Self-Administration, Sec. 270a InsO. “Ordinary” Self-Administration

Protective Shield Proceedings, Sec. 270b InsO. Preparation for Reorganisation (Chapter 11 like “Schutzschirmverfahren”), Sec. 270b InsO

Purpose of Insolvency Regime

Collective satisfaction of the claims of the creditors by liquidation or rehabilitation.

Collective satisfaction of the claims of the creditors by means of an insolvency plan. This process provides more leeway and often aims at restructuring the business.

Collective satisfaction of the claims of the creditors by means of self-administration of the restructuring process.

Gives a debtor the chance to prepare an insolvency plan, with the assistance of creditors and a preliminary custodian (referred to as vorläufigerSachwalter) prior to occurrence of illiquidity (akin to a pre-pack).

Specialized Court for Hearing InsolvencyProceedings

Bankruptcy Court

Party that InitiatesInsolvency Proceedings (Voluntary or Involuntary)

Debtor or creditor(s) Debtor or creditor(s) initiate insolvency proceedings, insolvency administrator or the debtor applies an insolvency plan.

Debtor or creditor(s) initiate insolvency proceedings and the debtor applies for self-administration.

A debtor applies for protective shield proceedings prior to occurrence of illiquidity.

Conditions to Initiation of Insolvency Proceedings

Illiquidity, Sec. 17 InsO, and/orImminent illiquidity, Sec. 18 InsO, and/orOver-indebtedness, Sec. 19 InsO.

Illiquidity, Sec. 17 InsO, and/orImminent illiquidity, Sec. 18 InsO, and/orOver-indebtedness, Sec. 19 InsO, andApplication for insolvency plan.

Illiquidity, Sec. 17 InsO, and/orImminent illiquidity, Sec. 18 InsO, and/orOver-indebtedness, Sec. 19 InsO, andApplication for self-administration.

Imminent illiquidity, Sec. 18 InsO, and/orOver-indebtedness, Sec. 19 InsO, andApplication for self-administration, andCertification according to Sec. 270b InsO.



Germany





Illiquidity, Sec. 17 InsO.Over-indebtedness, Sec. 19 InsO.In case of illiquidity or over-indebtedness, management must file within three weeks (and during that period, management must take steps to overcome the financial crisis).Management is entitled, but not required, to file in the context of imminent illiquidity.

Definition of Insolvency

Illiquidity: debtor is not able to honor its payment obligations as they come due (three weeks cash forecast: debtor is unable to pay at least 90% of the debt which is due or which will become due within the next three weeks with current funds).Imminent illiquidity: predominantly likely that debtor cannot honor its payment obligations as they come due (1 to 2 year forecast).Over-indebtedness: Existence of financial over-indebtedness (not identical to balance sheet over-indebtedness) and lack of a going concern-prognosis.

Management Preserved During Proceedings and its Role;Appointment of an Insolvency Administrator or Other Similar Entity

No, an insolvency administrator is appointed who takes over management responsibility.

In the case of an ordinary insolvency proceeding, an administrator is appointed. In the case of self-administration, management is preserved and, instead of an administrator, a custodian (Sachwalter) is appointed to supervise management.

Yes, but management remains under supervision of the custodian (Sachwalter).

Yes, but management remains under supervision of the preliminary custodian (vorläufiger Sachwalter).


Potential criminal liability for management if management violates obligation to file the case within a maximum of three weeks of illiquidity or over-indebtedness, Sec. 15a InsOPotential criminal liability for management and employees for certain conduct when the debtor is or is near a state of insolvency, such as violation of book-keeping duties, extending unlawful benefits to creditors or debtors or unlawful disposition of assets, Sec. 283 et seqq. StGB.



Germany




Moratorium or Automatic Stay

Upon filing for insolvency, the bankruptcy court will order a stay. There is no statutory limitation on the length of the stay.The automatic stay covers (a) all enforcement action by unsecured creditors and (b) enforcement action by secured creditors with respect to assignment of receivables and the transfer of security interests in equipment and inventory. The stay does not cover a secured creditor’s enforcement action with respect to share pledges or real estate mortgage enforcement action. The automatic stay can be extended to cover such enforcement action by secured creditors, however, provided the debtor can persuade the court that such enforcement action by secured creditors will impact the ongoing business of the insolvent entity.

Upon filing for protective shield proceedings, the bankruptcy court will most probably order a stay, and is obliged to order one – in each case for up to 3 months – if the Debtor applies for it.The automatic stay covers (a) all enforcement action by unsecured creditors and (b) enforcement action by secured creditors with respect to assignment of receivables and the transfer of security interests in equipment and inventory. The stay does not cover a secured creditor’s enforcement action with respect to share pledges or real estate mortgage enforcement action. The automatic stay can be extended to cover such enforcement action by secured creditors, however, provided the debtor can persuade the court that such enforcement action by secured creditors will impact the ongoing business of the insolvent entity.

