EuroResource—Deals and Debt

Recent Developments

Italy—Italian law decree No. 83 of 22 June 2012 (the "Decree") has introduced significant amendments to several provisions contained in the Italian Insolvency Act, governing, among others, the following major pre-insolvency restructuring proceedings: (a) the debt-restructuring agreement (accordo di ristrutturazione dei debiti) pursuant to Article 182-bis ("Art. 182-bis Agreement"); and (b) the arrangement with creditors (concordato preventivo) pursuant to Article 160 ("Arrangement with Creditors"). With respect to such restructuring proceedings, the Decree provides for the following main amendments: (i) faster, easier access to an Arrangement with Creditors that was reformed along the lines of the key principles underlying the chapter 11 process in the U.S. Bankruptcy Code; (ii) a new form of Arrangement with Creditors aimed at ensuring the continuity of an insolvent debtor as a going concern (concordato con continuità aziendale); (iii) enhanced protection of new financing granted in connection with restructuring proceedings; and (iv) certain amendments to provisions regulating the repayment of nonconsenting creditors under an Art. 182-bis Agreement.

Italy—Amendments to legislation governing the Italian Antitrust Authority (Autorità Garante della Concorrenza e del Mercato, or "AGCM"), including expansion of the AGCM's powers, were recently introduced pursuant to Italian Prime Minister Mario Monti's governmental "decree on liberalisation". The changes include: (i) merger-control thresholds that will apply cumulatively rather than alternatively; and (ii) replacement of the current mandatory merger-control filing fee with a mandatory fee of €0.08 (US$0.098) per thousand of a company's turnover (whether or not a merger transaction is actually registered) to all companies with turnovers exceeding €50 million. The changes grant AGCM additional powers to protect against unfair contractual provisions in business-to-consumer agreements, as well as unfair commercial practices impacting micro-businesses with fewer than 10 employees and turnovers not exceeding €2 million. Other measures enacted as part of the decree affect class actions, which may now be commenced for the protection of collective interests (in addition to individual homogeneous consumer rights), and the jurisdiction of specialised intellectual property sections of the Italian courts, which has been expanded to encompass claims for damages for EU as well as national antitrust infringements. For a more complete description of the amendments, please see our Jones Day Commentary, "New 2013 Italian Antitrust and Competition Law Rules".

Spain—On 11 July 2012, the Eurogroup signed a memorandum of understanding ("MOU") for the restructuring of Spain's financial system. The MOU splits Spanish financial entities into four different groups, the members of which are to be designated in October, after the completion of bank stress tests. Group 0 will include entities that do not need to increase their capital requirements. Group 1 will include entities already controlled by the Spanish Fund for Orderly Bank Restructuring (Fondo de Reestructuración Ordenada Bancaria). Group 2 will include entities that need to strengthen their capital and cannot do so via private investors (if viable, these entities could receive public cash injections; otherwise, they will be wound up). Group 3 will include entities that need to strengthen their capital and are in a position to call on the markets, or have other private means to do so. The MOU also stipulates that entities requiring public aid will have to transfer distressed assets to a state-held "bad bank".

Spain—Spanish savings banks could be forced to sell industrial assets. Spain's savings banks could be preparing sales of industrial assets and minority stakes, ranging from stakes in listed and unlisted companies to interests in renewable-energy projects and toll roads, once a €64 billion (US$78.44 billion) European rescue package for the sector comes into force. The first €30 billion tranche of aid has already been agreed to by Spain's European partners. Spain's EU partners also agreed to ease Spain's deficit targets, although new budget cuts have been approved by the government.

Spain—The Spanish government approves new budget cuts. On 13 July 2012, Prime Minister Mariano Rajoy released his fourth set of budget measures in seven months, a package intended to reduce the budget deficit by €65 billion (US$79.68 billion) over two and a half years. The measures include: (i) an increase in the rates of value-added tax ("VAT") from 18 to 21 per cent; (ii) an increase in VAT rates applicable to public transportation, hotels and processed foods from 8 to 10 per cent (the VAT on bread, medicine and books remains at 4 per cent); (iii) suspension of Christmas bonuses for public-sector employees; (iv) a cut in jobless benefits beginning with the sixth month of unemployment; (v) a 30 per cent cut in councillors in some areas; and (vi) a 20 per cent cut in 2013 subsidies for political parties and unions.

