FRANCE Trends and Developments Contributed by: Magali Béraud, Anthony Minziere and Jonathan Nabarro, Nabarro Béraud Avocats
in whole or in part with the rules governing the masse and voting rights and to implement con- tractual rules which may provide for a reduced or increased majority or unanimous consent in appropriate instances. This flexibility has led to widespread use of the wholesale regime where Since French unirate financings are generally structured as bonds and as a result of some of the issues discussed above, they are not well suited to the financing of the working capital requirements of a business. Bond issues are not well suited to the cyclic nature of working capital requirements with frequent drawdowns and repayments. It is therefore becoming com- mon for a revolving credit facility (RCF) to be put in place by banks alongside the unirate bond financing. the relevant conditions are met. Unirate and Super Senior RCF French banks have historically been averse to this type of structure, perhaps because the debt funds were formerly perceived as undesir- able competitors. While this remains true to a degree, this logical structure is becoming more commonplace in France although banks, and in particular the French regional banks, are still often in the learning phase with the attendant misunderstandings and the need to allow time to implement the structure. As a result, the RCF is often put in place at some time after the closing of the acquisition financed by the unirate instru- ment. This, in turn, gives rise to its own issues, particularly a strong likelihood of the need to renegotiate the intercreditor agreement. Where the RCF is made available to subsidiar- ies of the issuer of the unirate instrument, the issues are relatively straightforward. The RCF will be closer to the cash flows and the assets and will benefit from a structural subordination
of the unirate instrument. There are, however, still some matters of friction. This is the more so where the RCF is made available to the issuer of the unirate instrument. Of particular concern is the fact that the unirate instrument is generally in an amount far greater than the amount of the RCF so the bondholders will not want the RCF lenders to be in a posi- tion to act in a manner contrary to their inter- ests. This leads to some complex intercreditor arrangements where the RCF lenders benefit from the same security as the unirate lenders but, in exchange for a super senior ranking on enforcement of the security or on a winding up, they accept to limit their rights to accelerate their loan upon the occurrence of an event of default and their rights to enforce the shared security. Under normal circumstances, the two instru- ments are therefore of equal rank (pari passu), the RCF lenders benefiting from a prior rank in the two situations mentioned above but relin - quishing a degree of control where financial dif- ficulties arise. Obligations Transition After the success of the obligations relance , which were aimed at helping businesses recov- er from the COVID-19 epidemic, a new instru- ment called obligations transition has been cre- ated. These obligations are designed to assist in improving the environmental performance of businesses and enabling them to contribute to ecological transition. Alternatively, they may be used to assist in enabling France to attain its decarbonation goals for 2030. The exact details of the instruments will be implemented by statu- tory instrument. It is clear however that one of the conditions will be that the obligations transition must be subordinated to other creditors in the event of
211 CHAMBERS.COM
Powered by FlippingBook