Uría Menéndez advises on the refinancing of Celsa Group?s debt, a pioneering transaction

Uría Menéndez has advised 39 Spanish and foreign financial entities on the restructuring of Celsa Group’s financial debt, which exceeded EUR 2,800 million. The syndicate of lenders was coordinated by BBVA (which also acted as agent), Caixabank, Santander, Sabadell, Banco Popular, Bankia, CatalunyaBanc, NCG Banco. The restructuring agreement was executed in Madrid between 5 and 7 July 2013 and involved dealing with aspects of Spanish, French, German, English and Polish law.

Founded in 1967 in Barcelona, the Celsa Group focuses on steel lamination activities. It is a world leader in forging, and is one of the top 30 steel production companies worldwide.

The restructuring comprised, amongst other issues, (i) the amendment agreement to a syndicated loan of EUR 1,650 million; (ii) the amendment agreement to the master agreement executed in the 2010 refinancing, which regulates the essential terms and conditions of a myriad of bilateral working capital financing and derivatives contracts executed by Celsa Group, for an aggregate amount of approximately EUR 1,300 million; and (iii) the granting by the coordinator entities of a complex additional financing of close to EUR 90 million. The financing agreements also provide the lenders the faculty to convert their participation in certain debt tranches into shares of certain foreign companies within Celsa Group.

Celsa Group’s restructuring was achieved by, amongst others, the execution of a master restructuring agreement in accordance with article 71.6 of the Spanish Insolvency Law, including a viability plan for the short and medium term and a favourable report issued by an independent expert. Given that certain financial entities did not execute the refinancing documents, Celsa Group requested the court’s imposition of the restructuring agreement to such dissident creditors pursuant to the Fourth Additional Provision of the Spanish Insolvency Law.

The cram down request was approved on 28 June 2013 by means of a court order rendered by Mr. Daniel Irigoyen, the magistrate-judge of the Commercial Court number 5 of Barcelona. The court order is pioneering on several very important issues. In particular, it:

1)            clarifies the situation of minority creditors in syndicated financing agreements guaranteed by means of security rights (garantías reales). Since these minority creditors are beneficiaries of collective security rights that do not permit their separate enforcement, they are subject to the same legal regime as the unsecured creditors. Under Spanish law, this allows the terms and conditions of a refinancing transaction to be imposed on the minority creditors in syndicated financing agreements, achieving results similar to those of the English law scheme of arrangement;

2)            provides a more in-depth and detailed analysis on the absence of unjustified economic detriment (sacrificio patrimonial injustificado) for dissident creditors in comparison to any other court order rendered to date; and

3)            applies a five-year repayment schedule to dissident lenders, which exceeds the maximum legal term of three years, as it considers that this maximum legal term only applies to the suspension of individual seizures and is not applicable to the standstill term agreed in the restructuring agreement.

The Uría Menéndez lawyers who led the transaction were Jaime de San Román (partner, finance), Ángel Pérez López (partner, finance) and Eva García Morales (associate, finance). The financial advisor of the syndicate of lenders was PricewaterhouseCoopers. Celsa Group relied on the services of Lazard as its financial advisor and Cortés Abogados as its legal advisors for the transaction.

In connection with this transaction, Jaime de San Román and Ángel Pérez López have said that: “apart from the technical complexity of the proposed refinancing structure, which has been very challenging for everyone involved in this transaction, the Celsa Group transaction could mark a milestone in the Spanish restructuring market. The rules of the game in this type of transaction may change if Spanish courts follow the path created by the court order that resolves on forcing the refinancing agreement on the dissident creditors. This court order is a brave decision, which gives practical use to the Fourth Additional Provision of the Spanish Insolvency Law, and boosts the recurring use of the cram down action in the refinancing processes, as it creates a disadvantage for the dissidents which otherwise would block or prevent a refinancing and, furthermore, avoids the refinancing processes from “escaping” to Anglo-Saxon law, which needless to say is very positive for Spanish lawyers”.