Corporate Restructuring and Creditors' Participation

By Wolfgang Höller & Barbara Steger

While in other jurisdictions creditors of an insolvent company may swap their debts into equity, creditors in Austria are still confronted with a "take it or leave it" approach as to the proposed quota payment to unsecured creditors. The recent insolvencies of large Austrian companies show the inadequacy of Austrian insolvency law in that respect.

Financial crisis just arrives

The past year has again witnessed a spectacular surge in corporate restructuring around the world, driven by the financial crisis and the increasingly intense global competition for capital supply.

Austria is no exception. Some of the major Austrian companies are highly leveraged due to the excessive use of debt capital from the capital markets in the past. While refinancing of corporate bonds was no big issue in the pre-Lehman era, it became much more complicated for leveraged companies after the credit crunch. With final repayment dates