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External support to restructure companies in Greece

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Taking advantage of recent changes for viable businesses.

Febru­a­ry 8th 2016, Dr. Dani­el H. Brüll­mann,,

After noti­cing in a pre­vious paper that the impro­ved Greek legal frame­work for insol­venci­es, which still seems dys­func­tio­n­al in some aspec­ts, and the recent reca­pi­ta­li­za­ti­on of banks open oppor­tu­nities to com­pa­nies and entre­pre­neurs to rest­ruc­tu­re their busi­nes­ses, we address some of the steps to under­ta­ke for eit­her out-of-court or in-court rest­ruc­tu­ring to save long term sur­vi­val of a via­ble busi­ness.

The bur­den of credi­tors to opi­ne on the finan­ci­al situa­ti­on, the via­bi­li­ty of the busi­ness and whe­ther and how the mea­su­res shall affect the satis­fac­tion of the sta­ke­hol­ders can be redu­ced pro­du­cing clear and trans­pa­rent pro­po­sals.

A via­ble tur­naround con­cept with a cohe­rent stra­te­gy and detail­ed mea­su­res shall thus address the cri­sis situa­ti­ons, and con­vin­ce sta­ke­hol­ders that it can be imple­men­ted suc­cess­ful­ly to pro­vi­de impro­ve­ments for the sta­ke­hol­ders.

A neu­tral view is vital to find even crea­ti­ve mea­su­res favor­able to all. An exter­nal team com­ple­men­ting busi­ness rest­ruc­tu­ring, legal and audi­t­ing skills and qua­li­fi­ca­ti­ons can effi­ci­ent­ly add resour­ces for an unbia­sed ana­ly­sis of the situa­ti­on and the imple­men­ta­ti­on of urgent mea­su­res. It can also media­te con­ver­gent solu­ti­ons accep­ta­ble to the par­ties even fol­lo­wing unpro­duc­tive nego­tia­ti­ons.

It might sound need­less to say, but credi­tors want to reco­ver as much as pos­si­ble of their claims and they need to be con­vin­ced that they will. Credi­tors may not renoun­ce to any of their rights, but they might have to accept limi­ta­ti­ons in order to maxi­mi­ze the amount of repay­ments which they can rea­son­ab­ly expect.

How can we con­vin­ce credi­tors that they can impro­ve their situa­ti­on? What have we to pro­du­ce and exp­lain? What else do we have to do, in order to estab­lish such con­fi­dence?

As Law exten­si­ve­ly sug­gests in chap­ter seven of the insol­vency code for Reor­ga­ni­za­ti­on, we shall pro­du­ce detail­ed infor­ma­ti­on about the finan­ci­al sta­te of the com­pa­ny, cau­ses, assets, lia­bi­li­ties and cash posi­ti­on as well as any infor­ma­ti­on of eco­no­mic or none­co­no­mic natu­re that could affect it to allow for a com­pa­ri­son of satis­fac­tion of the sta­ke­hol­ders accord­ing to rest­ruc­tu­ring sce­n­a­ri­os and that based on liqui­da­ti­on.

We shall descri­be cor­po­ra­te struc­tu­ral chan­ges, orga­ni­za­tio­nal chan­ges and ope­ra­tio­nal pro­grams, finan­cing, and modi­fi­ca­ti­ons to the rights of invol­ved sta­ke­hol­ders such as con­ver­si­on of claims to sha­res for the suc­cess­ful con­ti­nua­ti­on of the busi­ness or its trans­fer and how to ensu­re the imple­men­ta­ti­on of the pro­po­sed mea­su­res.

This has to take into con­si­de­ra­ti­on a safe assess­ment of the rights and gene­ral legal posi­ti­on of every credi­tor, depen­ding on the class of insol­vency credi­tors to which one belongs, or of others invol­ved in the plan wit­hout being a credi­tor, which will influ­ence any mea­su­res such as for­gi­veness of debt, reduc­tion or pay­ment in instalments of claims, wai­ver or restric­tion of a lien or secu­ri­ty, as well as the posi­ti­on of the debtor in ful­fil­ling the plan and the resul­ting obli­ga­ti­ons.

Howe­ver, such bankrupt­cy pro­ce­du­res are com­plex and time con­suming and one might want to avo­id them.

To pro­du­ce such and bet­ter alter­na­ti­ves tho­rough­ly, we must be sure to:

  • Exami­ne the details of the situa­ti­on and defi­ne long term stra­te­gic oppor­tu­nities of the busi­ness.
  • Assess the inte­rests of all sta­ke­hol­ders. A broad view can inspi­re alter­na­ti­ve stra­te­gic sce­n­a­ri­os.
  • Pre­pa­re solu­ti­ons tru­ly favor­able to all sta­ke­hol­ders inte­rests.
  • Defi­ne ope­ra­tio­nal rest­ruc­tu­ring mea­su­res such as stra­te­gic re-posi­tio­ning, asset focu­sing and key manage­ment chan­ges.
  • Defi­ne con­trol to insu­re imple­men­ta­ti­on.
  • Com­mu­ni­ca­te to the sta­ke­hol­ders in a plain, trans­pa­rent, under­stand­a­ble and con­vin­cing form.

Such princi­ples app­ly to eit­her out-of-court or in-court solu­ti­ons such as the rati­fi­ca­ti­on of rest­ruc­tu­ring agree­ments appro­ved with the majo­ri­ty of credi­tors. In more radi­cal cases of Spe­cial Liqui­da­ti­ons, whe­re the busi­ness or via­ble parts of it shall be put on sale at auc­tion, a spe­cial focus has to be put on buil­ding up the demand or an ade­qua­te and accep­ta­ble acqui­si­ti­on vehi­cle.

Should it nevertheless come to a bankrupt­cy pro­ce­du­re, the gathe­red infor­ma­ti­on might be qui­te use­ful, not least for an even­tu­al acqui­si­ti­on of assets.

In any case, a com­pre­hen­si­ve under­stan­ding of pos­si­ble results of an insol­vency pro­ce­du­re helps us to pro­po­se and nego­tia­te bet­ter out-of-court solu­ti­ons.

Of cour­se, imple­men­ta­ti­on is not easy and con­fi­dence might initi­al­ly be scar­ce, but via­ble busi­nes­ses have to con­si­der also decisi­ve actions to assu­re their long term sur­vi­val.

Over indeb­ted com­pa­nies can­not find any finan­cing for their ope­ra­ti­ons, as no len­der in his mind is rea­dy to sha­re repay­ments with exis­ting credi­tors.

A re-estab­lish­ment of a sustainab­le debt level is thus a pre-con­di­ti­on to avo­id con­ti­nuing death of eco­no­mic activi­ty even if in bet­ter mar­ket con­di­ti­ons, impro­ved liqui­di­ty, avai­la­bi­li­ty of equi­ty and buy­ers for non-core assets impro­ved.

Our expe­ri­ence shows that the extent of ent­an­gle­ment and per­so­nal lia­bi­li­ties span­ning from intra­group rela­ti­ons to post-dated checks is often unde­re­sti­ma­ted.

Pro­blems and solu­ti­ons can be sides of the same medal.

Rest­ruc­tu­ring works best if employ­ed ear­ly on, not in des­pair. We thus recom­men­ded a time­ly action