Companies in financial trouble, how to refinance?
Reform of the 15th September 2021, state-guaranteed loan, trust... There are several legal mechanisms to support companies in financial trouble.
In the event of a hard blow, there are tools that can help finance and restructure a company. The 17th s Safeguarding talks, organised on the 31st of January 2022 by the French Institute of Collective Proceedings Practitioners (IFPPC), provided an opportunity to look in detail at these mechanisms, which are sometimes underused by companies.
The reform of the 15th of September 2021
The conference, which had as its theme "what way out of the crisis?", first looked at the reform of the 15th of September 2021 and the financing and restructuring tools that result from it. "Two complementary orders were published on the 15th of September in the Official Journal: a reform of the law of securities and a reform of Book VI of the Commercial Code (transposition of the "insolvency and restructuring" directive of the preventive framework)", recalls Jean-François De Montgolfier, Director of Civil Affairs and the Seal. The reform of the law on securities includes a number of tools to support restructuring. "For example, the rules on the creation and realisation of trusts have been made more flexible, the securing of new property securities has been enshrined, the pledge of immovable property by destination has been admitted and the prohibition of mortgages on the future property has been abolished," explains Jean-François De Montgolfier. For its part, the ordinance transposing the "insolvency and restructuring" directive introduces new measures such as the post-money privilege and a change in the rules for dissolving shareholdings. "The post-money privilege was introduced as a transitional measure in the context of the health crisis and was made permanent by the order of the 15th of September", informs Jean-François De Montgolfier. Its objective is to encourage and facilitate cash contributions to companies in safeguard or receivership proceedings. In addition, this reform allows for "inter-class enforcement", a mechanism that allows classes of creditors to impose a recovery or safeguard plan on other classes of creditors.
Another tool to help finance companies in difficulty is the state-guaranteed loan (PGE), the repayment terms of which were recently modified. Extended until the end of June 2022, this scheme represents an envelope of 300 billion euros. No repayment is required in the first year. After this period, the company director may decide to repay the loan immediately, to amortise it over 1 to 5 years or to mix the two. Companies can also obtain a deferment of one more year to start repaying their EMP. In addition, VSEs with severe cash flow problems will be able to benefit from an extension of the repayment period from six to ten years. To do so, the company will have to justify that it is not in a position to repay its EMP but that its future situation will allow it to do so. "This analysis must be carried out by a chartered accountant or an auditor who must provide a certificate," explains Frédéric Visnovsky, the National Credit Mediator. After contacting their bank, these companies can contact the Banque de France's Credit Mediation Service or the departmental crisis exit advisors.
This was also an opportunity to look at the trust, which can be of interest for financing companies in difficulty. It is a contract between the borrower, the lender and a trustee which provides for the transfer of ownership of the asset into an autonomous estate managed by the trustee so that the lender can benefit from this guarantee. "In complex situations, the trust makes it possible to secure negotiations so that the company can obtain new financing or benefit from new extensions," explains Stephan Catoire, Chairman of the Supervisory Board of Equitis. Depending on the case, however, the trust can be more or less complex to implement.