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Banks, big winners of future restructuring

Posted September 21, 2021, 6:04 PMUpdated on September 21, 2021 at 6:59 pm

Rally, bourbon…. the end. From October 1, banks in France will no longer be twisted in a major financial restructuring. The transposition of European directives on business insolvency into French law strengthens the weight of banks in negotiations with their creditors. “It is a new balance that is needed between the forces present, welcomes a banker. Investors need to engage in a real strategic analysis of the French approach”.

What will count now? The owner of the loan with the strongest guarantee, a so-called senior loan, is usually held by traditional banks. They will be able to more easily impose their plans, force other creditors to write off their debts, or take the keys to the company when faced with unsecured creditors, bondholders, such as hedge funds or recalcitrant shareholders. So dictate their terms. This is a new device of Anglo-Saxon origin called “cramdown”.

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