Spanish Guarantees in Rem: Heading Towards Cramdown?

28 de julio de 2014

Fedra Valencia and Jaime Ruiz Rocamora of Cuatrecasas Gonçalves Pereira explore whether the treatment of secured creditors with guarntees in rem could be leading towards cramdown:


"Debt capitalisation and loan-to-own structures should play a major role in the years to come, without altering the common use of guarantees in rem as an additional protection for creditors."


The treatment of secured creditors with guarantees in rem has evolved significantly in the framework of the modernisation and harmonisation of Spanish insolvency law. Before the enactment of the Insolvency Act 22/2003, holders guarantees in rem (ie, mortgages and pledges) had a so-called right of total abstention, that allowed them to refrain from participating in insolvency proceedings and keep the nature of their guarantee intact unless appearing at the general creditors meeting. Under the last reform of insolvency law through the Royal Decree Law 4/2014, secured creditors with guarantees in rem can be crammed down while negotiating refinancing agreements.


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