|Ignacio Buil Aldana||Alicia Galindo Aragoncillo|
Despite SAREB's key role in the distressed market, it has been unclear whether it should be deemed a financial entity in the context of a Spanish Scheme (such schemes apply exclusively to financial entities according to Spanish law) and, therefore, whether SAREB should be taken into consideration for majority purposes; and, more importantly, whether SAREB could be crammed-down under a Spanish Scheme. SAREB's activity is supervised by European authorities and by Spanish authorities (such as the Bank of Spain), even if it is not per se a financial entity due to its particular nature and its specific corporate purpose.
With this in mind, on December 27 2013, the Spanish government included, by means of the seventh final provision of Law 26/2013, an amendment to the Spanish Insolvency Act (and in particular to the fourth additional provision) clarifying that SAREB and (most notably due to SAREB's purpose) its future assignees, should be considered financial entities for Spanish Scheme applicability purposes. Consequently, after this amendment, SAREB and its assignees will be considered financial entities under a Spanish Scheme and, therefore: (i) will be counted for majority purposes; and, despite the amendment not literally providing so (ii) we believe should be crammed-down should SAREB (or its assignees) be a dissenting entity under such schemes.
In light of the above legal development, those Spanish restructuring situations where SAREB holds a relevant position in the capital structure should be reassessed. Distressed investors should also be aware when analysing the credits sold by SAREB that, regarding those credits, they will be considered a financial entity in the context of a potential future Spanish Scheme, even if the investor is not formally a financial entity.
Ignacio Buil Aldana and Alicia Galindo Aragoncillo
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