SLOVENIA Law and Practice Contributed by: Markus Bruckmüller, Klemen Radosavljević and Matej Kraner, Wolf Theiss Attorneys-at-law
of law, all liabilities of a debtor rank pari passu (in proportion to their claims), with the excep- tion of liabilities that are mandatorily preferred by law or those that are subordinated by law or by agreement between the parties. In cases where there are several pledges on the same collateral, their priority is determined either by the date of perfection of the security interest or by the specific agreement between the parties involved. Generally, holders of pledges are con- sidered preferential creditors in the bankruptcy proceedings as they have a right to preferential satisfaction from the pledged assets as com- pared to ordinary unsecured creditors. In Slovenia, both pledge subordination (for cer- tain collateral) and claim subordination are avail- able as mechanisms for adjusting the order of priority among creditors. Pledge subordination refers to the arrangement whereby the prior- ity of security interests is determined accord- ing to the order of perfection of pledge. Claim subordination, by contrast, permits creditors to contractually deviate from the ranking of claims that would otherwise apply under general prin- ciples of law. This mechanism allows them to establish a bespoke priority framework, enabling a negotiated order of payment that may over- ride the default sequence based on the timing of security interest perfection. Contractual sub- ordination clauses are recognised and permitted under Slovenian law, both within and outside of insolvency proceedings (in accordance with the Slovenian Bankruptcy Act ( Zakon o finančnem poslovanju, postopkih zaradi insolventnosti in prisilnem prenehanju (ZFPPIPP)). Intercreditor agreements typically include sev- eral key provisions, including: • a payment waterfall, which sets the priority of payments, ensuring that senior creditors
are paid before any distributions are made to junior creditors; • a standstill clause, which restricts junior creditors from enforcing their claims for a defined period, giving senior creditors the opportunity to control enforcement and man- age the collateral; • a turnover clause, requiring junior creditors to pass on any recoveries they receive to senior creditors until the senior obligations have been fully satisfied; and • collateral control provisions, which designate which creditor has decision-making authority over actions involving the collateral, such as its disposal, enforcement, or restructuring. 4.2 Bank/Bond Deals For transactions involving multiple creditor classes, particularly acquisition financings that combine bank loans and bond or other debt instrument issuance, intercreditor agreements are important in Slovenia. Such transactions often result in differing expectations and risk pro- files among creditors, as well as discrepancies in maturity, repayment terms, and security struc- tures. An intercreditor agreement mitigates these risks by regulating the relationship between the various creditors via a contractual agreement. 4.3 Role of Hedge Counterparties In the context of complex financing transac- tions, derivative liabilities arising from hedging arrangements (such as interest rate or currency swaps) are often designated as senior obliga- tions and rank pari passu with other senior obli- gations associated with the transaction and they usually participate in the benefits of the collat- eral pool established to secure the senior debt facilities. The terms of the hedge documentation typically include limited early termination rights for the benefit of the hedge provider; however, such rights are narrowly tailored and generally
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