A webinar presented by the IBA Banking Law Committee
The practice of debt enhancement has developed in the last decade in the context of financial restructurings, in favour of providers of new money who take risks on their new money loans. It consists of granting security interests or additional security interests or improving the ranking of security to a new credit aimed at refinancing an existing unsecured or under-secured debt. The enhanced debt benefits from more robust recovery expectation and protection against subsequent debt-to-equity swaps and/or liquidation scenarios.
This is the source of potential conflicts between up-tiered creditors and other creditors when the restructuring in which the enhancement is granted is unsuccessful, as has been flagged recently in the case in France involving ORPEA’s restructuring.
It is relevant to look into this issue from an international perspective, not only because large financial restructurings generally involve debt instruments issued on various foreign markets and collateral governed by different laws, but also because best practices in relation to work-out scenarios influence the attractiveness of any marketplace.
The purpose of this webinar is to review the stakes of debt enhancement in financial restructurings, consider the balance of conflicting interest among the various stakeholders, identify how legal principles such as the equality of creditors, proportionality and efficacy principles come into play and to explore best practices in the domestic and international arenas.
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