2008-04-12 Schultze & Braun

Hedge funds with German investments warned to prepare for worst as credit crisis continues to take its toll

Germany’s leading business recovery law firm, Schultze & Braun, is warning its hedge fund and banking clients to ensure they have adequate contingency plans for their German investments as the credit crunch’s impact continues to bite.

Dr Volker Beissenhirtz, head of its Berlin office and a corporate restructuring specialist, said:  “We expect, from the increasing numbers and types of mandates coming across our desks, that the second half of this year is going to be grim in terms of businesses going into administration.

“A major cause of the problems is acquired companies carrying large amounts of debt. In the normal course of events, companies struggling to repay the debt would usually be able to refinance with different terms.  But now struggling companies are facing major difficulties getting satisfying terms as banks are fighting to secure sufficient liquidity for themselves, let alone for fresh lending.

“We are advising financial clients with investments in struggling German businesses to make sure they have a Plan B ready in case refinancing is not available.

“Plan A will always be to secure different terms for the debt and new finance.  However, it is no good exploring the other option, insolvency, at the last minute.  The insolvency administration path often leads to a sale of the business as quickly as can be arranged: the downside for creditors and debtors alike from this is that they have little influence on this process.  Often the result of this procedure is not the best outcome, particularly in terms of maximising the total proceeds for distribution. 

“If time has been used wisely to get an Insolvency Plan procedure in place, it allows hedge funds and other major creditors and debtors to maintain the initiative, giving them more influence over the conduct of the administration of the troubled company and any sale.”

A good example of the administration path being used successfully was Ihr Platz, the 125-year old German drugstore chain that, following a series of problems, was facing bankruptcy a few years ago.  However, a remarkable turnaround was achieved using Germany’s insolvency laws and the company is now trading successfully.
A current example of an administration not being pursued as a considered ‘plan B’ is PIN, the private postal service, where the options available have been severely limited by the restructuring having to be done ‘on the run’.

For further information please contact our spokesperson:
Mail: Presse@schubra.de, Phone: +49 (0) 7841/708-0

Additional information:
  • 2016-07-13 Dr Stefan Schmittmann to assist Schultze & Braun as of counsel
  • 2012-10-10 New statistic from Schultze & Braun: Insolvency plan under-used
  • 2009-02-23 Appointment of Frank Tschentscher
  • 2008-12-19 Germany’s crunch to hit even harder in 2009 warn top insolvency lawyers
  • 2008-12-05 Comments on the outlook for investment in distressed debt in 2009
  • 2008-10-23 Warning for hedge funds with investments in Germany
  • 2008-07-25 Schultze & Braun wins landmark case against the Ordre des Avocats de Strasbourg
  • 2008-07-02 Law hits distressed debt investors
  • 2008-03-03 German ministers seek to inflict pesticide on financial “locusts”
  • 2007-09-28 Leading german insolvency law firm launches in London
  • 2006-09-21 First book on restructuring with the insolvency plan under German law
  • 2005-03-21 New head of Schultze & Braun’s international team
Schultze & Braun LLP
http://www.schubra.de, Email: mail@schubra.de