N/A N/A


Limited influence.Informal influence of significant creditors through discussions with insolvency administrator and most administrators will consider input by creditors.Formal influence through (Preliminary and Regular) the formation of a creditors’ committee and meeting.Preliminarily, a creditors’ committee may suggest the appointment of an administrator and supervise an appointed administrator.Creditors may decide, at a meeting, whether to pursue liquidation or continuation of business and, if applicable, the nature and substance of the insolvency plan.

Major informal and formal influence.Informal and early input by creditors is necessary for successful adoption of the insolvency plan.Approval of the insolvency plan requires consent the creditor classes.

Major informal and formal influence.Self-administration rarely successful without close co-operation between the debtor, any custodian and the creditors.The creditors’ committee must formally consent to an insolvency plan, to the sale of the businesses or any other fundamental transactions in the proceedings. The creditors’ committee can request the revocation of self-administration proceedings by a majority vote.

Major informal and formal influence.Self-administration rarely successful without close co-operation between the debtor, any custodian and the creditors.The creditors’ committee must formally consent to an insolvency plan, to the sale of the businesses or any other fundamental transactions in the proceedings. The creditors’ committee can request the revocation of self-administration proceedings by a majority vote.



Germany




Availability of SubstantiveConsolidation

No N/A N/A N/A

Creditors Entitled to Vote to Accept or Reject Restructuring Plan and Associated Documents and Associated Voting Thresholds

A simple majority of the sum of the creditors’ claims is required to approve the plan to restructure or to liquidate.

Creditors vote on a proposal prepared by Debtor or insolvency administrator, divided into classes.Adoption of plan requires at least a majority in number and amounts of the creditors in at least a majority of the classes.

Not applicable.If insolvency plan is proposed during self-administration, see corresponding column.

N/A


No Only as one of several classes entitled to vote. The voting threshold is a combined headcount majority as well as ownership-percentage majority of the equity holders attending the meeting.

Self-administration proceedings may be opened either in form of regular proceedings or insolvency plan proceedings – see respective column for corresponding information.

N/A



Germany





N/A Classes of creditors are formed based on shared legal position and similar economic interests.Standard classes:- Secured Creditors- Unsecured Creditors- Subordinated Creditors- Shareholders (in case of debt-equity-swap).Additional classes can include:- Suppliers- Employment Agency- Pension Fund- Splitting of Secured Creditors if different economic interests.

N/A N/A

Absolute Consensus Required

N/A No, adoption of a restructuring plan requires at least a majority in number and amounts of the creditors in at least a majority of the classes of creditors.

N/A N/A



Germany




Cram Down No Classes of creditors and classes of equity holders can be crammed down under certain conditions, Sec. 245 InsO.Dissenting creditors and equity holders will be deemed to have consented if the provision for their recovery under the insolvency plan is (i) not worse than their recovery without the insolvency plan (liquidation or ordinary insolvency proceedings) and (ii) fair and adequate compared to the recovery of other creditors.

Only if self-administration proceedings are opened as insolvency plan proceedings – see corresponding column.

N/A


Preferential status granted for (i) court fees, remuneration and expenses of preliminary and regular insolvency administrator and members of creditors’ committee and(ii) all debts created by activities of the insolvency administrator or by the way of administering the insolvency estate.

See corresponding column for regular insolvency proceedings.

See corresponding column for regular insolvency proceedings, substituting custodian for insolvency administrator.

See corresponding column for self-administration proceedings.

Minimum Protections for Creditors that Vote to Reject the Proposed Restructuring Plan

N/A In addition to the conditions for cram down, dissenting creditors may request that the insolvency plan not be approved and be heard by the bankruptcy court prior to the approval of the insolvency plan. The bankruptcy court will analyze if conditions of a cram down are met or otherwise.

N/A N/A



Germany




Ability of Debtor to Obtain New Debt During Insolvency Proceeding and Priming Liens

Yes, but practical reasons limit availability. Special loan agreements (Massekredit), similar to DIP financing, may be entered into by the insolvency administrator, debtor or custodian (often with consent of the creditors’ committee), but some investors or banks may not be willing to provide this kind of financing, especially considering the postpetition lender will not be granted a superpriority lien over existing security interests.

