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Valuation of Collateral continued from page 15
( c) On the other hand, the favorable vote for the plan by the collateral class would allow, even if the plan is not approved by all classes( nonconsensual plan), for the simple majority being sufficient for its judicial sanction( art. 639.1 of the Insolvency Act), as long as the additional requirements provided in the regulation are met. 4
( d) Finally, approval of the plan by the class composed of credits with collateral on the debtor ' s assets – again, linked to the value assigned to the collateral – would also enable its judicial sanction if that class is“ in the money”( art. 639.2 of the Insolvency Act), 5 even if the other classes vote against it. 6
1.2. On the valuation of collateral and the“ exit right”
Likewise, the valuation of collateral plays a fundamental role in relation to the so-called“ exit right” provided in article 651 of the Insolvency Act. This right, available only to those secured
4
Some authors( see PULGAR EZQUERRA, J. `Comentario al artículo 639’ in Comentario a la Ley Concursal, La Ley, 2023) have pointed out the risk of a possible breach of the majority principle, which is the foundation of the restructuring plans model, through this sanction route. The risk would arise with
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the artificial multiplication of classes with the sole purpose of achieving a simple majority, thus allowing an insignificant percentage of credits to drag the other classes of credits. However, the truth is that the regulation offers a wide margin of flexibility, even allowing the formation of single-person classes( see Xeldist, Vilaseca, Ecolumber, or Transbiaga cases), which undoubtedly makes the formation of classes often more a strategic than an economic issue.
5
A class of credits will be considered“ in the money” when it can reasonably be presumed that it would have received some payment after a valuation of the debtor as a going concern. For this purpose, a report from the restructuring expert on the value of the debtor as a going concern must accompany the request for judicial sanction( art. 639.2 of the Insolvency Act).
6
This case was addressed in the order of the Commercial Court No. 1 of Pontevedra on May 20, 2024, which sanctioned the restructuring plan of Fandicosta, S. A. by considering it approved by the in-the-money class of credits with collateral on the debtor ' s assets. creditors that have voted against the plan and belong to a class where the favorable vote have been less than the dissenting vote, allows them to avoid the drag caused by judicial sanction of the plan and request the realization of the encumbered assets or rights within one month after the publication of the sanction order. The valuation of the collateral will determine both the possibility of exercising this right by the creditors and the conditions under which they can do so.
The value assigned to each collateral will determine the role and influence of each of the credits within the class in which it has been included. Thus, the distribution of the intraclass voting right will be based on the value of collateral; and this will impact whether or not, in that class, the favorable vote is less than the dissenting vote( thereby allowing the creditor to exercise its exit right).
Once the requirements to apply this exit right are met, the valuation of the collateral will also directly determine the conditions under which it is exercised. In particular, the value of the collateral is decisive for the treatment of the amount obtained when enforcing the security when it is less than the secured claim( understood as the total credit, regardless of the value assigned to the collateral 7) 8.
7
Although the term“ secured debt” used in article 651.3 of the Insolvency Act could initially be interpreted as the part of the secured credit actually covered by the value of the collateral( according to the credit computation rule provided in article 617.5 of the Insolvency Act), the contrast of this term with“ value of the security” in the same provision excludes such interpretation.
8
Article 651.3 of the Insolvency Act foresees the following two scenarios:( i) if the amount obtained exceeds the value of the collateral, the enforcing party is allowed to take it all, allocating that excess to the amount it would have received or must receive according to the restructuring plan for the part of the credit considered unsecured;( ii) if the amount obtained is less than the value of the collateral, that difference will remain unmet, contrary to what some authors have been stating that this seeks to discourage the use of this alternative. See GARCIMARTÍN ALFÉREZ, F.,‘ Sobre el nuevo régimen aplicable a los planes de reestructuración( y las novedades en el Libro IV)', in Revista general de