Linde Allows Greater Flexibility on New Corporate Refinancing Requirements

19/03/2014 – Expansion

The Bank of Spain has not waited for the deadline established by the Royal Decree – Law to arrive. The new regulation imposed amendents in the Insolvency Law facilitating viability for companies facing over-indebtedness in order to establish loan qualification criteria and perhaps allowing them to break free from present provisions. (…).

The Executive Committee of the national bank (…) with Luis María Linde ahead claims that the changes ´go along with the IMF´s recommendations´ included in the fund´s latest report and that the new reform on refinancing agreements ´will contribute to cutting in the Spanish corporate debt and will encourage the viable firms´ continuity.´

Ordinary loans

(…) All the refinancing agreements under umbrella of the recently introduced Royal Decree shall from now on be considered ordinary.  Therefore, entites will not be obliged to impose provisions on the loans as long as they are not defaulting. (…).

The Bank of Spain points out that estimation of debt forgiveness effect, postponing deadlines and weighting up possible swap of the debt into capital in order to “recover the owed amount” may play crucial role in the process. (…).

Precautionary measures

If the restructued companies fail to meet requirements, newly granted loans will have to be considered as doubtful receivable or even defaulting. Once classified as so, they will have to face further obligations but this time banking entities will be able to improve their risk qualification and normalize payments.

 

 

Original article: Expansión (Salvador Arancibia)

Translation: AURA REE

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