European Union: EuroResource-Deals And Debt - September 2014

Last Updated: October 2 2014
Article by Corinne Ball

For the benefit of our clients and friends investing in European distressed opportunities, our European Network is sharing some current developments.

Recent Developments

Spain—On 5 September 2014, Spain enacted urgent measures ("RDl 11/2014") to facilitate restructurings and avoid the liquidation of companies which, under the previous regime, might have been forced into liquidation. RDl 11/2014 modifies several provisions of the Spanish Insolvency Act. The reform seeks to improve the legal framework that governs voluntary arrangements between creditors and sales of distressed businesses outside of insolvency, by removing certain obstacles that previously impeded successful reorganisations. Furthermore, RDl 11/2014 establishes rules to deal with the ongoing insolvency proceedings of certain concession holders in relation to Spain's toll highways with the aim of preventing such concession holders from being placed into liquidation. A detailed discussion of RDl 11/2014 is available here.

Spain—Effective as of 1 September 2014, Royal Decree 625/2014 introduces significant changes to procedures relating to temporary incapacity, or sick leave, benefits during the first 365 days of an employee's incapacity. The Royal Decree is designed to prevent fraud, reduce bureaucratic procedures and allow for more individualized monitoring of each employee on leave for temporary incapacity. The most relevant changes include the elimination of the weekly confirmation of sick leave and adjustments to the monitoring of sick leave relative to the estimated duration of the particular condition that necessitates the leave. Various conditions related to sick leave are now evaluated with tables designed to estimate the condition's duration (and accounting for age and occupational factors), and such conditions will receive appropriate monitoring schedules. A detailed discussion of Royal Decree 625/2014 is available here.

Germany—On 15 September 2014, the German Federal Court of Justice (Bundesgerichtshof) published the landmark Immovest decision clarifying that holders of bonds issued prior to 5 August 2009 under the old German Bonds Act of 1899 (the "1899 Act") may opt in to, and take advantage of the benefits of, the provisions of the new German Bonds Act of 2009 (the "2009 Act"). For the first time, the German Federal Court was called upon to construe the meaning of the 2009 Act. The court took the opportunity to answer questions of practical importance for restructurings, such as whether holders of bonds issued prior to 5 August 2009 under German law by German or foreign issuers could take advantage of the benefits of the 2009 Act, including the ability to amend the terms of the bonds if approved by a majority of bondholders. The ruling is expected to promote successful restructurings of bonds issued under the regime of the 1899 Act (irrespective of whether such bonds were issued by a German or non-German issuer), thereby minimizing the risk of insolvency for bond issuers and allowing them to overcome financial difficulties. A detailed discussion of the ruling is available here.

Portugal—Banco Espirito Santo SA ("BES"), Portugal's second-largest lender, will split up under a rescue plan backstopped by €4.9 billion (US$6.6 billion) in state money after the bank sustained devastating losses on its exposure to the troubled Espirito Santo financial group ("Espirito Santo"). Under the "resolution measure," the healthy assets and businesses of BES will be spun off into a new bank ("Novo Banco," provisionally), while problem assets will remain with the vestigial entity, and losses will be borne by shareholders and subordinated creditors. Novo Banco will be recapitalized by Portugal's central bank and rebranded. The collapse came just weeks after the central bank expressed confidence that BES had adequate capital reserves to weather its exposure to Espirito Santo, which filed for protection from its creditors in July after a central bank audit turned up accounting irregularities. The European Commission quickly determined that the resolution plan complies with bloc rules governing state aid, which do not require contributions from depositors or senior debt holders in bank failure cases. According to the EC, "a disorderly resolution of BES could create a serious disturbance in the Portuguese economy and ... the creation of the bridge bank is suitable to remedy that disturbance." The Eurozone is in the process of finalizing a "single resolution mechanism" pursuant to which the European Central Bank would take charge of dismantling and winding down failed financial institutions, but the procedures will not be implemented until 2016.


Jones Day is representing French telecommunications giant Orange SA in connection with its US$4.4 billion (€3.4 billion) friendly tender offer for 100 percent of the share capital of Jazztel, a listed Spanish company that is the fourth-largest operator in the telecommunications market in Spain. By means of the transaction, Orange SA will create the second-largest fixed-line broadband operator and one of the most dynamic players in the mobile segment in Spain. This transaction represents the largest tender offer in Spain during the last three years. The transaction remains subject to the approval of the relevant authorities and is expected to close in the first quarter of 2015.

Jones Day advised Ares Management L.P. ("Ares") in connection with its US$107 million (€82.8 million) acquisition of the Pegasus Business Park located near Brussels Airport in Belgium from UK real estate investment trust SEGRO plc group. Jones Day also acted as advisor in Belgium with respect to the financing of the acquisition through a €70 million term loan facility entered into with Deutsche Bank AG, London Branch. Ares is a leading global alternative asset manager with approximately US$77 billion of assets under management and approximately 700 employees in more than 15 offices in the US, Europe and Asia as of 31 March 2014.

Jones Day is advising Ferro Corporation ("Ferro") in connection with its definitive agreement with Milan, Italy-based Private Equity Funds' Management Company Star Capital SGR S.p.A. and two minority owners and founders Gianfranco Padovani and Sergio Zannoni to acquire Casola Valsenio, Italy-based Vetriceramici S.p.A. ("Vetriceramici") for €83 million (approximately US$108 million). The deal is expected to close by 1 December 2014, subject to customary closing conditions. Vetriceramici is a leading global supplier of specialty products that enhance the appearance and improve the durability of high-end ceramic tile. The acquisition is expected to improve Ferro's growth opportunities by enhancing its product portfolio and improving its position in important growth markets, including the US, Mexico, Turkey and Eastern Europe.

Jones Day advised the senior secured lenders to Spanish casino and racetrack operator Codere SA, in connection with an agreement to restructure €1.1 billion (US$1.4 billion) in debt.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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