2010 | n.1
Newsletter Restructuring ENScarica il pdf
On May 25, 2010 the Italian Cabinet of Ministers approved Law Decree n. 78/2010 containing provisions designed to support stabilization within the financial sector and to promote economic competitiveness (the “Law Decree”). The Law Decree, published on the Official Gazette on May 31, 2010 and effective immediately (however, no longer effective if not converted into law within 60 days), introduces initiatives across a wide range of economic sectors and enacts measures designed to shore up Italy’s economy and foster competiveness through the goal of reducing the ratio between the annual deficit and Italian GDP to below 3% in compliance with the provisions of the Maastricht Treaty.
Article 48 of the Law Decree (Provisions on insolvency proceedings) significantly amends the Royal Decree No. 267 of March 16, 1942 (the “Bankruptcy Law”) providing for, inter alia:
(i) the new Article 182-quater of the Bankruptcy Law which grants super-seniority to loans made by a bank or authorized financial intermediary (A) pursuant to court-ratified pre-insolvency work out agreements with creditors (concordato preventive) or a court–ratified restructuring agreement under Article 182-bis of the Bankruptcy Law (such super-seniority status also applies to up to 80% of the value of shareholders’ loans) or (B) made in view of the filing of a work-out agreement or restructuring agreement for court review, provided that the agreement is subsequently ratified.. These measures provide an important new tool for providing new financing to distressed companies;
(ii) three new paragraphs in Article 182-bis of the Bankruptcy Law, which provide for a stay of action during the work-out or restructuring negotiations. The injunction against enforcement proceedings is issued in advance by the judge following petition by the debtor, including the filing of the relevant documents required under the new criteria. These measures are therefore well suited to facilitate the conclusion of the restructuring agreements, and serve to relieve the debtor company from aggressive creditors acting outside the agreement for the period necessary to conclude restructuring negotiations.
1.New article 182-quater
The Law Decree introduces into Bankruptcy Law new provisions under article 182-quater pursuant to which claims arising under loans that have been granted by banks or financial intermediaries with respect to either the implementation of a court-ratified pre-insolvency workout agreement with creditors (concordato preventivo) or a court-ratified restructuring agreement pursuant to article 182-bis of the Bankruptcy Law are deemed super-senior (prededucibili) under article 111 of the Bankruptcy Law. Under 182-quater, super seniority also applies to claims arising under loans provided by banks and authorized financial intermediaries in anticipation of a filed application for pre-insolvency workout agreement with creditors (concordato preventivo) or the application for the ratification of a restructuring agreement pursuant to article 182-bis, but only if: (i) the loans fall within either the plan underlying the pre-insolvency workout agreement (concordato preventivo) or the restructuring agreement and (ii) the court subsequently ratifies the pre-insolvency workout agreement or the restructuring agreement. Consequently, if the debtor goes into bankruptcy, claims related to such loans have seniority and are repaid out of any proceeds from the liquidation of the bankrupt party’s assets.
It is further provided that super-seniority is granted in claims for repayment of 80% of the value of those shareholder loans that have been granted to the company in implementation of a court-ratified pre-insolvency workout agreement (concordato preventivo) with creditors or a court-ratified restructuring agreements pursuant to article 182-bis of the Bankruptcy Law. The priority granted to such shareholder loans expressly marks a deviation from those provisions of the Italian civil code that provide for the statutory subordination of loans granted to limited liability companies by its shareholders or by entities that exercise direction and coordination activities.
Finally, the new measure grants seniority to claims for payment owed to professionals in charge of the drafting of the report certifying the feasibility of either (i) the plan and the truthfulness of the economic data within the context of a pre-insolvency workout agreement with creditors (concordato preventivo) or (ii) the report on the feasibility of the restructuring agreement and on its suitability in allowing for the regular payment of the creditors not party to the restructuring agreement. The new provision also provides that the claims qualifying as super senior pursuant to article 182-quarter are not to be included in the calculation of the majorities required by Bankruptcy Law for the approval of the pre-insolvency workout agreement (concordato preventivo) or the restructuring agreement.
The fact that the loans meeting the criteria set out above are deemed super senior facilitate and help to ensure the granting of new money in the framework of a pre-insolvency workout agreement with creditors (concordato preventivo) or a restructuring agreement.
2. New provisions introduced in article 182-bis
The second paragraph of article 48 of the Law Decree adds three new paragraphs to article 182-bis of the Bankruptcy Law.
These new provisions provide that the prohibition on commencing or continuing interim or foreclosure proceedings against the debtors’ estate for creditors whose claims arise under a title preceding the filing of the restructuring agreement, for which a sixty day period starting on the date of filing of the restructuring agreement with the competent companies’ register is already provided for, may be requested during the negotiations of the restructuring agreement with creditors, filing with the competent court:
(i)the documents listed under the first and second paragraphs of article 161 of the Bankruptcy Law;
(ii)a restructuring agreement proposal together with a statement by the debtor certifying that at least the 60% of the creditors are negotiating such restructuring agreement proposal;
(iii)a statement by a professional, meeting the requirements provided for by article 67, paragraph 3, letter d) of the Bankruptcy Law, declaring that conditions are in place to assure the regular payment of those creditors either not participating in the negotiation of the restructuring agreement or who have declared their intention not to enter into the restructuring agreement.
These provisions further provide that the court shall, once it has verified the completeness of the documentation filed, provide the creditors with a copy of such documentation and fix a hearing within 30 days from the date of the filing of the application by the petitioner. The court, once it has determined that the requisite conditions exist for the entering into of a restructuring agreement with 60% of the creditors that will also provide for regular payment of the creditors not party to said agreement, shall issue a ruling providing for the injunction against commencing or continuing interim or foreclosure proceedings against the debtors’ estate, providing the debtor with a deadline of sixty days from the issuance of the court’s ruling for the filing of the agreed upon restructuring agreement and the expert’s report regarding its feasibility.
The amendments introduced by the Law Decree in article 182-bis allows the entrepreneur to benefit from the prohibition of interim and foreclosure proceedings before the execution of the restructuring agreement. Such benefit may be particularly useful where the relationship with financial or commercial counterparties is particularly strained due to the financial distress of the company