Debitos helps unblock ‘zombie’ multi-creditor restructurings with creditor coordination service
- Creditor Coordination utilises the Debitos marketplace to connect disparate creditors in widely held corporate loan facilities
- Solves poor creditor coordination which ECB cites as potential cause of NPL sector “market failure” with a potential market value uplift of up to 6%, expressed as % of gross book value (GBV)
- Increases cooperation and coordinated transactions, enables investors to secure underlying collateral ownership and improves exit terms for minority creditors
Frankfurt – September 30, 2022: Debitos has launched a service to leverage its platform as the leading secondary market for loans in Europe to coordinate cooperation and transactions in multi-creditor loan facilities.
The new product, named Creditor Coordination, utilises the Debitos marketplace to connect disparate creditors in widely-held corporate loan facilities including non-performing loans (NPLs), sub-performing syndicated loans or Schuldscheine and unlikely-to pay (UTP) debt in corporate restructurings, insolvencies and loan defaults. The product helps to solve the problem of poor creditor coordination, identified by the European Central Bank (ECB) last November as a potential cause of “market failure” in the otherwise strengthening NPL sector.
The ECB stated “the existence of multiple creditors leads to uncertainty about rights to the assets and cash flows of the debtor for any specific creditor”, in a statistical study on creditor coordination in non-performing corporate loans. All this complexity causes longer resolution times and lower investor participation while increasing creditor coordination costs, which collectively negatively impact asset values and recoveries.
Gains from improved creditor coordination can increase market value as % of gross book value (GBV) by up to 6%, according to the ECB study. “Consolidation of the entire debt of a distressed firm by one investor, as done by some system-wide asset management companies (AMCs), would address this challenge,” the ECB report concluded.
In the past five years, Debitos has successfully helped consolidate ownership of multiple major multi-creditor loan facilities in Germany, the UK and Italy. Last month, Debitos launched an offer to creditors of Greensill Bank, the supply chain finance lender which collapsed into insolvency in March, to sell their claims to investors via its marketplace.
The Creditor Coordination service on the Debitos platform helps overcome multi-creditor NPL bottlenecks, stimulate transactions and provide improved creditor recoveries for investors and banks. Investors can coordinate the purchase of unowned loan positions from minority creditors, paving the way for a controlling creditor to secure ownership of underlying collateral and execute asset business plans. Minority investors in multi-creditor NPLs benefit from the opportunity to sell positions to a motivated buyer, improving recovery prospects. Faster workouts also help to accelerate the broader economy’s recovery.
The Creditor Coordination service supports sales from one creditor to another, linked to the same borrower, sales from several creditors to a third-party investor or where a single investor wishes to buy all creditor loans/claims from one debtor.
“Multi-creditor corporate restructurings are among the most difficult to resolve,” says Timur Peters, founder and CEO of Debitos. “Our new Creditor Coordination service helps to consolidate ownership of multi-creditor loans, take ownership of underlying assets and secure improved creditor recoveries in coordinated sales activities on the Debitos marketplace. We already have a track record in this space, in both Germany and Italy, which this new product launch extends. The process is confidential, secure and efficient. In addition, it helps supports the revival of distressed corporates and asset-backed portfolios.”
More information on the new service is available here: Additional services | Creditor Coordination
Debitos is the leading loan transaction platform in Europe that enables banks, funds and companies to sell their credit exposures on the market through its open and transparent auction-based online transaction platform.
The platform leverages on the digitalisation of the entire sale process and can reduce the expected disposal timing to 3-8 weeks compared to 3-6 months of the traditional process. Debitos was founded in Frankfurt in 2010 and has since successfully transacted more than 800,000 loans in 16 countries. By now, more than 1,700 investors from all over Europe have registered with Debitos.