Trade Alert - April 2017, Issue 40


Greek banks entered the crisis in 2008 with a total outstanding amount of Non-Performing Exposures (“NPEs”) of EUR 14.5bn. At the end of June 2016, NPEs had reached EUR 108.4bn, representing the most significant challenge for the Greek banking system.

The Bank of Greece, working in cooperation with the European Central Bank (“ECB”), is implementing measures to reduce NPEs, including an operational targets framework.

“NPEs”1 and Non-Performing Loans2 (“NPLs”) are monitored and reported on quarterly by the Bank of Greece to measure performance against targets. Click here for the latest Bank of Greece report (5 April 2017).

NPE and NPL volumes of the four “systemic” institutions; Alpha Bank, Eurobank, Piraeus Bank SA and National Bank of Greece are subject to targets along with the “high priority less systemic institutions”; Attica Bank, Pancretan Cooperative Bank and Cooperative Bank of Chania, aiming to cut NPEs by 38% to EUR 66.7bn and NPLs by 49% to EUR 40.2bn by 2019.

The targets are anticipated to be met by way of write offs, restructurings, liquidations and sales, with EUR 7.4bn estimated to be removed from banks’ balance sheets through portfolio disposals. A further EUR 9bn of assets under special liquidation is expected to be brought to market in 2017 under the management of the newly appointed Single Special Liquidator (“SSL”).

Other initiatives include the enactment of legislation in 2015 (Law 4354/2015) providing a fully developed regime for the transfer and servicing of NPEs and performing bank exposures (“NPE Regime”).

Under the NPE Regime, investors acquiring NPEs on the secondary market are required to enter into a Servicing Agreement with a licensed service provider or obtain a servicing license directly from the Bank of Greece (no European Passport is available for such a license). At the time of going to press, Cepal Hellas (formally known as Aktua Hellas), KKR (via its restructuring platform, Pillarstone), Qualco, Kaican, Alvarez & Marsal and 3R and Associates are known to have submitted applications to manage loans under the NPE Regime. Cepal Hellas is currently the only applicant to have been granted a license.

Alpha Bank is expected to conclude its first transfer to Cepal Hellas of a EUR 500m NPL portfolio of mostly mortgage loans in the next two weeks. Alpha Bank reportedly holds 55% of the share capital of Cepal Hellas and the remaining 49% is held by Spanish group Aktua.

The Greek press also suggest that the sale of defaulted real-estate-linked assets will be accelerated using internet-based auctions which are expected to launch in September 2017.

While significant progress has been made in facilitating NPE resolution, concerns still remain in the Greek banking industry regarding the potential liability of bank management where loans are sold at a discount to book value, which has to date impeded sales. The banks are hoping for change and discussions are ongoing for legislation to protect management from personal liability when executing restructurings and loan write-offs. This would remove a significant hurdle and progress the implementation of sales.

This alert summarises the key issues for loan investors to consider in the Hellenic Republic.


Pursuant to the Greek Bankruptcy Code (Law 3588/2007, as amended) secured creditors can elect to exercise their security irrespective of bankruptcy proceedings save in circumstances where the assets are closely related to the debtor’s business, in which case such option shall be temporarily suspended (for a maximum of 10 months). Secured creditors cannot exercise their security where the debtor is in liquidation.

Unsecured creditors can individually attempt to recover their debt through ordinary legal proceedings and the creditor can enforce its rights by obtaining an executory title against the debtor. A creditor with an executory title can seize any of the debtor’s assets, proceed to a forced sale of the same (through an auction) and claim satisfaction of the debt from the proceeds. Where bankruptcy proceedings have commenced, however, unsecured creditors will have to announce their claim and be ranked in the bankruptcy process.


There have been extensive amendments to the voluntary reorganisation procedure in Greece. To date, the reformed procedure remains largely untested and market intelligence suggests that most financial institutions will continue to make use of the existing ‘special administration procedure’. Whether the new procedure will gain traction within the jurisdiction remains to be seen.

