Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Christian Hoenig: Assessing the impact of the legal framework on the Restructuring process: Examples and lessons learned

1,065 views

Published on

• Legal framework slanted in favour of existing equity
• Potential shortfalls for creditors
• Suboptimal allocation of resources
• Strategies for outside bidders and creditors

Published in: Economy & Finance
  • DOWNLOAD FULL BOOKS, INTO AVAILABLE FORMAT ......................................................................................................................... ......................................................................................................................... 1.DOWNLOAD FULL. PDF EBOOK here { https://tinyurl.com/y6a5rkg5 } ......................................................................................................................... 1.DOWNLOAD FULL. EPUB Ebook here { https://tinyurl.com/y6a5rkg5 } ......................................................................................................................... 1.DOWNLOAD FULL. doc Ebook here { https://tinyurl.com/y6a5rkg5 } ......................................................................................................................... 1.DOWNLOAD FULL. PDF EBOOK here { https://tinyurl.com/y6a5rkg5 } ......................................................................................................................... 1.DOWNLOAD FULL. EPUB Ebook here { https://tinyurl.com/y6a5rkg5 } ......................................................................................................................... 1.DOWNLOAD FULL. doc Ebook here { https://tinyurl.com/y6a5rkg5 } ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... .............. Browse by Genre Available eBooks ......................................................................................................................... Art, Biography, Business, Chick Lit, Children's, Christian, Classics, Comics, Contemporary, Cookbooks, Crime, Ebooks, Fantasy, Fiction, Graphic Novels, Historical Fiction, History, Horror, Humor And Comedy, Manga, Memoir, Music, Mystery, Non Fiction, Paranormal, Philosophy, Poetry, Psychology, Religion, Romance, Science, Science Fiction, Self Help, Suspense, Spirituality, Sports, Thriller, Travel, Young Adult,
       Reply 
    Are you sure you want to  Yes  No
    Your message goes here
  • Be the first to like this

Christian Hoenig: Assessing the impact of the legal framework on the Restructuring process: Examples and lessons learned

  1. 1. SCAVENGERS, WHITE KNIGHTS AND OTHER OUTSIDE BIDDERS FOR DEBTOR’S ASSETS – ARE THEY ENJOYING A LEVEL PLAYING FIELD WITH INCUMBENTS? 1
  2. 2. HYPOTHETICAL  Insolvent entity – business continued by Administrator  Current owners are preparing a Plan of Reorganization (“Sanierungsplan”) offering creditors 20%  Outside bidder is interested in purchasing debtor’s enterprise as a whole  If outside bidder was allowed due diligence, its offer would increase the quota creditors receive compared to the pay-out under the Plan of Reorganization  Variant: Plan of Reorganization fails (e.g., due to inability to come up with necessary cash portion). Therefore, current owners attempt a buy- out through a “Auffanggesellschaft” (rescue SPV) which would result in only a 10% quota 2
  3. 3. ISSUES  How can outsider get a reasonable chance to succeed against incumbents? In particular, how can outsider get access to information about target?  What are the risks of allowing outsiders to compete?  What are creditors to do if they whish to trigger competition? 3
  4. 4. AUSTRIA: LAW AND STRUCTURE OF PROCEEDINGS SLANTED IN FAVOUR OF INSIDERS  Exclusivity for debtor to submit Plan of Reorganization  Outside bidder has no access to company information and file of insolvency proceeding • Thus outside bidder may initially only stitch together rough indicative bid (based on industry reports, and past financial statements and, sometimes, own knowledge of sector)  By contrast, management, and Administrator, and often current owners have access to all information and do not need to conduct a due diligence which facilitates Plan of Reorganization or buy-out 4 Statutory Bias
  5. 5. AUSTRIA: LAW AND STRUCTURE OF PROCEEDINGS SLANTED IN FAVOUR OF INSIDERS  Insolvency Administrator • Due to collaboration with debtor’s management often psychological bias in favour of insiders/incumbents • Due diligence risks: outsider obtains valuable information about debtor enterprise and may solicit key employees • Thus risk of liability towards company (creditors) and maybe current owners • Comfort factor: if Administrator refuses due diligence, he has less work (no need to set-up a data room, no need to manage a bidding process). 5 Institutional and Transactional Bias
  6. 6. AUSTRIA: LAW AND STRUCTURE OF PROCEEDINGS SLANTED IN FAVOUR OF INSIDERS • BUT:  Administrator has duty to preserve business and maximize quota for creditors. Hence indicative offer may prompt Administrator to allow due diligence and thus competition  Administrator is bound to inform creditors committee of competing offer(s) 6
  7. 7. AUSTRIA: LAW AND STRUCTURE OF PROCEEDINGS SLANTED IN FAVOUR OF INSIDERS  Creditors’ Committee, Creditor’s Meeting and Court • Oftentimes mere rubber stamp for Administrator’s proposals • Key motivation to side with insiders/incumbents and Administrator is fear of  damage to business (misuse of trade secrets, poaching of key employees)  withdrawal of Plan of Reorganization 7 Institutional and Transactional Bias
  8. 8. AUSTRIA: STRATEGY FOR OUTSIDE BIDDERS AND CREDITORS  Outside Bidders • Send letter indicating interest • Mention potential purchase price along with proof of funds • Ask for due diligence • Offer strict secrecy and non-exploitation terms, ideally with liquidated damages provision • Lobby stakeholders, in particular management, key employees, unions, and creditors (via Administrator, Creditors Committee and Court) by stressing advantages to business and creditors • Always keep cooperation with insiders/incumbents in mind (e.g., participation of one or more current owners in bidding SPV) • Maybe informal inquiries with Court 8
  9. 9. AUSTRIA: STRATEGY FOR OUTSIDE BIDDERS AND CREDITORS  Creditors • Seek potential outside bidders • Give as much information as possible to potential outside bidders to facilitate assessment of target (but keep risks in mind) • Assist outside bidders with their strategies (see points above) • Eventually, request Court to refuse Plan of Reorganization or buy-out by insiders/incumbents 9
  10. 10. OTHER JURISDICTIONS, IN PARTICULAR CEE  Creditors may submit Plan of Reorganization (e.g., Serbia and Poland) • Evaluate possible cooperation with qualified creditor • Evaluate buying claims to be able to submit Plan of Reorganization  Possibility of sale of shares in insolvent entity free of liabilities (e.g., Serbia) • Advantage, e.g., vital contracts stay in place • Precondition is valuation of business resulting in indicator of fair value/price  Creditors Committee unusually weak (e.g., Poland and Bulgaria) • Lobby Court, especially if Administrator is recalcitrant (Poland) • Lobby major creditors with a view to achieve out-of-court settlement (Bulgaria) 10
  11. 11. THANK YOU FOR YOUR ATTENTION RA Dr. Christian Hoenig, LL.M. Schubertring 6 1010 Vienna Austria T +43 1 515 10 5040 christian.hoenig@wolftheiss.com 11

×