Valuation of Collateral continued from page 33 for such assets.
It should be noted that, when determining the fair value of real estate or other assets or rights other than securities, it will not be necessary to prepare a new report, as long as there is one whose date is reasonably close to the approval of the restructuring plan. 11
Under the second paragraph of article 617.5 of the Insolvency Act, it will be necessary to attach to the public instrument in which the restructuring plan is formalized the certifications, if any, issued by the governing body or the appraisal company that determine the fair value of the assets or rights on which the collateral is based. 12
1.4. Deductions from the fair value of the collateral asset and limits
On the one hand, an“ automatic” deduction of 10 % must be applied to the previously determined fair value 13; and, on the other,
11
Strictly speaking, the regulation does not provide a reasonableness criterion for valuation purposes in a pre-insolvency context, but it merely considers it reasonable to issue a report within the six months prior to the declaration of insolvency. However, it is logical to assume that, in the context of restructuring plans, the reasonableness criterion extends to reports
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issued within the six months prior to approval of the plan( this opinion is shared, among others, by GALLEGO CÓRCOLES, A., ' Artículo 617 ' in Comentarios al articulado del Libro Segundo del Texto Refundido de la Ley Concursal, Sepín, 2023, p. 311). However, it is not an undisputed issue, as other authors consider it possible to take the date of judicial sanction of the plan as the reference date( see AAVV.,‘ La aprobación de los planes de reestructuración’ in Reestructuraciones e Insolvencia, Tirant lo Blanch, 2023, p. 817).
12
Under article 273.3 of the Insolvency Act, it will not be necessary to provide reports when the collateral is cash, current and savings account balances, electronic money or fixed-term deposits.
13
Lawmakers justified this deduction in the preamble to Royal Decree-Law 11 / 2014, of September 5, on urgent measures in insolvency matters, considering“ prudent to reduce said fair value by ten percent since the collateral, if enforced, will require the enforcement of the asset or right on which it is constituted, which entails costs and delays that reduce the value of the the amount of outstanding credits with a preferential collateral, if any, on that same asset must be deducted. 14 Likewise, the resulting value of the collateral may in no case exceed the amount of the secured obligation itself nor the value of the agreed maximum mortgage or pledge liability( art. 275 of the Insolvency Act).
2. Valuating collateral as part of the strategy for designing and approving the plan
As mentioned above, secured creditors may find their credit rights affected by measures imposed even by decision of lower-ranking creditors. However, due to the interference this entails regarding the economic function of secured rights, compensatory measures are foreseen to achieve a balance between the rights of these creditors and the collective interest inherent in the restructuring process of a viable company. It is precisely in this context that the valuation of collateral plays a decisive role.
However, as with all rules, there are exceptions in certain circumstances. As the preamble to Act 16 / 2022 rightly indicates, restructuring plans are flexible instruments whose purpose is the short- and medium-term viability of debtor companies. No two plans are the same, so the flexibility provided to these instruments should allow them to adapt to the specific case( its tailormade nature is what gives this mechanism its economic and legal appeal), as long as they
collateral by at least that percentage”(“ una regla de prudencia reducir dicho valor razonable en un diez por ciento por cuanto la garantía, de hacerse efectiva, requerirá la ejecución del bien o derecho sobre el que esté constituida, lo cual entraña unos costes y dilaciones que reducen el valor de la garantía en, al menos, dicho porcentaje”). However, the truth is that this deduction percentage may not adjust to reality in most cases, as enforcements entail very different costs mainly depending on the asset’ s degree of liquidity.
14
Although article 275.1.2 º of the Insolvency Act does not expressly address this aspect, it is reasonable to interpret that, in view of the rest of the articles of the regulation and the purpose pursued by the lawmakers, the deduction should be at most the amount of the agreed maximum pledged or mortgaged liability.
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