The new scheme permits the development of a debtor-in-possession insolvency procedure (akin to a Chapter 11 process in the US) which allows the debtor to maintain control of the business along with the bankruptcy administrator. A reorganisation plan can be proposed by any debtor within four months of it being declared bankrupt or where it files a voluntary bankruptcy petition.

Upon the commencement of insolvency proceedings, a bankruptcy administrator is awarded the right to manage and transfer the debtor’s assets. The bankruptcy administrator is entitled to submit a reorganisation plan following the expiry of the four month period.

Following receipt of the plan, the court may permit the debtor to maintain control of its business under the supervision and cooperation of the bankruptcy administrator. Until the grant of any court order, a moratorium may be imposed as a preliminary measure. A moratorium on all enforcement actions by unsecured creditors will immediately come into effect following a declaration of bankruptcy.

Any ratified organisation plan will be binding on all creditors.


Creditors that supply credit, goods or services pursuant to or in connection with a ratified recovery agreement or reorganisation plan will become first ranked general preferential creditors superseding all other creditors.



Under the NPE Regime, the transfer by Greek banks of any debt, including performing and non-performing loans, is only permitted where the transferee: (i) has entered into a Servicing Agreement with a service provider licensed by the Bank of Greece under the NPE Regime; or (ii) is a licensed credit institution. This rule is subject to limited exemptions, such as the transfer of debt in the context of the Greek securitisation regime (“Securitisation Regime”). It should be noted that transfers between licensed credit institutions do not fall within the scope of the NPE Regime.

The Servicing Agreement should stipulate the servicing powers of the servicer and the servicing fee. The Bank of Greece should be provided with notice of the Servicing Agreement within 10 days of its execution.


Institutions licensed under the NPE Regime are entitled by virtue of statute to enforce the rights and claims arising pursuant to the underlying credit agreements. Licensed entities are also entitled to extend additional finance to borrowers provided that they satisfy certain minimum capital requirements. Licensed servicers granting new loans are liable for a special charge otherwise known as the “Bank of Greece levy” (equal to an annual fee of 0.6% on the outstanding amount of the loan). Note that various exemptions apply to the levy, including for loans in the form of Greek bonds.


Resident or non-resident entities may apply to the Bank of Greece for a servicing license. Applicants will need to, among other things: (i) show that they are “fit and proper” institutions for the purpose of servicing existing loans; (ii) present appropriate organisational and operational structures; and (iii) develop a servicing manual based on their proposed business model.

Licensed entities will be supervised closely by the Bank of Greece and will have to abide by all rules applicable to Greek banks for the servicing of NPEs, including consumer protection legislation (where applicable) and the Code of Conduct on NPE management.


Under the NPE Regime and the Securitisation Regime transfers are permitted by way of assignment of rights. Legally, this is the preferred transfer mechanism, as it secures the concurrent transfer of any ancillary rights of the loan (including rights to interest payments and security rights) provided the borrower is notified of the transfer (unless the assignment is in the context of a Greek securitisation structure, in which case deemed notification applies as of registration of the transfer with the securitisation registry). Notably, novation (as an alternative) would constitute a new contract between the parties and therefore carry a risk of releasing existing security and triggering the resetting of hardening periods for insolvency purposes.


15% withholding tax will apply to interest payments by Greek borrowers irrespective of the domicile of the beneficiary of the interest. Bilateral tax treaties may apply, for example a double taxation treaty with the UK provides for a zero rate of withholding on interest between the two countries.


Transfer of Greek loans is not subject to any Greek stamp duty or VAT. Nevertheless, capital gains or other income tax implications may arise for the transferor as a result of the transfer. VAT will apply to the fees payable under any Servicing Agreement, for example.


The concept of a trust is not recognised under Greek law. However, parallel debt arrangements, whilst not explicitly provided for under Greek law, are commonly used in Greece.


The transfer of bank debt under the NPE Regime and/or the Securitisation Regime requires registration with a public registry (e.g. cadastres).


