High yield bond and leveraged loan issuance for restructurings across the United States and Western and Southern Europe has climbed 65% year-on-year, up from US$29.1 billion for the first nine months of 2019 to US$48 billion over the same period this year.

Last Friday, in response to the outbreak of the coronavirus pandemic (COVID-19), the German government announced various measures described as a big "bazooka" to avert a crisis in the Eurozone's largest economy. The German development bank KfW will play a key role in the context of the announced measures and has been tasked to provide liquidity assistance to German companies hit by the pandemic.

HEADLINES

• Default levels remain historically low at 1 per cent to 2 per cent
• Prevalence of cov-lite loans in Europe may be concealing some underperformance, but there are no conventional triggers for lenders to act

Despite concerns that the economic cycle is peaking, and the impact of geopolitical and trade volatility on corporate earnings, leveraged finance default rates show little sign of rising during the next 12 months.

With cov-lite financings at record highs, debt holders will need to be proactive in maximising recoveries

Will the last person leaving please turn out the lites?

Cov-lite loans can leave lenders with limited restructuring options, but creative lenders will still find ways to bring debtors to the table, partners Ian Wallace and Christian Pilkington of global law firm White & Case LLP explain

The banking reform package marks an important step toward the completion of the European post-crisis regulatory reforms

As more Turkish companies begin to report liquidity issues and economic pressures begin to bite, successful financial restructurings are likely to become increasingly critical to the prosperity of the Turkish economy

Only time will tell whether local processes will provide a suitable toolkit for large-scale corporate restructurings, or whether other international restructurings processes may also have a role to play.

All three institutions of the European Union have now approved the EU Preventive Restructuring Framework Directive. This is the EU's first attempt to "harmonise" insolvency laws across the Member States, that have disparate existing legislation. What does the Directive do and what will be its effect in practice?

The Directive

On 28 November 2016 the German Federal Fiscal Court (FFC) (GrS BFH 1/15, published on 8 February 2017) held that the guidance on a reorganisation tax privilege (Reorganization Decree (Sanierungserlass)) issued by the German Federal Ministry of Finance (FMF) in 2003 was invalid. The ruling has created great uncertainty for the restructuring practice in Germany regarding the proper tax treatment of restructuring gains.

An extract from GRR The European, Middle Eastern and African Restructuring Review 2018

Brief overview of insolvency proceedings

Enhanced by no less than five reforms over the past 10 years, French insolvency law now provides a comprehensive set of tools designed to efficiently handle the legal, economic and financial difficulties that companies are facing. The whole insolvency architecture hinges on the key concept of cessation of payments (ie, inability of the debtor to pay its debts as they fall due with its available assets).

Investors in non-performing loans ("NPLs") continue to look for new jurisdictions and opportunities to achieve attractive returns on capital. Much of the European NPL market is now in a relatively advanced state (particularly in the more mature parts of the market such as UK, Ireland, the Netherlands, Spain and, to a lesser extent, Italy). Funds are, therefore, looking further afield for NPL opportunities. One interesting jurisdiction, given the 1.71 trillion yuan (c.US $270 billion) of NPLs held by commercial banks, is China.