A composition agreement was approved involving the merger of some of group’s companies and with different alternatives, one of which is specifically designed for financial institutions, but open to all creditors, proposing a partial capitalization of the insolvency credits and the payment of the resulting credits through the realization of certain assets and the free cash flow generated by the company in the coming eight years.

First decisions on the court-sanction of refinancing agreements and extension of effects to dissenting entities under the new text of the Fourth Additional Provision, and analysis of the concept of disproportionate sacrifice when there is opposition to the agreement

The lender’s credit in respect of the joint-and-several guarantor declared insolvent is contingent unless existence of p

Rescission of an extension to a mortgage granted by the insolvent company securing a preexisting debt of a company of its group

Spanish Royal Decree-Law 4/2014, passed on March 7 2014, has considerably changed the rules for the court-sanctioning of so-called Spanish schemes of arrangement. Amongst those changes, the reform has lowered the majorities required to achieve a Spanish scheme. Currently, a majority of at least 51% of the financial liabilities held by all creditors at the time of the refinancing agreement (acuerdo de refinanciación) approval, will suffice to request the insolvency judge to sanction the agreement, so it is considered ringfenced and protected from any challenge for rescission.

Financial institutions are not de facto directors of the insolvent company because they do not significantly affect the performance of the insolvent company’s activity, but only ensure that  certain costs do not affect the repayment of their loan.

The extension of the term for the delivery of works not authorized by the guarantor that had secured  the penalty for delay does not  harm it and, therefore, the guarantee is not  extinguished;  any increase in the  penalty agreed does not extinguish the guarantee,  but  cannot be enforceable on the guarantor that will be liable in the terms agreed in the initial  agreement. This decision discussed the effects  on the guarantee of  the novation of the  secured  obligation agreed without the guarantor’s knowledge.

The rescission was declared of a mortgage the insolvent company  granted over a  warehouse it owned in guarantee of the  loan a credit institution  had  granted to a company of its group. The Supreme Court declared (i) that the contextual guarantee was  for consideration and (ii) the need for proof of the profit (even indirect) of the guarantor  company without merely belonging to the  group sufficing, and  confirmed that the  rescission only affected the guarantee and not the loan.

SUPREME COURT RULING OF APRIL 9, 2014, NO. 175/2014: IN THE RESCISSION OF THE  ASSIGNMENT IN PAYMENT AGREEMENT (DACIÓN EN PAGO), THE CREDIT OF THE NONDEFAULTING PARTY  IS AN  INSOLVENCY CLAIM AND NOT AGAINST THE INSOLVENCY ESTATE

The assignment in payment (dación en pago) of debt is an act extinguishing obligations and not a bilateral agreement. Therefore, its rescission leads to an insolvency claim for  the non-defaulting party.

A creditors’ composition agreement has been approved for Pescanova, and section six of  the insolvency proceedings (categorisation of the  insolvency) has not been opened, as  there is  a type of creditor whose  moratorium is less than three years and  whose debt  relief is below one third.