The Commercial Court in Zagreb today published the ruling on assigning creditors to groups based on the proposal of the Extraordinary Commissioner, who acted in compliance with the obligation stipulated in Art. 18, item 1 of the Act on the Extraordinary Administration Proceeding in Companies of Systemic Importance for the Republic of Croatia, within the scope of which the Extraordinary Commissioner had addressed the Court with the proposal to pre-establish the number of members of the Creditors’ Council and the way of assigning creditors to groups. The sorting of creditors and defining of groups is based on the records of claims filed and the differences in the legal position of each of the groups. Creditors who will be entitled to appoint members to the Creditors’ Council are creditors with verified claims as well as creditors the contestations of whose claims will be renounced. The status of verified and contested claims is not final, as it is subject to possible civil proceedings which may be instituted to establish the merits and their outcome. Furthermore, some contestations are being withdrawn by the contesting parties even over the course of this period, prior to instituting civil proceedings.
Within the scope of the submission the Extraordinary Commissioner has proposed for the Creditors’ Council to have five members, as has been the case so far with the Interim Creditors’ Council. The Council’s composition of five members proved to be the best way for all creditors and their groups to be proportionally represented and optimal in terms of operativeness, quality and efficiency. The proposed number of Creditors’ Council Members is also optimal with regards to the need to secure regular attendance of all its members at all meetings, which thus can be held frequently enough at acceptable cost, without jeopardizing the quality of work.
The difference compared to the Interim Creditors’ Council consists in the fact that the majority of supplier claims are now within one group, while the unsecured, mostly financial creditors are divided in two groups based on the different economic interests of their claims. In defining the creditor groups the following criteria were taken into account: first of all, whether the creditor is a company subject to the extraordinary administration procedure, whether there is a secured right, whether there are guarantees provided by a greater number of companies subject to the extraordinary administration, the specificities of individual claims (trading on regulated markets), facts arisen in the post-petition period (participation in the SPFA and payment of pre-petition claims during the course of the extraordinary administration).
The chart below shows the criteria and decision-making process in sorting creditors and defining the groups to be represented in the Creditors’ Council:
Note:
(1) Includes claims secured for an amount lower than the amount of the claim (ie. the secured right request is lower than the amount
of the claim)
(2) Includes verified claims from guarantees where the main debtor is not subject to the extraordinary administration
(3) Guarantors subject to the extraordinary administration procedure
Pursuant to previously stated criteria, the Extraordinary Commissioner has proposed for the creditors to be assigned to five separate groups: A, B, C, D and E with regards to the various legal and economic positions of each of the groups. At the same time the groups reflect the representativeness of creditors within the existing groups in the Interim Creditors’ Council to date.
Group A consists of creditors whose claims bear secured rights, ie. secured creditors. The existence of secured rights, in particular firm securities such as mortgages on real estate or share pledges differentiates the legal position of such creditors from all other groups, providing them with additional rights in the recovery. This group corresponds to the secured creditors group in the Interim Creditors’ Council.
Creditors who are holders of bonds issued by the debtor and to whose benefit guarantees were issued / there is a co-debtorship with not less than five related and/or subsidiary companies of the debtor which are subject to the extraordinary administration procedure shall be assigned to Group B. What legally differentiates the claims of those creditors from the claims of creditors assigned to other specific groups is the listing of bonds on international regulated markets upon issuance; being subject to international material laws; large number of end holders and representation of end holders in exercising rights by trustees. Group B corresponds to the bondholder group in the Interim Creditors’ Council.
Group C is comprised of creditors whose claims have been secured by issued guarantees, co-debtorships and recourse debtorships from not less than five companies related and/or subsidiary to the debtor which are subject to the extraordinary administration proceeding and have participated in financing the debtor with seniority rights in recovery pursuant to the SPFA of up to EUR 1,060,000,000.00 dated June 8, 2017. For the avoidance of doubt it should be noted that these creditors do not participate in this group with the claims arising from the SPFA, but only with their pre-petition claims.
Creditors whose claims are secured by issued guarantees, co-debtorships and recourse debtorships of not less than five companies related and/or subsidiary to the debtor, which are subject to the extraordinary administration procedure and have not participated in financing the debtor with seniority rights in recovery pursuant to the SPFA of up to EUR 1,060,000,000.00 dated June 8, 2017 shall be assigned to Group D. Groups C and D correspond to the group of unsecured creditors in the Interim Creditors’ Council and are differentiated by various economic interests, given that Group C is party to the SPFA.
Group E will be comprised of creditors to the benefit of which no guarantees have been issued nor is there a co-debtorship or recourse debtorship with not less than five companies related and/or subsidiary to the debtor. It combines the groups of large and small suppliers from the Interim Creditors’ Council and also includes other creditors meeting the said criteria.
The groups from A thru E thus defined enable the sorting of all creditors with all the claims they held at the point of opening the extraordinary administration procedure, enabling them to efficiently exercise their rights established by the Law.
The Creditors’ Council protects creditor rights in the extraordinary administration procedure and participates on behalf of the creditors in drawing up and preparing the settlement, gives consent to the Extraordinary Commissioner for the final wording of the settlement agreement, whereupon the Extraordinary Commissioner can submit the settlement to the Court.
The Extraordinary Commissioner shall by way of invitation to be published in the Official Gazette invite the creditors whose claims have been verified to inform the Extraordinary Commissioner and the Court of the Creditors’ Council Members within 30 days. In case a creditor group should not appoint their member to the Creditors’ Council within 90 days as of the publication of the invitation by the Extraordinary Commissioner, such member shall be appointed to the Creditors’ Council by the Court within 8 days upon expiry of the aforementioned period of 90 days.