N/A N/A N/A

Limitation on the Transfer of Claims During Insolvency Proceedings

No

Private Proceeding No. Under supervision by Bankruptcy Court



Germany




Fixed Deadline to Approve a Restructuring Plan or Other Deal, and Implications of Missing this Deadline

No Statutory Deadline N/A N/A N/A

Timing Several Years At least ~3-6 months, with variation depending on complexity and if pre-pack has been agreed.

At least ~3-6 months, with variation depending on complexity of cases.

Up to 3 months only, then opening of “regular” self-administration proceedings.



Italy United Kingdom


Article 67 and Restructuring Plan

Article 182-bis and Restructuring Agreement

Article 160 and Pre-bankruptcy Agreement

Administration under Insolvency Act 1986and Insolvency Rule 1986

Liquidation under Insolvency Act 1986 and Insolvency Rules 1986

Company Voluntary Arrangement under Insolvency Act 1986 and Insolvency Rules 1986

Scheme of Arrangement under Companies Act 2006

Receivership/ Administrative Receivership under Insolvency Act 1986 and Insolvency Rules 1986 and under specific agreement which permits the appointment of a receiver.

Purpose of Insolvency Regime Rehabilitation Rehabilitation and/or liquidation

Rehabilitation and/or liquidation

3 cascading purposes: (1) save company as a going concern; (2) achieve a better result than if company were wound up; and (3) realize property to make distribution to one or more creditors.

Company dissolution procedure. Assets are realized and distributed to creditors.

Company compromises or enters other arrangement with creditors under the supervision of an insolvency practitioner. Only binds unsecured creditors not secured or preferential creditors unless they agree to be bound.

Court sanctions a compromise or arrangement which has been agreed by the relevant class of creditors or members. This is not an insolvency procedure but is commonly used by companies in financial distress.

Purpose of receivership is to enforce security/realize assets over which receiver is appointed to discharge the debt owed to the appointer.

Specialized Court for Hearing Insolvency Proceedings

Not Applicable Bankruptcy Court. Bankruptcy Court. No No No No No

Party that Initiates Insolvency Proceedings

Debtor Debtor Debtor Debtor or Creditor(s) Company is unable to pay its debts or the court considers it just and equitable to wind up company. Solvent company may also enter liquidation.

No particular trigger, although used when company is nearing insolvency to restructure.


Trigger event in agreement permitting appointment of receiver should have occurred.








Administration under Insolvency Act 1986 and Insolvency Rule 1986






N/A N/A N/A Debtor or Creditor(s) Company is unable to pay its debts or the court considers it just and equitable to wind up company. Solvent company may also enter liquidation.



Trigger event in agreement permitting appointment of receiver should have occurred.

Definition of Insolvency Recoverable crisis (squilibrio).

Debtor in distress (statodi crisi) or insolvent.Insolvency as incapacity of the debtor to regularly pay out his debt when due.

Debtor in distress (statodi crisi) or insolvent.Insolvency as incapacity of the debtor to regularly pay out his debt when due.

Inability to pay debts is ascertained by two different tests:Cash Flow test: can company pay its debt as they fall due, if not company is insolvent regardless of whether assets exceed liabilities on balance sheet.Balance Sheet test: Company deemed insolvent if liabilities (taking into account contingent and prospective liabilities) exceed assets.

No insolvency required.



N/A













Management Preserved during Proceedings and Its Role

Appointment of an Insolvency Administrator or Other Similar Entity

Yes Yes Yes, with the supervision of Court appointed officerExtraordinary acts need judge’s prior approval.

An administrator is appointed to the company. Although directors remain in place they cannot exercise power that might interfere with an administrator and have a duty to cooperate with the administrator.

A liquidator is appointed and replaces the directors.

A nominee is appointed to make the CVA proposal and then a supervisor is appointed to implement proposal. These may be the same person. During process management remain in place.

Management is preserved.

An administrative receiver has the power to carry on business and whilst in office management’s powers are suspended.


Potential criminal liability for management under Article 223 (bancarottafraudolenta), Article 224 (bancarotta semplice) and others.

Potential criminal liability of the Management under Article 223 (bancarottafraudolenta), Article 224 (bancarotta semplice) and others.

Potential criminal liability of the Management under Article 223 (bancarottafraudolenta), Article 224 (bancarotta semplice) and others.

Absent fraud generally directors incur civil liability for offences such as breach of duty and wrongful trading.

N/A N/A N/A N/A













Moratorium or Automatic Stay No 60 days (negotiation phase) + 60 days.The stay is generally referred to as the “Stay of Claims.”

