Bidding Bon Voyage to creditor term-outs - French insolvency primer update
- Chris Haffenden
On 1 October, France adopted new laws on restructuring and insolvency as it applies the EU minimum standards directive. It remains debtor driven and has more court involvement than other jurisdictions, but in many aspects, creditor protections are greatly improved, in what was traditionally seen as a debtor-friendly process. The horror stories experienced by Comexposium and Rallye creditors are unlikely to be repeated under the new legal regime, with the 10-year term out option under Sauvegarde removed.
Other notable features are improved creditor classes, the adoption of cross-class cramdown (with absolute priority protections) and further tweaks to the well-regarded fast-track Sauvegarde acceleree process. There are also changes to the court-supervised conciliation procedure and super-priority protections to new money financing provided during the observation period, allowing DIP financing.
The dreaded 10-year term out is still available if converted into redressement rehabilitation proceedings from Sauvegarde, but this is only to be applied as a last resort, say local lawyers. There is more demarcation between the two processes under the new law, with rehabilitation only available to insolvent companies.
Under the new law, the exclusion of employment claims from being compromised is the main downside, but the shareholder veto on debt/equity swaps has been removed with equity able to be crammed down.
Speaking to local lawyers and referring to their client materials, this article goes into greater detail on the changes and their potential impacts on future deals.
Restructuring market being quiet, and no high profile cases expected before the New Year, we might have to wait a while to find out.