Why is it essential to seek out experienced legal counsel for this? As relayed above, there are very large discrepancies in terms of the recognition of pre-insolvency proceedings initiated in the UK across Europe and within EU Member States. What makes the difference in complex restructuring cases is not only a dedicated team and international restructuring experience but also being familiar with the UK and US regimes and concepts so the best solutions can be found. The advice required depends on the type of financing involved, i.e. a bonds transaction (where there is actually another potential grounds for justifying a creditor cramdown – if recognition is actually sought in Luxembourg – through Article 470-13 of Luxembourg Companies law) or a credit financing as briefly demonstrated above, which means that legal counsel with experience is needed in this area. This is even more necessary in Luxembourg; given the lack of clarity surrounding this area of law, this is absolutely essential at present. Why is a multidisciplinary team ideal for these situations? Given that most large-sized multijurisdictional debt restructurings entail many different layers of debt, often both loan and bond debt, it is key to have a multidisciplinary team that is familiar with corporate, lending and bonds aspects as well as with restructuring proceedings, mechanics and tools. For us, one of the main added value to our cross-practice restructuring team is also that many of our people have UK or US legal background or training and are thus familiar with both civil law and common law concepts and legal mindsets. In addition, any complex restructuring requires a team comprising corporate, finance, tax and litigation experts to ensure that all aspects are catered for. During your collective time in practice, what changes have you observed in the way that financial restructuring is undertaken? We see more litigious cases now that funds tend to be on the sponsor and lender side. There are also more widespread alternatives where not just the UK or the US is driving the restructuring process but other jurisdictions might be key as well, or a local restructuring process may even be needed to ensure the key assets are secured. We have also noted a US influence on the parties and structures now that, in the last decade, more US funds have invested in Europe and some US firms have beefed up their European (or at least London) presence. 1Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings (recast), as amended, Annex A. 2Re Gategroup Guarantee Limited [2021] EWHC 304 (Ch) 3For example, Spain, as per Book II of the CIL and Germany under the German Corporate Stabilisation and Restructuring Act, which was modelled on the English Scheme of arrangement and allows for both horizontal and vertical cramdown of dissenting creditors. 4It is also worth noting that this procedure can only be initiated if the place of central administration is in Luxembourg, i.e. no consideration of creditor cramdown of a Luxembourg company’s creditors following a COMI shift. 5Re DTEK Energy B.V. & anr [2021] EWHC 1456 (Ch) (convening); [2021] EWHC 1551 (Ch) (sanction). Be sure to also check out this article on the Lawyer Monthly website, where a range of useful sources are available. EXPERT INSIGHT 37 Michael Scott Michael Scott, partner, is a member of the dedicated Corporate Restructuring Team in Loyens & Loeff’s Luxembourg office and co-heads the overall Luxembourg Restructuring practice. He focuses on complex cross-border distressed debt restructurings for noteholder groups and multinational companies. He mainly advises US and UK based clients with investments in Luxembourg entities owning target groups in EU jurisdictions. Anne-Marie Nicolas Anne-Marie Nicolas, partner, heads Loyens & Loeff’s Luxembourg Banking & Finance practice and co-heads its Luxembourg Restructuring practice. Anne-Marie focuses on secured lending, including acquisition finance and real estate as well as distressed financings, security enforcements and debt restructurings. Véronique Hoffeld Véronique Hoffeld, partner, is a member of the Executive Committee of Loyens & Loeff Luxembourg and heads the Litigation & Risk Management Practice Group of its Luxembourg office. She focuses on commercial law, financial litigation and international arbitration. She is also recognised for her contentious insolvency prowess. Patrick Ferguson Patrick Ferguson, associate, is a member of the Banking and Finance practice group in Loyens & Loeff’s Luxembourg office. Patrick specialises in banking and finance law and acts for private equity firms, financial institutions and investors in various types of cross-border finance transactions, including secured lending, acquisition finance, refinancings and restructuring. Loyens & Loeff is a leading full-service European law firm with home markets in Luxembourg, Belgium, Switzerland and the Netherlands which specialises in legal and tax matters. From its Benelux and Switzerland offices and in key financial centres around the world, its 1,000 advisers are well-prepared to advise on a broad range of issues including in or out-of-court restructurings, pre-insolvency issues, security enforcements, cross-border insolvencies, corporate governance, financing and rescheduling, distressed acquisitions and sales, distressed debt trading and investments, as well as crisis management and debt restructuring.
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