First Instance Court number 60 of Madrid has been the first court to approve the postponement of certain payment obligations of the borrowing party under a financing agreement, based on the application of the “rebus sic stantibus” clause, in light of the impact of the COVID-19 pandemic on its business. The following is a summary of the facts, as well as the requirements that characterise the application of the “rebus sic stantibus” clause and that formed the grounds for the court’s decision.
Background
On 31 October 2017, the CELSA group (a leading company in the Spanish steel sector) entered into a financing agreement, through its company Barna Steel, S.A., as borrower, and with the majority of the companies in the group as guarantors, amounting to 900 million euros, with a syndicate of banks and Banco Bilbao Vizcaya Argentaria, S.A. acting as the agent entity (the “Financing Agreement”).
The Financing Agreement was signed on the basis of the feasibility plan prepared by the CELSA group through KPMG, S.A., which acted as an independent advisor, in the context of the situation and position of the group on the date of said agreement (the “Feasibility Plan”). In this regard, the Financing Agreement establishes a number of obligations for the borrower and the guarantors, including the obligation for the borrower to comply with a specific repayment schedule for the principal and interest payments (due on 4 May and 4 November of each year), as well as the obligation to meet certain financial ratios (leverage ratio and cash ratio).
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