The UK—On 1 May 2012, the Chancery Division of the English High Court handed down its ruling in Re JT Frith Ltd (Young v Kenneth) [2012] EWHC 196 (Ch), concerning the ability of a secured lender to share indirectly in funds set aside for unsecured creditors. Section 176A (2) of the Insolvency Act 1986 provides that in cases where a floating charge has been granted over all of a company's assets, the liquidator, administrator or receiver must make a "prescribed part" of the company's net assets available for the benefit of unsecured creditors. A secured creditor may share in the "prescribed part" only if it: (i) releases its security; and (ii) shares as an unsecured creditor.

In Frith, a junior secured creditor of a company in liquidation was held to have effectively surrendered its security interest by submitting both a deed of release and proof of debt stating that it held no security in the company. As a result, it was allowed to participate in the "prescribed part". The significance of the case is that the junior secured creditor was also party to an intercreditor agreement with a senior secured creditor which contained a subordination clause requiring the junior lender to turn over any recoveries received from the debtor to the senior lender until the latter had been repaid in full. The result was that the senior secured lender was able to benefit indirectly from the prescribed part, even though it had already relied on its security and was therefore unable to participate in the prescribed part directly. This outcome was upheld by the court, as the intercreditor agreement was seen as a separate contractual matter between the junior and senior lenders and did not therefore undermine Section 176A (2).

Belgium—The Company Code has been amended to permit the liquidation of companies in a single step. Pursuant to the amendment, which became effective on 17 May 2012, a company can be dissolved and liquidated in a single legal instrument if: (i) no liquidator has been appointed by the shareholders; (ii) a statutory auditor has confirmed that the company has no outstanding liabilities; and (iii) all shareholders have approved the company's dissolution and liquidation. The assets held by the company on the date of its dissolution must be transferred to the shareholders by means of an agreement that is not provided for specifically by the new rules. The one-step liquidation process aims to facilitate the liquidation of dormant companies or the exit of shareholders after disposal of the company's assets. However, given that all companies have liabilities (whether in the form of outstanding bills, contingent tax liabilities or otherwise), a one-step liquidation process will be possible only where one or more shareholders or third parties have agreed to assume these liabilities before the liquidation. For this reason, the new regulation may not be as successful as anticipated by the legislature.


Jones Day is acting as antitrust counsel to the London Metal Exchange ("LME") in connection with a £1.4 billion (US$2.2 billion) acquisition offer by Hong Kong Exchanges and Clearing Limited ("HKE"), Hong Kong's stock exchange operator. The 135-year-old LME is the world's largest metals market, accounting for 80 per cent of global trading in nonferrous metals. HKE's offer follows plans announced earlier this year to expand into commodities, marking a major move away from its slow-growing equities business. The deal would give China, which accounts for 42 per cent of global consumption of nonferrous metals like aluminium, copper, nickel and zinc, more power in influencing how metal prices are set in global trading.

Jones Day is advising London & Stamford Property Plc in connection with the formation of a central London residential joint venture (the "Joint Venture") and the Joint Venture's entry into contracts with Project Red Limited, a subsidiary of Qatari Diar, to acquire Moore House for £147 million (US$230 million). Moore House forms part of the prestigious Grosvenor Waterside development and occupies a prominent position at the front of the development on Ebury Bridge Road in London, immediately south of the Chelsea Barracks development.

Jones Day is advising The Lubrizol Corporation in connection with its acquisition of Lipotec SA, a Barcelona-headquartered leader in the development, manufacturing and sale of ingredients for personal-care products based on three core technologies: peptide-based active cosmetic ingredients, delivery systems and biotechnology products. The purchase includes Lipotec's active cosmetic ingredients business, along with its subsidiaries, DiverDrugs and Lipofoods. The acquisition complements Lubrizol's global personal-care ingredients business, strengthening its offering of high-performance technology solutions to marketers of formulated skin-care products.

Jones Day hosted a panel discussion in London, entitled "Distressed Investment Opportunities and Real Estate Finance in Europe", on 19 June 2012. The panel comprised William Ackman (CEO, Pershing Square), John Barakat (head of real estate finance, M&G Investments), Gad Caspy (head of commercial real estate EMEA, Deutsche Bank), Wilbur L. Ross, Jr. (chairman and CEO, WL Ross & Co.), Max Sinclair (head of the UK division, Eurohypo) and Van Stults (managing director, Orion Capital). Jones Day partner Andrew D. Barker chaired the discussion. The panel discussed a number of issues relevant to real estate investors and lenders in Europe, including the opportunities created by bank deleveraging, currency risk within the eurozone, the impact of regulatory change and new sources of debt finance.