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Banking and Finance Alert | March 2014

Refinancing agreements and their protection against claw-back actions after the reform of the Insolvency Law by the Royal Decree-law 4/2014


The Royal Decree-law 4/2014, dated 7th of March, adopting urgent measures on the refinancing and restructuring of corporate debt, has modified certain provisions of the Insolvency Law regulation in relation to refinancing agreements.

Although it could be said that almost all of the reform refers in some way to such agreements, the core of the regulation, which defines the requirements these types of agreements must comply with to be protected against insolvency claw-back actions, has remained pinpointed in article 71 bis.

The legislator has realised that the protection of refinancing agreements, which were subject to claw-back actions in the insolvency framework, is crucial in attempting to ensure that the debtor does not end up heading towards a liquidation process.

The fear that claw-back actions could damage the agreements reached in the refinancing framework of the debtor’s bank debt, especially the security interests granted to the creditors, has heavily influenced its scope and content in recent years. On a more serious note, it has also put an end to the execution of many of these transactions which would have allowed viable companies to continue their activities, albeit temporarily free from the burden of excessive debt.

Another fundamental obstacle which hampered the success of many of these agreements was the insufficient regulation of their judicial approval. Therefore, it should be noted that the reform makes a significant attempt to facilitate the execution of agreements in which the financial creditors, supporting the risk of postponing the satisfaction of their credits, or even accepting their definitive reduction or conversion into equity, allow the debtor’s scarce resources to be assigned to the commercial creditors, a basic need for business continuity. This is a sacrifice which the majority of creditors will not be willing to accept if, by contrast, it enables a minority of them to take advantage of such effort, being their credits still satisfied without improving the debtor’s sustainability.


Portrait of Gracia Sainz
Gracia Sainz