Yes.Under the recently added paragraph 6 to Article 160, a debtor may now seek the protection of the Stay of Claims by filing a notification of the intent to restructure. Under paragraph 6, the Debtor will have 60 to 120 days, with the potential for a further extension of 60 days, to submit additional required documents, but will be able to enjoy the breathing room of the stay at a point earlier in the process.Otherwise, the Stay of Claims is generally in effect from the date of the publication of the petition for approval of the Pre-bankruptcy Agreement in a debtor’s register until the agreement is approved by the court and is no longer subject to appeal.

Yes Yes Only for small companies if it satisfies two of the following three requirements: revenue of not more that £5.6 million; assets of no more than £2.8 million; and less than 50 employees.

No Bi














Each of the separate proceedings under Articles 67, 182 and 160 are led by the debtor and any restructuring plan will likely be negotiated with the creditors, though the extent of the involvement will depend on the Article under which the proceedings were initiated.In certain circumstances, it is also possible for creditors to propose and develop a restructuring plan separate and apart from the debtor.

N/A N/A No statutory requirement, but in practice a creditors committee will be appointed to liaise with administrator and so informally creditors may have input.

Creditors holding at least one-fifth of total claims may submit a restructuring plan.

No statutory requirement but in practice view of creditors may be canvassed informally to ensure proposal is acceptable and minimum voting thresholds will be met.

No statutory requirement but in practice view of creditors may be canvassed informally to ensure proposal is acceptable and minimum voting thresholds will be met.

Primary duty of a receiver is to his appointer to realize the property of the company and repay indebtedness owed to the appointer.

Availability of Substantive Consolidation Yes Yes Yes No No No No No













Creditors Entitled to Vote to Accept or Reject Restructuring Plan and Associated Documents and Associated Voting Thresholds

Not applicable –agreement with affected creditors (to implement the Plan).

Restructuring Agreement to be approved by creditors representing at least 60% of outstanding indebtedness.

Creditors, including those creditors that waived their security interests and under-secured creditors, are entitled to vote.The Bankruptcy Agreement must be approved by a majority of voting creditors from each class of creditors and a majority of each class must vote to approve the Agreement.

Creditor vote on a proposal prepared by the administrator. Proposal may be accepted with or without modification. 50% of creditors present and voting must pass proposal. If proposal is voted down then administrator must return to court and seek directions.

No Yes. Proposal must be passed by 75% in value of creditors present and voting and 50% in value of creditors that are unconnected with company.

Yes. 75% in value of creditors present and voting and a majority in number must pass the scheme in each class.

No proposal although an administrative receiver is required to update unsecured creditor who may also form a committee.


N/A N/A N/A No Only in a solvent liquidation.

Shareholder can approve proposal by simple majority in value, although if they do not pass the proposal but creditor do, the CVA will still be implemented.

Equity would only vote in a scheme if their rights were being compromised. Not very common in restructuring schemes of arrangement.

No














Chance to create classes of creditors (based on the nature of claims) to differentiate treatment.



No class. N/A No class issues as typically only unsecured creditors vote on CVA and unless they are being treated differently they will be deemed the same class.

The class must be confined to those persons whose rights are not so dissimilar as to make it impossible for them to consult together with a view to their common interest. Class composition is of vital important since each class must pass the scheme.Creditors/Lenders should not unnecessarily be segregated into separate classes as this would effectively give them a veto.

N/A













Absolute Consensus Required Yes (any affected creditor has to consent)

Yes (Restructuring Agreement to be approved by creditors representing at least 60% of outstanding indebtedness.Non consenting or non-participating creditors to be satisfied in full).

No No N/A No No N/A

Cram Down No No Yes, a Bankruptcy Agreement can be approved over the dissent of a class if the reviewing court finds that the dissenting creditors have an opportunity under the Bankruptcy Agreement to have their associated claims satisfied or that there are no better chances for satisfaction outside of the Bankruptcy Agreement.

Yes N/A Yes Yes N/A














Yes, certain claims, such as claims for procedural expenses, certain taxes, and employee wages and benefits, may be given priority status.



Very limited preferential creditors (unpaid wages to £800 and certain liabilities related to occupational pension schemes) are paid after fixed charge holders but prior to floating charge holders. Also note that an amount is set aside from funds owed to floating charge holders for payment to unsecured creditors known as the prescribed part being the 50% of the first £10,000 net realization from floating charge property and the 20% thereafter to a maximum of £600,000. Crown preference for taxes has been abolished.

Secured creditors and preferential creditors cannot be bound by a CVA unless they agree to it. No cram down available in this respect.

N/A Not applicable to fixed charge receiver. Administrative receiver must pay preferential creditors and set aside funds for the prescribed part from floating charge realizations.