  1. NPEs are defined by the European Banking Authority (EBA) as non-performing exposures that satisfy any of the following criteria: (a) material exposures which are more than 90 days past due; or (b) the debtor is assessed as unlikely to pay its credit obligations in full without realization of collateral, regardless of the existence of any past due amount or of the number of days past due.
  2. Under Greek Law 4354/2015, as initially enacted, any loan or credit agreements which are due and unpaid for a period of more than 90 days fall within the definition of a “non-performing loan”. The current definition is derived from the combined application of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms, article 150 of Law 4261/2014 on suspension on-balance sheet accrual of interest payments in loans 90-days past due (introducing into Greek law DIRECTIVE 2013/36/EU OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC), ACT 42/30.5.2014 of the Executive Committee of the Bank of Greece, as amended by virtue of ACT 102/30.8.2016, IFRS 9 on impairments (given the distinction between on and off balance items) and, most recently, the EBA Standards (Annex V. Part 2. 145-162).

Special Note

With special thanks to Nikos Salakas at Koutalidis in Greece, who assisted us with this Trade Alert.


George Pelling Associate, London
+44 207 170 8569
George Pelling is an associate in the Financial Restructuring Group and the Debt and Claims Trading Practice in Cadwalader's London office. George advises on distressed debt investing and claims trading and has significant experience in international finance transactions.



On 6 April 2017, the Croatian Parliament passed the “Law on the Procedure of extraordinary administration in companies of systemic importance for the Republic of Croatia”, now known as “Lex Agrokor” (the “Emergency Law”). The new law introduces an extraordinary administration procedure for financially distressed companies of systemic importance to the Republic of Croatia.

Proceedings under the Emergency Law were officially commenced on 10 April 2017 on behalf of Agrokor d.d., which is Croatia’s largest employer and privately owned company. Under the Emergency Law a state appointed trustee, Ante Ramljak, will now manage the rights and obligations of the Agrokor Group.

Pursuant to the new legislation, the trustee must propose a settlement plan to creditors within 12 months of the commencement of proceedings, subject to being granted a three month extension by the Commercial Court of Zagreb. The trustee’s proposal requires the consent of the creditors' council.

As reported by Reuters, Agrokor’s largest creditors include two Russian banks, Sberbank and VTB Bank, two Croatian banks, Zagrebačka Banka and Privredna banka Zagreb (PBZ), and two Austrian banks, ERSTE Staiermerksiche and Raiffeisen Bank. Bondholders include T Rowe Price, Fidelity Investments, Jupiter Asset Management, Knighthead Capital Management and AXA. According to Sberbank’s First Deputy Chairman, Maxim Poletayev, Sberbank is now considering selling EUR 1.1bn in loans (granted to Agrokor) on the secondary market.

Pursuant to the Emergency Legislation, financiers are able to lend to Agrokor on a super senior basis. Subject to the consent of the creditors’ council, such new financing will rank ahead of the claims of other creditors except for claims of employees. On 12 April 2017, Agrokor was provided with an EUR 80mn super senior facility by Zagrebačka, Privredna Banka Zagreb branche, ERSTE and Raiffeisen. According to Ante Ramljak, the trustee, the money will be used to pay all the Company’s obligations until June, taxes and salaries included.

Agrokor purchased Mercator Poslovni Sistem d.d., the Slovenian retailer in June 2013, of which Agrokor is majority shareholder. On the 25 April 2017, the Slovenian Parliament adopted its own emergency legislation, known as “Lex Mercator”. The legislation provides some protection to the Slovenian company from its distressed parent. Reports from Debtwire suggest that under the new legislation a state appointed associate member of Mercator’s management board will now be able to reject instructions from the majority shareholder where such instructions are deemed harmful to the company.

On 25 April 2017, the trustee engaged Alix Partners as chief restructuring officer in the administration process in order to conduct a detailed analysis of the Agrokor Group and propose a restructuring plan that will be offered for approval to debt holders and creditors by January 2018.

