July 2023

Decision of the Kalamata Court of First Instance on the Validation of the Rehabilitation Agreement

The decision No. 11/2023 of the Kalamata Court of First Instance was published, which accepted our application for the ratification of the Rehabilitation Agreement signed between the company and two Servicers. 

In the context of the agreement, in addition to the settlement of the outstanding debts to the management companies, arising from credits that the company had received, the company also obtained an interest-free settlement of its debts to the State and the e-EFKA, with a significant write-off of debts, rejecting the main interventions by those bodies, in which they sought the rejection of the application. 

In particular, the debts to both the State and the EFKA were settled in 240 interest-free instalments (20 years), with the first instalment payable within 90 working days of the publication of the decision confirming the agreement. It is indicative that through the out-of-court debt settlement mechanism, which is the most widely used debt settlement tool, debts to the State and the EFKA can be settled in up to 240 instalments, but at an interest rate of 3%. 

At the same time, the resolution agreement cancelled part of the debts to the State and the EFKA, but also all the debts to these entities arising from the submission of the resolution application until the publication of the validation decision. Indicatively, for EFKA, the benefit to the company from the write-off alone amounts to approximately half a million Euros, not including the benefit to the company from the interest-free arrangement of its non-written-off debts. 

The Court upheld the agreement, holding that it did not infringe the principles of equal treatment and of non-deterioration of the creditors' position, since the State and EFKA, on the one hand, are not in the same position as the financial institutions, which justifies their less favourable treatment, and, on the other hand, would not recover more through the insolvency proceedings than the amounts they would receive through the implementation of the reorganisation agreement. On the basis of those considerations, the Court rejected the main submissions of the above-mentioned parties seeking the dismissal of the application, on the ground that the write-off and the non-interest-bearing nature of the arrangement were unlawful. 

As we have written elsewhere: "In fact, the courts when deciding to write off a debt to the State also base this position on the following considerations: "In this way, from the above legislative choices, it becomes clear that in view of the socio-economic crisis, the viability of the company is a priority, and in the face of the possibility of its survival, the claims of the Greek State and the social security institutions are subordinated. Moreover, the achievement of the objective of consolidation (i.e. the return of the company to the production process) will result in future revenues for both the Greek State and the social security funds".

(for more see here, here, here and here)