EHYA asks Britain to re-think restructuring rules
By Tom Freke
LONDON, March 6 (Reuters) - Top representatives of Europe's leveraged-finance industry have asked Britain to re-examine its insolvency laws, warning the current system makes it more likely companies will go bust.
The European High Yield Association (EHYA) says UK rules have not kept up with an explosion of investors and capital structures, and make restructuring tough because creditors have to accept a deal unanimously.
EHYA members met with lawyers, academics, civil servants and two senior judges on Wednesday to press their case.
"There was a broad consensus that the insolvency and restructuring regime needs to change," said Andrew Wilkinson, co-chair of the EHYA's insolvency committee.
"That is a tremendous step forward and we hope on the back of that the government decides to launch a consultation paper," said Wilkinson, who also heads Goldman Sachs's European restructuring team.
Demands for changes to the UK's insolvency laws have grown in recent months as more companies have run into difficulty.
There were 4,607 corporate insolvencies in England and Wales in the last three months of 2008, a 52 percent increase on the same period a year previously, according to the government's Insolvency Service.
At present there are no plans for changes to the UK's laws, the Insolvency Service said.
"We believe the UK insolvency framework is sufficiently robust to cope with the current economic circumstances," a government spokesman said.
"There isn't a consensus on what should be changed in the framework but we continue to discuss the framework with the insolvency profession and other stakeholders to see whether there are any areas where it can be further strengthened," the spokesman added.
The EHYA points to increasingly complex capital structures, which can include many different layers of debts, and sometimes hundreds of lenders.
Wilkinson said recently introduced "sauvegarde" rules in France, which allow a judge to strike a deal that binds all creditors into a restructuring proposal, provide an interesting model for Britain.
"If the UK government wanted to do something quickly, looking at the sauvegarde law in France would be a valuable thing to take into account during any consultation process."
The sauvegarde rules were introduced during the long-running restructuring of Eurotunnel, the cross-channel rail tunnel operator. That allowed a restructuring deal to be approved for Eurotunnel [GETP.PA] in 2007 despite the objections of a minority of creditors.
(Reporting by Tom Freke; editing by Simon Jessop)
