The entry of the company into a difficult situation is an alarm signal, including for its creditors. Things get complicated on a practical level for both creditors and debtors when the company in question has loans from several financial institutions. From a legal point of view, such situations require careful management of financial and banking aspects related to credit restructuring, risks of violation of competition rules, as well as (dis)benefits that may arise as a result of procedures to prevent the debtor’s insolvency or from the moment of opening bankruptcy proceedings.

“Several financial creditors of a distressed company must decide together on the optimal strategy – and ‘together’ is the key word here. The chosen decision must take into account the specifics of the specific case and the borrower’s situation. Conventional approaches in the past (for example, standing still) need to be rethought and adapted to the new insolvency prevention regime introduced by legislative changes in the summer of 2022,” said Matej Florja (partner), coordinator of the specialized financial and banking practice of Schoenherr and SCA Associates, during the recently organized the event’s law firm.

“Parties involved can choose different restructuring options before bankruptcy. Regardless of the path chosen, close cooperation between financiers, their open cooperation with the debtor, trust between the parties involved and a common understanding of the goals are among the key elements that will limit the risks of financial institutions and protect the debtor.” – added Justin Armashu (local partner), who specializes in litigation, arbitration, bankruptcy and reorganization at Schoenherr and SCA associations.

At the same time, regardless of the chosen practical solution, credit restructuring projects provided by several financial institutions to the same company have a number of restrictions of competition law. “Financial institutions participating in the restructuring of loans granted to the same company must be very careful to ensure compliance with competition law both in the interaction between creditors and in their behavior towards the debtor. Assessment of the position of creditors, exchange of information necessary for successful restructuring vs. the restrictions imposed by the competition rules and, not least, the conduct of creditors after the stay are hotspots that require increased attention,” said Georgiana Bedescu (Partner), coordinator of the specialized EU and competition law practice. Schoenherr and SCA Associates.

Review article by Matei Florea, Financial Banking Practice Coordinator, Justin Armas, Litigation, Arbitration, Insolvency & Reorganization, Georgiana Bedescu, EU & Competition Practice Coordinator, Schoenherr and SCA Associates