Enforcement of non-performing loans in CEE

15.04.2016

Noerr gladly presents a guide on the CEE insolvency issues arising in the course of the enforcement of non-performing loans.

The guide provides a comparative analysis of key legal issues in the context of cross-border insolvency proceedings. The emphasis is placed on the enforcement of claims under syndicated loan agreements based on the Loan Market Association standard and involving security grantors located in Central and Eastern Europe, including Russia.

The local jurisdictions, in which the security grantors are incorporated, often provide for specific regulations meant to protect the local creditors of such entities. The courts in the local insolvency proceedings do not have strong incentives, if any, to favour the foreign lenders, whose claims are of such value that they can completely frustrate the other creditors of the relevant entity.

The guide provides an overview of the most common legal risks in the selected CEE jurisdictions that can jeopardize the position of the lenders when enforcing claims under syndicated loan agreements. Those legal risks are also crucial for the evaluation of non-performing loans offered for sale by the lenders.

The guide is intended to serve as a help for:

  • lenders in the process of structuring financing transactions;
  • potential investors in the process of evaluation and purchase of non-performing loans;
  • creditors (original lenders or their assignees) in the process of enforcing their claims under syndicated loan agreements.

We have selected six CEE jurisdictions, i.e. the Czech Republic, Hungary, Poland, Romania, Russia and Slovakia, and addressed following legal issues:

  • Enforceability of security interests in insolvency;
  • Parallel debt and other concepts for securing syndicated loans;
  • Capital maintenance rules/Limitation language;
  • Subordination of intra-group liabilities;
  • Allocation of recoveries;
  • Taking control over an insolvent debtor – enforcement of share pledges.

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