SLOVENIA Law and Practice Contributed by: Vid Kobe and Peter Gorše, Schoenherr Slovenia
Preventative Restructuring A preventative restructuring proceeding ( postopek preventivnega prestrukturiranja ) is an instrument aimed at enabling eligible distressed corporate debtors to avoid insolvency by entering into a financial (debt) restructuring agreement with their financial creditors outside formal insolvent reorganisation/CS proceed- ings (see 7.1 Impact of Insolvency Processes ). If the requisite majority – creditors holding 30% of financial claims – agree to the initiation of preventative restructuring proceedings, this will (for the time period of the preventative restructuring process) result in a statutory stand-still/execution holiday for the entire class of financial creditors. If the requisite majority – creditors holding 75% of financial claims – then accedes to the financial restruc- turing agreement (worked out between the borrower and co-ordinating creditors) and the financial restruc- turing agreement is confirmed by court, dissenting financial creditors face cram-down. The “restructuring toolbox” available in the context of a preventative restructuring proceeding is generally limited to maturity extension and reduction of out- standing claims (“haircut”). Judicial Restructuring Procedure In a recent addition to the Slovenian preventative restructuring framework, a new (court-supervised) pro- cedure of judicial restructuring to remedy impending insolvency ( postopek sodnega prestrukturiranja zaradi odprave grozeče insolventnosti ) was introduced. In contrast to the (relatively straightforward) preventa- tive restructuring proceedings, the judicial pre-insol- vent restructuring procedure is based on the (relatively complex) rules governing insolvent reorganisation/ CS proceedings (see 7.1 Impact of Insolvency Pro- cesses ); as such, the judicial restructuring procedure entails stricter control over the borrower, but also pro- vides an expanded restructuring toolbox (eg, debt-to- equity swaps and the creation of common security pools, in addition to haircut and maturity extension) to eligible distressed corporate debtors.
exceeded the cost of bankruptcy proceedings), approximately 18% for unsecured creditors and approximately 60% for priority and secured credi- tors; and • in respect of all bankruptcies generally (ie, includ- ing those where no distribution to creditors took place), approximately 7% for unsecured credi- tors, approximately 25% for priority creditors and approximately 50% for secured creditors. Again, in practice, actual recoveries in a particular proceed- ing may notably deviate from the aforementioned mean values. 7.4 Rescue or Reorganisation Procedures Other Than Insolvency Slovenian borrowers in financial distress (and their creditors) will typically employ either (i) an out-of-court restructuring process or (ii) a court-sponsored preven- tative or judicial-restructuring process. Out-of-Court Debt Restructuring Despite the availability of preventative restructuring proceedings (see later in this section), out-of-court debt restructurings – where a distressed borrower group and its senior lenders reach an agreement on rescheduling (and, typically, on other common terms) of the borrower’s financial indebtedness based on contract/consent of all affected parties – remain rela- tively commonplace. In particular, parties will employ such process in con- stellations with cross-border elements (where poten- tial application of multiple pre-insolvency regimes to different members of the borrower’s group may lead to uncertain results) or where the “official” opening of (pre)insolvency proceedings is perceived as having the potential to negatively affecting a debtor’s busi- ness. On the other hand, in cases where one or more lend- ers refuse to temporarily suspend enforcement (“stand still”) and/or subscribe to a restructuring agreement (“hold-out lenders”), stakeholders willing to effect a restructuring will then typically seek to employ a (court-sponsored) preventative restructuring process.
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