Restructuring in Iberia and LatAm

The jurisdictions examined in this document —Spain, Portugal, Chile, Mexico, Colombia and Peru— follow civil law systems with insolvency laws that share some common ground. Debtors and creditors in these jurisdictions face similar challenges when dealing with financial distress scenarios.

Spain and Portugal recently adapted their Bankruptcy Codes to the new EU Directive on Restructurings. The implementation of the Directive in these countries has been a success, based on the number of local restructuring proceedings taking place in both jurisdictions. In Spain, the success has been slightly more significant tand two landmark examples are the Celsa and the Codere restructurings. Celsa was the first creditor-led restructuring taking place in Spain that resulted in creditors taking over the steel company after years of distress and restructuring attempts. Codere restructured its capital structure several times under the English scheme of arrangement until the introduction of this reform, which gave the company the tools to do it in Spain. The UK is still an very relevant venue for European companies facing distress, given the predominance of English governed law debt and its combination with the rule in Gibbs. However, with the EU reform, debtors and other stakeholders in the restructuring arena now have more options available in local jurisdictions. In Portugal, the impact of the EU Directive on Restructurings was less significant but the EU Directive on Restructurings brought some new features, namely regarding protection of new money and classification of creditors.

The situation in the Latin American region is different In the main jurisdictions, the legal rights of creditors of distressed companies are often based on the statutory classification nof their claims, rather than the US approach, where discussions of in-the-money v. out-of-the-money or impairment issues serve as the basis for creditors' rights.

While the trend for European companies, like Portuguese and Spanish ones, to restructure in the UK courts has decreased in the last few years, the trend for companies headquartered in the Latin American region dealing with a distressed situation through Chapter 11 proceedings under the US Bankruptcy Code is increasing. All the jurisdictions analyzed have local proceedings to deal with bankruptcy and reorganization. However, in the Latin American region, some complex restructurings with foreign creditors are still taking place in the US. In each country, there are different tdrivers leading to a Chapter 11 filing but there is some shared common ground:

We summarize below some of the main features of a Chapter 11 crossborder proceedings and highlight whether these tools are available in the local jurisdictions analyzed: