The importance of anticipating the restructuring of State Guaranteed Loans

The start of the school year in 2021 is taking place under pressure for companies due to the many challenges they have to face: employees returning to work, increase in the price of raw materials, management of stocks and supplies due to existing shortages, and the re-launching of the business.

After the accounts have been closed, banks and other partners will ask about their clients' ability to rebound and whether they should continue to lend. Banks that have granted State Guaranteed Loans (Prêts Garantis par l’Etat) will not be inclined to wait until the latter are due to be paid before engaging in this type of reflection.

Therefore, it seems important to prepare and initiate discussions with banking partners by showing anticipation, which presupposes a clear vision of the situation and business and cash flow forecasts for the next 12 to 24 months. This approach will always be appreciated by the banks, even when it is a question of informing them of current or foreseeable difficulties.

In the event that the forecasts show that there is a short or medium-term impasse, it is strongly recommended that these discussions be conducted within the framework of a procedure to prevent difficulties (ad hoc mandate or conciliation).

These procedures allow negotiations to be held with the company's various partners in a confidential and secure framework that safeguards the interests of the company and third parties under the aegis of a professional appointed by the court (ad hoc agent or conciliator).

In addition, these procedures encourage the conclusion of agreements with creditors, in particular credit institutions, thanks to the intervention of the conciliator, who can reassure them that the efforts they are being asked to make are (i) balanced in relation to the other parties involved (other creditors in particular) and (ii) sufficient to ensure the continuity of the business.

With regard to the restructuring of State Guaranteed Loans, the order of 8 July 2021 amending the order of 23 March 2020 granting the state guarantee to credit institutions and finance companies pursuant to Article 6 of the Amending Finance Act 2020-289 provides for the possibility for banks to amortise their maturities beyond six years while retaining the state guarantee in the context of insolvency proceedings but also in the context of a conciliation procedure.

From this point of view, conciliation is the most suitable procedure for bank restructuring since it allows borrowers to benefit, subject to an agreement, from a deferment of the State Guaranteed Loans equivalent to what could be obtained in collective proceedings but in a strictly confidential framework.

This is of undeniable interest, particularly for companies that respond to public tenders or for which the activity is sensitive to the opening of a collective procedure.

It also makes it possible to secure the borrower's situation throughout the discussion phase and to impose deadlines on recalcitrant creditors throughout the conciliation. In practice, banks are accustomed to these procedures and agree to suspend the payment of their outstanding debts during the conciliation, which immediately generates a breath of fresh air in terms of cash flow and allows for the calm negotiation of a long-term agreement, in the best interests of all parties.

At a time when the first State Guaranteed Loans deadlines are coming up, companies must anticipate the difficulties to come and appropriate these preventive procedures that the legislator has greatly favoured in recent months to support the end of the crisis.

Published in Les Echos Solutions De l’intérêt d’anticiper la restructuration des PGE (lesechos.fr) on the 29 September 2021