Post by account_disabled on Mar 5, 2024 1:12:53 GMT -5
Following the reform promoted by Law No. there was a significant change in the financing regime during judicial recovery due to the introduction in Chapter III of Law No. of Section IV-A consisting of articles -A to -F dedicated to specifically dealing with the financing of the debtor and the debtor group during judicial recovery. Thus the express approval of DIP Financing was guaranteed consequently bringing greater legal security for investors. We then highlight some of these innovations.
Article -A of the LREF included by the reform establishes that in the course of judicial recovery the debtor may request judicial authorization to enter into financing contracts guaranteed by the encumbrance or fiduciary alienation “of assets and rights theirs or those of third parties belonging to non-current assets” in order to finance its activities and the expenses of restructuring or preserving the value of assets.
This provision is directly related to the provisions of the aforementioned B2B Email List article of the LREF which prohibits the sale or encumbrance of assets forming part of the non-current assets of the debtor under recovery. By the way it is worth highlighting that based on a contrario sensu reading strictly speaking there would be no need for judicial authorization for the debtor in recovery to contract financing without guarantees or even for the debtor to only encumber assets belonging to current assets .
Another notable innovation comes from article -B according to which the reform of the decision to authorize financing at appeal level cannot change the extra-competitive nature of credit in bankruptcy “ under the terms of article of this law” nor deconstitute the guarantees granted by the debtor provided that the financier has actually disbursed the amounts and has acted in good faith. Therefore according to the doctrine the rule seeks to encourage access to credit as the investor has the guarantee of sufficient security to release the resources in favor of the debtor immediately after the court decision authorizing the financing. It is worth noting however that some authors question the constitutionality of the device especially due to possible violation of the non-defeasibility of judicial control CRBF article.
Controversy aside it is worth noting that article of the LREF to which the aforementioned article -B makes express reference was amended to enshrine a new order of classification of extra-bankruptcy creditors in bankruptcy. In what is most directly important to this article DIP Financing is now provided for in item IB of article right after the credits relating to “the amounts referred to in articles and of this law” item IA of article from LREF.
Therefore the reform guaranteed the preference of credits actually delivered by the financier to the recovering debtor. This is especially evident when compared to other suppliers who maintain business with the debtor during judicial recovery according to article of the LREF which in view of the new system are provided for in item IE of article of the LREF and receive their credits only after for example the judicial administrator and other service providers of the bankruptcy estate. In other words the financier now has a lower risk of receiving their credit in the event of bankruptcy thus enabling DIP Financing to be offered in a more attractive manner to the recovering debtor.
Article -A of the LREF included by the reform establishes that in the course of judicial recovery the debtor may request judicial authorization to enter into financing contracts guaranteed by the encumbrance or fiduciary alienation “of assets and rights theirs or those of third parties belonging to non-current assets” in order to finance its activities and the expenses of restructuring or preserving the value of assets.
This provision is directly related to the provisions of the aforementioned B2B Email List article of the LREF which prohibits the sale or encumbrance of assets forming part of the non-current assets of the debtor under recovery. By the way it is worth highlighting that based on a contrario sensu reading strictly speaking there would be no need for judicial authorization for the debtor in recovery to contract financing without guarantees or even for the debtor to only encumber assets belonging to current assets .
Another notable innovation comes from article -B according to which the reform of the decision to authorize financing at appeal level cannot change the extra-competitive nature of credit in bankruptcy “ under the terms of article of this law” nor deconstitute the guarantees granted by the debtor provided that the financier has actually disbursed the amounts and has acted in good faith. Therefore according to the doctrine the rule seeks to encourage access to credit as the investor has the guarantee of sufficient security to release the resources in favor of the debtor immediately after the court decision authorizing the financing. It is worth noting however that some authors question the constitutionality of the device especially due to possible violation of the non-defeasibility of judicial control CRBF article.
Controversy aside it is worth noting that article of the LREF to which the aforementioned article -B makes express reference was amended to enshrine a new order of classification of extra-bankruptcy creditors in bankruptcy. In what is most directly important to this article DIP Financing is now provided for in item IB of article right after the credits relating to “the amounts referred to in articles and of this law” item IA of article from LREF.
Therefore the reform guaranteed the preference of credits actually delivered by the financier to the recovering debtor. This is especially evident when compared to other suppliers who maintain business with the debtor during judicial recovery according to article of the LREF which in view of the new system are provided for in item IE of article of the LREF and receive their credits only after for example the judicial administrator and other service providers of the bankruptcy estate. In other words the financier now has a lower risk of receiving their credit in the event of bankruptcy thus enabling DIP Financing to be offered in a more attractive manner to the recovering debtor.
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