Background
Deutsche Nickel and EU Coin Group are two related holding companies (with cross-guarantees in relation to the bonds) of a German industrial group with a turnover of circa €300 million.
Issue
The group was insolvent for some time, with an impasse, as previous restructuring efforts were frustrated due to insufficient response to proposals from the bondholders as required under their indentures. Debt owed to creditors amounted to circa €430 million, of which €230 million were bondholders and the balance mainly major financial institutions.
Outcome
We stepped in and put the company into administration followed by a Creditors Voluntary Arrangement (CVA) exit route.
All creditors were converted in a debt for equity swap, with shares being issued in a new group holding company, whose shares were then listed on the Frankfurt Stock Exchange. Based upon initial share trading, creditors received a 15% return, as opposed to circa 1% otherwise achievable on liquidation.
Help, advice and solutions – this was a ground-breaking process for change of COMI (Centre of Main Interests) to enable resolution of issues under more flexible UK insolvency rules that were otherwise available under German laws, setting a precedent for future cross-border COMI migrations.
Using German corporate laws the original German holding companies were merged into partnerships with UK companies. Those partnerships were then dissolved, passing not only assets but also the liabilities to the UK entities. The UK entities were then placed into administration under UK insolvency rules with a CVA exit route, which compared to German procedures required a 75% majority voting on proposals of those attending the meetings, rather than a fixed percentage of the bondholders. There was in fact a 97% approval vote for the CVA to allow the restructuring to proceed.
