One year after the entry into force of the amendment to the Insolvency Code, experts see Germany as a restructuring jurisdiction on an equal footing with British law, Europe’s previous leader in this field, and praise restructuring successes in practice. However, international creditors would like even more transparent proceedings in normal insolvencies. In particular, there are complaints about the lack of clarity regarding the costs of proceedings. Many participants at Noerr's European Restructuring Day in Frankfurt came to this conclusion.
Well-known international restructuring experts, bankers, company representatives and investors attending the Noerr conference discussed the financial crisis and the consequences for restructuring multi-national groups and banks. In addition, the practical experience of corporate rescue was emphasised. Elmar Geissinger, former member of the executive board of the international listed building materials group Pfleiderer AG responsible for financial affairs, reported on the complex restructuring of the group. The prolonged negotiations on refinancing the EUR 5 billion real estate loan of the German Annington Group was described by Tom Campbell, Managing Director of Debt Advisory Practice at Blackstone. The lessons for bank insolvencies arising from the liquidation of the international investment bank Lehman Bros. were outlined by Daniel J. Ehrmann, partner in the management consultancy Alvarez & Marsal and US insolvency administrator of Lehman Bros. Ehrmann also compared the german with the US proceedings.
"The international comparison made possible by the European Restructuring Day impressively proves the competitiveness of amended German insolvency law," Dr. Thomas Hoffmann commented on the results of the current restructuring cases. Hoffmann, a partner at Noerr LLP, organised the event together with Dr. Martin Kleinschmitt, board member of Noerr Consulting AG.
The German amendment (the ESUG) to the Insolvency Code came into force on 1 March 2012. Positive experience was gained particularly in the first two major protective proceedings under the ESUG, namely the restructuring of Pfleiderer AG and of centrotherm photovoltaics AG. "The ESUG’s strength became especially clear in the restructuring of centrotherm," said Martin Kleinschmitt. The restructuring provided an example of maintaining the stock exchange listing of the company and, with the necessary capital reduction, enabling the shareholders to retain 20 % of their shares. "The ESUG meets the requirements of the capital market and offers shareholders a genuine alternative to out-of-court restructuring," said Hoffmann.
International creditors, however, criticised the lack of transparency in the course of normal insolvencies compared to US law. Above all, many US creditors would like more clarity on the costs of the proceedings. "The courts in Germany apply completely different criteria so that the costs of the proceedings are not calculable for the creditors. Legislation should correct this," suggested restructuring expert Hoffmann.
The first studies show that the new legislation has paved the way for insolvency law reform. According to a recently published survey by Noerr in cooperation with Roland Berger Strategy Consultants, 40 % of practitioners surveyed consider that their expectations have been fulfilled, namely that liquidations are less frequent. "Insolvency proceedings are now more readily understood as an opportunity not to break up a company but to restructure it under the new rules," emphasised Noerr partner Dr. Florian Becker in a panel discussion which included insolvency administrators Christian Köhler-Ma (Leonhardt Rechtsanwälte), Andreas Dörhöfer, Head of Risk Management Advisory Group of Deutsche Bank and Daniela Bergdolt, Vice President of the German Association for the Protection of Shareholders (DSW).
"We expect an increased demand for restructuring in Germany this year," said Thomas Hoffmann. Insolvency figures rose in the last quarter of 2012. A weakening automobile industry due to reduced sales in Europe is likely to put pressure on the supply industry. In structurally problematic industries such as printing or the solar industry, the risk of insolvency remains high in Hoffmann’s opinion.
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The Noerr Restructuring & Insolvency Group consists of specialists for refinancing, restructuring, and Distressed M&A and advises listed companies, medium-sized companies, investors, banks and insolvency administrators on restructuring and company rescue. Since 2009, the Group has rescued 35 companies or company divisions from crisis and insolvency.
The Noerr Restructuring & Insolvency Group is led by Dr. Thomas Hoffmann and Dr. Martin Kleinschmitt.
Julie is a law graduate who qualified with Price Waterhouse in 1994. Julie joined Smith & Williamson in 1997 and became a partner in 2001. With Mike Stevenson, Julie set up Middleton Partners offices in Salisbury and Southampton, both of which are now part of Begbies Traynor.
Julie is a member of the Insolvency Practitioners Association and is a Fellow of The Association of Business Recovery Professionals. Julie deals with all aspects of Corporate Recovery and turnaround work and takes all form of personal insolvency appointments.