Classification of claims under a refinancing agreement pursuant to Royal Decree Act 4/2014

According to its Explanatory Notes, RD Act (Order in Council) 4/2014, of 7 March, adopting urgent measures on business debt refinancing and restructuring, aims to facilitate the financial repair and recovery of companies facing an economic crisis. To this end, a set of rules varying in scope and significance have been laid down, which I here discuss with regards to the treatment reserved to loans granted under refinancing agreements - as provided by the Spanish Insolvency Act (IA) - and their signatory creditors.1. The superseded legal regime in respect of "fresh money".

Article 84(2)(11) IA, in its wording prior to entry into force of RD Act 4/2014, classified as claims against the asset pool, though limited to fifty percent of their value, claims arising from fresh money granted under a refinancing agreement as provided in the erstwhile art. 71(6) IA. Further, it was stated that this consideration did not apply when the fresh money had been provided by the debtor itself (how could it apply given that the insolvent company can hardly be a creditor – on insolvency or against the asset pool – in respect of itself?) or by specially related persons through share capital increases, loans or other acts with a similar purpose (the reference to capital increases is equally puzzling since claims do not arise for the person who becomes a shareholder or increases his stake in the company). In fact, claims in these cases were classified as subordinated by virtue of art. 92(5) IA.