The German Approach: Restructuring by Insolvency
entities which are able to respond to every size of troubled companies and to the competition with the large players in other jurisdictions. This development will lead to a concentration process in this field of practice. . It is for that reason the current trend in Germany goes to full time professional administrators with no other field of practice beside (e.g. advisory work). These professional administrators are ready to let them and their offices certified by ISO 9001 and are willing for an external rating by independent experts to prove their high level and standards towards the market. Finally, because of the ongoing internationalization of insolvency cases, the leading players in the German insolvency market have either founded their own international network of insolvency cooperation partners or joined an international network, thus strengthening their capability to handle large, cross-border insolvencies.
Summary and Outlook
In Germany the in-court restructuring offers excellent opportunities for companies in trouble by reorganizing not only the financial but also the operational side within the formal insolvency proceeding. The German administrators are going through a process of even higher professionalism certified by ISO 9001 and rated by independent rating agencies. But even in the past they achieved remarkable results in acting with an entrepreneurial approach and with the ability to take even personal risks to keep the business of the company in trouble going (e.g. Stella Musical, Babcock, Schieder Möbel etc.). Because of their membership in international networks, the large German players are ready for crossborder insolvencies. The administrators and the creditors and their advisors tend to play an more active role in the whole process and will help to improve the German insolvency system to an even higher level. The German government has installed a group of experts to verify if improvements are necessary.
focus. With the world financial crisis and rising interest rates and the lost confidence on the side of the banks, this business model is in serious trouble. The companies once bought are difficult to sell and the banks – who had sold their NPL’s are not keen to enter in new loans that might not perform... Additionally banks have been hit seriously by the world financial crisis and not only Lehman Bros. had to file for bankruptcy. Given the fact, that the financial side of many companies is a multi-layered one, an out-of-court restructuring is regularly impossible especially when the limited time frame is taken into account. Under these circumstances formal insolvency will be the only possible outcome. The highly qualified German administrators, who are willing and able to restructure not only the financial but also the operational side during the insolvency proceeding in order to “release” a completely restructured business to the market, are ready for this new challenge that already made many insolvency professionals busy in 2009 and even busier in 2010. Also the creditors and their advisors who do not only want to protect their particular interests but also have a focus on the business in trouble will play an important role in this process. But it will be important that the independence of the German administrator will not be affected in order to maintain the basic principle –not only of German insolvency lawthe “conditio par creditorum” (equal rights for every (unsecured) creditor). This in mind, Germany is ready for the downturn we are facing also in 2010.
Because of the credit crunch caused by the subprime-crisis in the U.S., German administrators are in the middle of a seamless downturn. Many investments in recent years have been calculated only on financial parameters strongly supported by low interest rates, a flood of liquidity and the possibility of a short term exit. The operational restructuring often has not been the primary numer 0 maj 2010