Pre­pa­ra­ti­on for the bond­hol­ders’ mee­ting — a deman­ding chal­len­ge

In recent years, a num­ber of bond issu­ers have had to admit that they lack the finan­cial resour­ces to repay their bonds on time. During the bond’s term, the issu­ers were not in a posi­ti­on to gra­du­al­ly build up reser­ves for the repay­ment of the bonds due at matu­ri­ty and/or to ensu­re refi­nan­cing. Such a situa­ti­on usual­ly occurs whenever the eco­no­mic deve­lo­p­ment of the issu­er has dete­rio­ra­ted signi­fi­cant­ly during the bond term. In this situa­ti­on it is also not pos­si­ble to refi­nan­ce the “old” bonds by issuing “new” bonds. As soon as it is fore­see­ab­le that it will not be pos­si­ble to rede­em the bonds on time, the issu­er has two alter­na­ti­ves: filing for insol­ven­cy or “going to Canos­sa” and asking the bond­hol­ders to post­po­ne the redemp­ti­on of the bonds and, if necessa­ry, redu­ce the inte­rest rate. The lat­ter, howe­ver, only beco­mes an alter­na­ti­ve cour­se of action if it can be demons­tra­ted in an inter­sub­jec­tively veri­fia­ble man­ner that the pro­lon­ga­ti­on of the bond term alo­ne or in com­bi­na­ti­on with other rea­listic mea­su­res can avert insol­ven­cy due to insol­ven­cy. The issu­er must the­re­fo­re docu­ment in good time that the post­po­ne­ment of bond redemp­ti­on is essen­ti­al to main­tain sol­ven­cy. If the issu­er fails to do so or is unab­le to pro­vi­de evi­dence of this, and if the matu­ri­ty pro­lon­ga­ti­on comes clo­se to insol­ven­cy, the issuer’s manage­ment may be guil­ty of delay­ing insol­ven­cy. Amend­ment of the bond terms and con­di­ti­ons To extend the bond term and redu­ce the inte­rest rate, the bond terms and con­di­ti­ons must be amen­ded as docu­men­ted in the secu­ri­ties pro­spec­tus. Accord­ing to the Ger­man Bond Act, the amend­ment can be made to the joint repre­sen­ta­ti­ve without excep­ti­on. Pri­va­te bond­hol­ders in par­ti­cu­lar are often not awa­re of this. In con­trast to insol­ven­cy cases, the need for a com­mon repre­sen­ta­ti­ve in bond rest­ruc­tu­ring must be asses­sed dif­fer­ent­ly. As long as the­re is no doubt about the inte­gri­ty of the issu­er and its wil­ling­ness to do ever­ything pos­si­ble to ensu­re full repay­ment of the bond, a com­mon repre­sen­ta­ti­ve can be dis­pen­sed with. As an alter­na­ti­ve, a much more cost-effec­ti­ve solu­ti­on would be the vol­un­ta­ry estab­lish­ment of a credi­tors’ com­mit­tee con­sis­ting of a small num­ber of per­sons to accom­pa­ny and moni­tor the eco­no­mic deve­lo­p­ment and the actions of the manage­ment until the end of the bond’s term. Con­vening of the credi­tors’ mee­ting

Con­vening the credi­tors’ mee­ting fol­lows a for­mal pro­cess (§ 9 ff SchVG). A for­mal­ly fla­wed credi­tors’ mee­ting can lead to unne­cessa­ry cos­ts and a con­si­derable loss of repu­ta­ti­on, as well as to a chal­len­ge of the reso­lu­ti­ons and thus end­an­ger the exis­tence of the issu­er. For this rea­son, detail­ed time plan­ning and the com­po­si­ti­on of a pro­fes­sio­nal pro­ject team is impe­ra­ti­ve from the out­set. What is nee­ded is a tight pro­ject manage­ment team that con­sist­ent­ly moni­tors com­pli­an­ce and cor­rect imple­men­ta­ti­on of each step of the pro­cess: a com­pe­tent lawy­er, a ser­vice pro­vi­der spe­cia­li­zing in tech­ni­cal imple­men­ta­ti­on and final­ly a com­mu­ni­ca­ti­ons agen­cy expe­ri­en­ced in dealing with the finan­cial com­mu­ni­ty and the rele­vant media.……

Column by Dr. Kon­rad Bösl as pdf

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