Starting in 2011, the Spanish legislator has introduced
a series of reforms which have included the possibility to
cram-down creditors through the Spanish scheme of arrangement
One of the most interesting effects of a scheme of
arrangement is the possibility (if certain majorities are
achieved) to extend the content of the refinancing to
non-consenting creditors (so-called hold-outs).
Once the court has issued the homologación
ruling, dissidents can challenge it on two grounds. Firstly, a
dispute over the threshold calculations; secondly, in the event
there was unfair treatment (sacrificio
desproporcionado). The concept of unfair treatment is not
statutorily defined and is, therefore, subject to judicial
interpretation. Notably, only a small amount of case law (none
of which has been decided by the Supreme Court) has so far
addressed the issue.
In the minor case law that has analysed the issue, unfair
treatment is referred to as different treatment –
under a refinancing agreement – of creditors whose
credits would have the same ranking in a potential insolvency
The simplicity of this analysis does not take into account
the enormous complexity of the situations that can arise within
a refinancing in light of the different capital structures. The
position of the equity, the exposure of the creditors to other
companies within the borrower's group or potential third
beneficiaries are all factors that a simple approach to the
unfair treatment concept does not account for.
The fact that a robust concept that includes all the
potential complexities of the refinancing processes (including
rules akin to the US absolute priority or best interests test)
has not been statutorily developed or analysed by the courts
implies that there is not yet a clear process in a scheme of
arrangement when it comes to dissenters challenging the court
The ruling on construction company FCC's
homologación judicial challenge is about to be
released and could be the case-law solution to this debate.
This is because it is expected to analyse the concept in depth.
Therefore, 2016 is set to provide a new milestone in the
development of the homologación judicial: an
answer to the unfair treatment debate.
Manuel Atencia and Ignacio Inigo