FRANCE Law and Practice Contributed by: Raphaële Courtier, Sébastien de Monès, Victor Camatta and Jessica Chartier, Bredin Prat
enforceability of these subordination agree- ments against the liquidator and against the liq- uidation proceedings opened against the debtor. 4.2 Bank/Bond Deals Inclusion of bonds in acquisition finance is a classic standard, given that junior debt or uni- tranche financing is generally provided through the issue of bonds. From a contractual stand- point, the same principles apply in the intercredi- tor agreement, whether the financing takes the form of a bank or bond deal or a mix of both. However, the contractual subordination arrange- ment organised under the intercreditor agree- ment may be complicated in the case of bank- ruptcy proceedings of the borrower. Indeed, under French law, in the case of bankruptcy of a debtor, creditors are grouped in committees, depending on the nature of their claim (bonds or loans) but without distinction between the senior and subordinated creditors within each commit- tee. A number of decisions adopted in the con- text of restructuring plans (including debt write- offs) require the consent of both committees. As a result, in a situation where junior lenders hold bonds issued by the borrower and are the only bondholders (or the majority ones) in the bank- ruptcy context, they will control the decision of the bondholders’ committee and may block a restructuring plan involving a write-off of their bonds, a situation which, obviously, gives them very strong leverage in the negotiations, which the intercreditor agreement would normally not provide them with. Since Ordinance No 2021-1193 dated 15 Sep- tember 2021, which entered into force on 1 October 2021, creditors affected by the plan are grouped into different classes reflecting a sufficient community of interests, based on an objective basis, taking into account, in particular,
the priority of the claims and the existing subor- dination arrangements. 4.3 Role of Hedge Counterparties The intercreditor agreement contractually pro- vides for a pari passu ranking between the claims of the hedging banks and those of the senior lenders. This is particularly crucial given that dif- ficulties can arise if, on the date French security interests are granted, hedging contracts have not yet been entered into (which is frequently the case, as borrowers generally negotiate a delay of several months to put in place the hedging of the financing). Considering that French law requires that the secured creditors be individually iden- tified in the pledge agreement at the time the security is granted, the pledge which will later be granted to the hedging banks (ie, at the time of entering into the hedging arrangements) will automatically rank lower than the one granted to the senior lenders. The pari passu ranking provi- sions of the intercreditor agreement allow for the remedy of this situation contractually. 5. Security 5.1 Types of Security Commonly Used Ordinance No 2021-1192 dated 15 September 2021 and entered into force on 1 January 2022 (the “Ordinance” ) has modernised guarantees and pledge over movable assets and created new legal instruments such as an assignment of receivables by way of security distinct from the Dailly law pledge. Three Decrees supplementing such reform have been published as follows: • Decree No 2021-1887, dated 29 Decem- ber 2021, relating to the register regarding security over movable assets and ancillary transactions, which entered into force on 1 January 2023 (save for the rules applying to
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