Lawyer Monthly - February 2023

all of our partners have many years of experience in big law firms, restructuring consultancies or management roles. In addition, we have a strong focus on finance and restructuring cases, combining expertise, experience and a hands-onapproach with in-depth market knowledge. Our lawyers usually know the advisors and market standards and can thus get straight to the points that matter. All lawyers have international experience and we regularly advice on cross-border financing and restructuring cases. Besides legal expertise and market knowledge, our experience in working with or in financial advisory firms as well as management experience helps us to identify the client’s commercial interest and put it in the centre of our advice. This helps us to better understand the client and find a solution that helps them not only legally but also commercially. Finally, communicational and project management skills are very important when there are many different stakeholders with different interests who need to be all taken into consideration when negotiating a solution. What does the successful restructuring of the bond mean for Metalcorp’s investors? First, it means that an otherwise almost certain insolvency of Metalcorp Group was avoided and the chances for a full recovery increased significantly. The negotiations did not only preserve the rights of the bondholders, but they resulted in a significant improvement of the bondholders’ position through mandatory partial repayments, participation in collateral, new security mechanisms, an interest step-up of 1,5% and a participation fee of 0.5% of their respective bond volume for participating bondholders. The negotiated down payments and additional fees and interest rate mean a significant de-risk and better commercial terms all bondholders. The approval rate of 99,77% for the restructuring proposal – and even 100% for DMR overseeing the further developments as a joint representative of the bondholders – shows that true value was generated for everyone. Capital market reaction on the price of the bonds confirmed it. Do you believe that there will be more bond restructurings of this nature in the German market? Yes, we believe that there will a lot more issuers that will have problems with refinancing their bonds or repayments. The capital market is very different today compared to five years ago, which is the usual term for a bond in the German market. As interest rates skyrocket, refinancing becomes more expensive, and – as investors are more conservative with their money – in many cases even impossible. We advised four major bond restructurings in Germany in 2022, including Metalcorp. For 2023 we believe this number will double, as we already see increasing demand for restructuring advice. Soon there will be more clients seeking advice than lawyers with time available to give it. Can you name Industries or companies that are likely to default in the near future? We of course monitor the market closely and have both a longlist and a shortlist of companies who we believe will have problems repaying their debt in the near future. Unfortunately, we cannot give you any names, but industries under pressure – at least in Germany – include the real estate industry, the automotive industry, energy-intensive producing industries and the healthcare industries. In general, all industries where companies face operational issues (energy prices, real estate market stagnation, electronic mobility) in addition to the turned financing market and high interest rates after years of cheap money are likely to have some repayment issues soon. What would you recommend to a company or a creditor that faces liquidity or refinancing problems regarding their bonds? A major problem in refinancing or restructuring cases is that the debtor usually acts to late on the issue. Debtors usually think they will find a solution soon and often start too late with initiating the talks with their creditors. That is usually not a result of bad faith, but managers and CFOs are deep in their daily work and few of them have restructuring experiences. Good advice by lawyers can help to identify options early and take the necessary steps before an event of default has occurred and everyone is limited to trying to fix it instead of actively shaping a solution. Finally, communication and organisational skills are very important as you usually face many different creditors, but also need to talk and negotiate with banks, shareholders, employees, directors and advisors all at the same time. Especially in larger refinancing or restructuring cases, professional advisors on the legal, financial and communicational side help to streamline the process and create value in stressful situations. Does DMR only advise on bond restructurings? No. DMR Legal is a finance and restructuring firm and we advise on all sorts of financing instruments. That includes tradeable instruments such as bonds, German Schuldscheine or certificates, but also ’classic’ term loans, acquisition-/leveraged finance, venture debt and high-yield finance, real estate, project, asset-based finance, digital finance, crowdfunding and crypto finance. We advise creditors and debtors alike and can assist our clients in all kinds of critical situations such as insolvencies, out of court restructurings, self-administration, or restructurings under the new German StaRuG scheme. Our litigation department, specialising in finance and capital market disputes, assists in cases where a solution could not be found. 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