A crisis always creates chaos. Nobody knows exactly what assets the company has, whether those assets can be used as security, and if so how that can be done. The diverse requirements of different stakeholders converge at once. The situation allows little room for manoeuvre, but requires more precision, knowledge and experience than ever.
Schultze & Braun can look after all aspects of collateral management on behalf of its clients. This includes the provision and management of collateral and the realisation of collateral for banks, credit insurers, central claims settlement bodies, bondholders and institutional investors. As one of Germany’s largest corporate restructuring specialists, we help clients structure the complex situations that arise when a large number of creditors hold a security interest in collateral. And gain clarity.
What does this involve, and why does it have a “dual-purpose”?
In a dual-purpose security trust, collateral – which could be company shares or a security interest in property – is transferred to a trustee. The trustee holds these securities on the basis of a “true” contract for the benefit of a creditor.
Schultze & Braun acts as such a trustee for its clients. If necessary, we will initiate and direct a professional M&A process. We will monitor compliance with the financial indicators specified in credit agreements. And, if necessary, with operational restructuring measures laid down in any ISW S6 restructuring report. For bondholders and holders of other capital market financing instruments, we hold both shareholdings and security interests in property of the issuer.
How can conflicts of interests between participating banks be avoided?
As a provider of securities management services, Schultze & Braun manages bank syndicates as a neutral third party. As pool manager, our role is to provide administrative services and to lay the groundwork for decision-making. Acting as trustee or service provider, we also furnish, manage and realise the syndicate’s collateral. And when the situation requires it, we also act as security agent.
How can a company optimise suppliers’ retention of title rights?
In larger insolvencies, rights to separate satisfaction (and in some cases rights to segregation too) are pooled together under a civil law partnership. Schultze & Braun then assumes management of the civil law partnership and acts as manager of the supplier pool. The aim is to realise suppliers’ retention of title rights as advantageously as possible, particularly as regards purchase terms.
What demands are made by the law relating to avoidance in insolvency as regards the validity of the collateral security provided?
As part of its collateral management activities, Schultze & Braun can review and optimise a company's collateral structure. In the case of revolving collateral (inventories, trade receivables), the principle of specificity, which requires the collateral to be distinct and identifiable, must be adhered to. To ensure this, we update the content of the collateral storage locations and resolve problems around property belonging to others.