FRANCE Law and Practice Contributed by: Arnaud Fromion, Frédéric Guilloux and Pierre-Benoît Pabot du Châtelard, Clifford Chance
dealing with the debtor knew that the debtor was bankrupt. Transactions relating to the transfer of assets for no consideration are also voidable when car - ried out during the six-month period prior to the beginning of the hardening period. 5.6 Release of Typical Forms of Security Typical forms of security released are very straightforward, as they take the form of a glob - al release letter (usually delivered in the same format as the pay-off letter). This is due to the fact that under French law, a formal release letter is not necessary per se, as the French security documents are automatically released as from the date the liabilities which are secured there - under are fully repaid. 5.7 Rules Governing the Priority of Competing Security Interests and/or Claims French law has explicitly recognised the mar - ket practice that consisted of creating multiple pledges over the same assets with the enact - ment of ordinance No 2021–1192 dated 15 Sep - tember 2021, which confirmed the possibility to create multiple pledges on receivables and securities accounts, the order of priority being governed by the order in which the relevant pledge has been granted. However, this ranking can be subject to contrac - tual arrangements under the intercreditor agree - ment. Typically, where a super senior revolving facility is entered into following closing and as a result the super senior creditors benefit from a legal second-ranking security, the proceeds of the first ranking security and lower ranking security can be contractually reallocated to ensure the super seniority of the revolving lend - ers through the waterfall.
French case law has long recognised the valid - ity and enforceability of arrangements between creditors relating to re-allocation between them of security enforcement proceeds. In addition, over the years and through the many reforms of French insolvency laws, intercreditor arrange - ments have been given an increasing importance and must be taken into account by the courts if made available to them. Under the current regime, intercreditor arrangements must be con - sidered by the courts in establishing the “class - es” of creditors in insolvency proceedings that require the establishment of such classes, which may not however always mean that the court will not disregard certain intercreditor provisions as demonstrated in certain recent cases. Con - sequently, modern intercreditor agreements for French transactions include certain statements of the parties as to the respective “classes” they should fall into in the event of insolvency pro - ceedings. 5.8 Priming Liens and/or Claims If the lender benefits from a first-ranking security, there is no material security interest and/or claim that arises by operation of law or contract that could prime a lender’s security interest. If the private debt lenders are contractually or structurally subordinated, then negotiations take place to provide them with the best comfort under the usual provisions of the intercreditor agreement (blocking/standstill provisions as far as enforcement of security is concerned, water - fall provisions, loss sharing provisions). 5.9 Cash Pooling and Hedging/Cash Management Obligations Cash pooling is regularly implemented in private credit transactions, but mostly imposed to be at a level below the issuer to reduce impact of discussions with the relevant creditors in a dis -
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