A priority matter

Author: | Published: 1 Jul 2007

The Eurotunnel restructuring has been one of the most complicated debt restructurings ever carried out in Europe and has thrown up many issues for lenders in the European distressed debt market. It has highlighted that the creditor approval process in the new French sauvegarde procedure, which was used to carry out the restructuring, can result in the agreed priority position among creditors being overturned.

A French company (or a company that has its centre of main interests (Comi) in France) can seek protection from its creditors by applying for the opening of a procédure de sauvegarde whenever it is faced with the prospect of becoming unable to pay its debts as they fall due. The court appoints an administrator to assist or supervise the management of the company, but the existing management continues to operate the business.

The company is required to produce a sauvegarde plan, which has to be...