N/A













Minimum Protections for Creditors that Vote to Reject the Proposed Restructuring Plan

Yes, including that classes of creditors may not be crammed down.

Yes, including that classes of creditors may not be crammed down.

Creditors that vote to reject a restructuring plan that are a part of a dissenting class may be granted certain protections.

N/A N/A N/A N/A N/A

Ability of Debtor to Obtain New Debt During Insolvency Proceeding and Priming Liens

Yes, and a DIP lender may be given a super priority lien provided the lien does not prejudice the holders of prepetition claims.



Will depend on circumstances and whether permitted by existing facilities/creditors. No “DIP” financing market.

No since it is a wind down not a rescue procedure.

Will depend on circumstances and whether permitted by existing facilities/creditors. No “DIP” financing market.

N/A N/A













Limitation on the Transfer of Claims During Insolvency Proceedings

No No No No moratorium on trading, although insolvency officeholder or relevant person in charge of process may as a matter of process seek to fix a date for creditors’ register or refuse to recognize transfers after a certain date to enable voting or payment of claims. The onus would shifts to the transferor who would need to ensure the transferee receives the appropriate information/distribution.

N/A N/A N/A N/A













Private Proceeding Yes, Plan to be acknowledgedby independent expert.

No (needs Court’s approval (omologa)).

No (judicial proceeding). Largely private, even where court appointed since majority of proceeding will be out of court. Court directions may be sought.

Largely out of court process. Although court directions may be sought.

Out of court process.

Two court hearings required, one to call meeting of creditors and another to sanction scheme.

Out of court process.


28




Feb-15

Real Estate Foreclose Times across Europe

29

Country Foreclosure Process

France• Foreclosure, 50% more than 1 year, 33% more than 2 years• Creditor must have court decision to seize property

Germany • 1 – 2 year recovery period

Ireland• Period of beginning of arrears status to forced sale no longer than 18 months• Presentation of civil bill, notice of trial/court hearing, order for repossession, execution order, repossession by

country sheriff

Italy • Lengthy court process with a period of as long as 8 years from time of default to recovery

Netherlands • Foreclosure process usually within three months

Spain• Regulated, new laws reduces number of required auctions from 3 to 1 to speed up process• However, foreclosure or auctions is rare, normal course of action renegotiation of rate or term of debt• Typically three years to foreclosure

UK• Legal repossessions process commences, with court order required and lasts 12 months, on average • Eviction and sale in open market• No government mandated auction system

Source: Merrill LynchFeb-15

30




Feb-15

Overview of Lease Structures across Europe

France Germany Italy Netherlands Spain UK

Rent Payable every:

Quarter Month Quarter Quarter Month Quarter

Typical Lease Length

3 / 6 / 9 years or fixed term of 6, 9

5 + 5 years 6 + 6 years 5 Years 3 – 5 years 5 – 15 years

Statutory right to renew lease

Yes No Yes No Yes Yes

Frequency of rent reviews

None Rare

Not possible after first 6 years. Free negotiation at the end of 12 years

By agreement 3 – 5 years5 Years (upwards only)

Frequency and basis of indexation of rent

Annual by agreement based on INSEE cost of Construction Index

Annual. Indexation based on CPI

Annual (75% of Italian ConsumerPrice Index)

Annual (based on CPI)

Annual (based on CPI)

Annual RPI linkeduplift (not applicable to all leases)

Lease disposal –Early terminating rights

Via break clause onlyVia break clause only (penalty is to be paid)

Via break clause only Via break clause only Via break clause only Via break clause only

Feb-15 31Source: DTZ Research 2014

Overview of Lease Structures across Europe

France Germany Italy Spain Netherlands UK

Rents – ExclusionsService charge,utilities, parking

Service charge,parking, VAT, utilities

Service charge, utilities

Service charge,utilities, property tax

Service charge, VAT, fit-out

Service charge, utilities, taxes

Letting Agent’s Fees (as % of first year’s rent)

15% – 30% 20% - 25% 10% – 15%8.5% – 10% (typically paid by landlord)

14% – 16% 10%

Local tax (as % of annual rent)

Property tax (varies between type of premise). Additional tax in the Greater Paris region (“taxebureaux”)

Property tax (variable), typically included in service charge

A nominal sum to be defined in each case

Property tax (landlord obligation but typically passed onto tenant)

Property tax called OZB (varies between locations)

Business Rates (variable – not standardised and subject to discounts for quantum)

VAT (as % of annual rent)

20%19% (where parties opt to tax)

22% where applicable 21%21% (where parties opt to tax)

20% (where landlord opts to tax)

Restriction on ownership of property by foreigners

No No No No No No

Feb-15 32Source: DTZ Research 2014