Domestic Procedures

In this article, partner Bertrand Géradin and managing associate David Al Mari from Ogier’s Restructuring and Insolvency team in Luxembourg provide a high level summary of the enforcement mechanisms related to share pledges in Luxembourg. This article first appeared in Chambers Expert Focus Guides.

Usual Luxembourg security package

Luxembourg is one of the leading domiciles worldwide for international investment portfolio acquisition vehicles.

Acquisition financing are usually secured against the assets and cash flows of the target company as well as of the buyout vehicle.

In practice, given that a Luxembourg holding company generally does not have any operational activities, shares, receivables and cash on bank are the most important assets to cover.

Background

Luxembourg went into full Coronavirus lockdown on March 16. By the ministerial decree of 16 March 2020, the State narrowed down the movement of citizens to the essential activities (notably the procurement of food, medication and basic necessities and travel to health facilities) and has ordered to limit business activities and allow people to stay at home. For workers engaged in other (non) commercial activities, the state recommends using home office and reducing activities to tasks that are essential for the operation of the business.

In light of the COVID-19 crisis, a Grand Ducal Regulation was published on 25 March 2020 (the Regulation)[1] that suspends certain procedural deadlines applicable in civil and commercial matters during the Luxembourg state of crisis. The Ministry of Justice has clarified that this suspension also relates to insolvency matters.

The Second Circuit issued its much anticipated decision in Marblegate Asset Management LLC v. Education Management Corp., holding that “Section 316(b) prohibits only non-consensual amendments to an indenture’s core payment terms.” At issue is whether the phrase “right . . . to receive payment” forecloses “more than formal amendments to payment terms that eliminate the right to sue for payment.” The Second Circuit held that it does not.

Since Marblegate was decided in 2014, the only court to address claims under §316(b) of the Trust Indenture Act (“TIA”) in the context of a corporate restructuring transaction is

The Second Circuit Court of Appeals heard oral arguments in Marblegate Asset Management LLC v. Education Management Corp. on May 12, 2016. One might have thought from the courtroom’s overflow crowd that it was the opening argument in a mob trial, but this is a case about a bond indenture. At issue is whether an out-of-court debt restructuring that did not amend the indenture’s principal and interest terms, but that effectively precluded the noteholders’ ability to be repaid, violated § 316(b) of the Trust Indenture Act (TIA).