Dr. Leo Plank (left) is a
restructuring partner in the
Munich, Germany, office
of Kirkland & Ellis, and Carl
Pickerill is a restructuring
associate in the firm’s
Chicago and Munich offices.
Plank focuses on financial
restructuring and bankruptcy
matters, concentrating on
high yield and distressed-debt investors and companies
in cross-border and
be seen whether legislation can alter a
restructuring culture heavily focused
on administration with little input from
stakeholders. In addition, ESUG will only
increase the valuation fights currently
engaged in by juniors and seniors and
will do so in a public forum. Other risks
include the potential for avoidance
actions and subordination of claims. 21
The absence of a unified European
insolvency regime results in complexity
and unpredictability for stakeholders,
including junior creditors. Absent careful
consideration of relevant restructuring
solutions and active coordination of
their members, juniors risk losing
value to senior lenders and other
constituencies. In contrast to the U.K.
and U.S., in-court options may not be a
palatable or feasible forum for resolving
intercreditor disputes, although that may
be changing in light of recent legislation.
Ultimately, junior creditors should
ensure that they are intimately familiar
with governing credit and security
documentation and are sensitive to
prior local restructuring precedent. J
1 Wilkinson, EUR. LAW. 2007, 68, 13-14
(discussing absence of unified regime).
2 See, e.g., Mallon, INSOLV. IN T. 2011,
24( 5), 80 (discussing English scheme of
German-based Rodenstock GmbH).
3 In some other jurisdiction cancellation
of indebtedness income can be
sheltered more effectively.
4 Compare Judgment of European
Commission ( 26 January 2011), C 7/2010
(S.A. 29150) (ruling void German provisions
allowing companies to continue using
tax loss carryforwards, notwithstanding a
change of control, where change of control
occurred in context of a rehabilitation).
5 Council Regulation (EC) No. 1346/2000
( 29 May 2000), OJ 2000 L 160/1.
6 See Ringe, E. B.O. R. 2008, 9( 4), 579-620
(discussing COMI-shifting generally
and the effect of Eurofoods).
7 HCJ, 8 December 2006, 6211/06  NZI 187
et seq. See also Ringe, supra (discussing same).
8 Interedil SrL (in Liquiation) v. Fallimento
Interedil SRL and another  EUECJ
C-396/09 ( 20 October 2011)
9 See Insolvency Act 1986, Sch. B1; see also
In re Collins & Aikman Europe SA et al.
 EWHC 1343 (Ch) (administration
involving subsidiaries incorporated in
10 different European jurisdictions).
10 See Insolvency Act 1986, Pt. I.
11 Companies Act 2006 §§ 895-901.
12 6 May 2011,  EWHC 1104 (Ch).
13 See also Pannen, Europäische
Insolvenzordnung, Art. 3 Nr. 39 (discussing
main criteria for determininig company’s nerve
center or mind of management, including
where administrative decisions are made,
accounting occurs, where management
is present, how much responsibility
management has at the registered office, etc.).
Most recently, the European Court of Justice
ruled in Interedil Srl (i.l.) v. Fallimento Interedil
Srl et al  EUECJ C-396/09 ( 20 Oct. 2011)
that “greater importance” must be attached to a
debtor’s center of administration. Accordingly,
to the extent a debtor can successfully move
its “nerve center” or base of administration
decision-making facilities, this may suffice to
show COMI in the transferee jurisdiction.
14 Final Report and Recommendation
of Parliamentary Legal Committee
17/7511 from 26 October 2011.
While the Bond Act became law on August 5,
2009, it is anticipated that ESUG will become
effective on or around March 1 or April 1, 2012.
15 See § 24, para. 2 SchVG.
16 See § 5, para. 4, SchVG.
17 See § 7 SchVG.
18 See generally Lürken/Pickerill,
CORP. FIN. L., 7/2011, 352.
19 See MAGNUM AG (creditor meeting resolution
26 August 2010); Koch Gruppe Automobile
AG (resolution 3 November 2010); Q-Cells
International Finance B.V. (resolution 25 October
2011). At least one bondholder challenge
has already arisen to use of the Bond Act to
restructure debt. See Decision of Frankfurt Local
Court 15 Nov., 2011 (voiding creditor resolution
approving debt-equity swap of hybrid bonds
because subordination provisions in the bonds
were governed by Dutch, not German, law).
20 Kranzusch ZInsO 2008, 1346, 1347
(noting that “debtor in possession” was
granted in only 1 percent of all business
bankruptcies between 1999 and 2007).
21 See generally Bruder/Fritz/Meyr-Löwy/Pickerill/
Plank, AM. BANK. INST. L.J. (forthcoming 2012).
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