Seminar “How to react to a diagnosis of insolvency? Treatment, refinancing, sales and successful cases”

In the first part of the session, Julio Manero, Managing Director of Alvarez & Marsal, analysed the measures that need to be taken in a pre-insolvency and/or insolvency scenario from both an operational and a managerial perspective in order to respond to four key objectives: to develop an industrial feasibility plan, establish refinancing agreements, reach an arrangement and ensure business continuity.

Operationally, Julio Manero addressed four important aspects. Firstly, liquidity management through cash optimisation and the creation of tools to manage the treasury. Secondly, the monitoring of transactions and processes to develop plans that reflect the actual situation of the company. And, finally, making immediate savings to reduce the level of cash outflow and a divestment plan to generate liquidity and reduce the debt.

In terms of managerial aspects, the importance of establishing sound governance which enables proper control and monitoring of the measures set out was discussed. The effective management of internal resources was also mentioned, in order to, among other things, prevent the talent drain and, finally, developing a policy of transparent communication to facilitate relationships with the various stakeholders was addressed.

“In the lifespan of a company the forewarning of a possibly sensitive situation tends to occur in the maturity stage. Uncovering these situations in a timely fashion is vital in order to be able to implement a transformation plan and allow the company to enter into a new stage of growth. Delays in commercial payments, the accumulation of unpaid taxes, the difficulties in addressing labour obligations, financial default or pressure on cash resources are just some of the signs to take into account,” said Julio Manero during his speech.

Following on from this, Laura Ruiz, senior associate of the Pérez-Llorca Litigation and Arbitration area, analysed the aspects of the refinancing agreements which have provided considerable work in the area of refinancing schemes of arrangement. In particular, Ruiz dealt with topics such as whether or not the possibility of arrangements for companies in a current or imminent insolvency situation should be limited, or whether rescuing the companies should come first, when considering the drag-effect for dissenting creditors.

Ruiz also discussed the scope of the anti-rescissory financial protection that should be applied to these agreements and alternative actions in the event of invalidity or creditor fraud.

Finally, Ruiz went over recent pronouncements on two aspects of the challenging of refinancing agreements: the calculation of the required majorities and the disproportionate sacrifice.

Finally, Javier García Marrero, Counsel of the Litigation and Arbitration area at Pérez-Llorca and Senior Judge on leave of absence, analysed some important and problematic aspects raised by the sale of the production unit within the insolvency. Cases of contractual assignment were looked at, for those affecting both the general budgets so that they could be carried out without the need for the counterparty, and some specific cases and the response of the courts was also examined. Finally, García Marrero examined the position of the preferential creditor when the secured asset forms part of the production unit being assigned and highlighted the main problems that could arise.