Creditors now have until the 10 June 2017 in which to file claims against Agrokor or any of its Croatian affiliates.

If you require any additional information in relation to Agrokor, or the claims filing process in Croatia, please contact George Pelling.


National Bank of Abu Dhabi PJSC v BP Oil International Limited [2016] EWHC 2892

This High Court judgment highlights the possible adverse consequences of settling a transfer in breach of a contractual restriction to obtain borrower consent.

The case concerned an agreement between BP Oil International (“BP”) and the National Bank of Abu Dhabi (“NBAD”) wherein NBAD agreed to purchase a proportion of a receivable from BP by way of equitable assignment. Under the agreement, BP represented that “it was not prohibited by any … agreement to which it is a party from disposing of the receivable” and that such sale did not “conflict with any agreement binding on” BP. It subsequently transpired that BP was not entitled to assign the receivable without obtaining the consent of the debtor. The judge found that BP was liable for misrepresentation.

Whilst the transaction concerned was not settled using LMA documentation, the case still reinforces the following legal principles, which are relevant to all traders in the secondary market:

  1. where assignment is prohibited without the prior consent of the debtor which is not to be unreasonably withheld, an assignment made before the debtor’s consent is sought is ineffective as regards the debtor and it is irrelevant whether or not the debtor could have reasonably withheld its consent if asked in time;
  2. an equitable assignment is an assignment that would require consent, if “assignments” generally require consent under the loan document;
  3. part of a debt cannot be the subject of a legal assignment but can be the subject of a valid equitable assignment;
  4. an agreed contractual repayment term (e.g. a disallowance provision) in the event of breach is the correct assessment for the purpose of calculating damages; and
  5. where a seller gives a representation that there are no restrictions on assignment, even where the contract provides for alternative methods of settlement (by way of participation, for example), the seller will still be liable for misrepresentation if a borrower’s consent to assign is required.The full decision is available here.
  6. The case serves as a useful reminder that sellers need to be aware of their representations in the context of any restrictions on transferability of the underlying debt/receivable that may give rise to a successful action by the buyer in circumstances where the transfer is made without the required consents.


On 27 April 2017, the LMA published its recommended form of “designated entity clause” for use in the LMA's senior facilities agreement for leveraged acquisition finance transactions (senior/mezzanine) and the LMA's recommended form of syndicated facility agreements.

The clause was developed to provide flexibility to allow Lenders to comply with current or future licensing requirements in different jurisdictions, for example, in light of passporting reforms post Brexit.

More information is available on the LMA website.



The workforce of the loss-making Italian airline Alitalia has rejected the terms of a proposed rescue deal, which envisaged 980 company layoffs and a recapitalisation package of EUR 2bn.

The board reconvened a shareholder meeting on 27 April 2017 to deliberate on the future of the company.

As reported in The Financial Times, it is now widely suspected that the embattled carrier will be placed into administration. The Italian government has ruled out the possibility of a state backed rescue of the company. It was recently reported in Debtwire that German airline Lufthansa has made an informal approach to buy the company.



Annual General Meeting:

Glitnir held its Annual General Meeting on 26 April 2017. The final agenda for the meeting can be found here.

Further information on the agenda items and final submissions are available for inspection by shareholders at Glitnir’s headquarters and can be found on the secured website

Optional Redemption Second Notification Date - 26 April 2017 and remaining balance after 26 April 2017 payment

On 26 April 2017, Glitnir redeemed the Notes in part by way of an optional redemption payment in cash pursuant to Condition 6.3 of the Terms and Conditions of the Notes. The final amount used to redeem the Notes was EUR 28,283,027.

The aggregate principal amount of the Notes is EUR 285,775,290 immediately following the payment on 26 April 2017.

Noteholders who wish to confirm the outstanding principal balance in respect of their holding of the Notes can do so by logging in to the secured website.

LBI ehf.

On 19 April 2017 LBI released its Financial Statement for 2016. A copy of the Financial Statement is available here.

LBI held its Annual General Meeting on 27 April 2017. A final agenda for the meeting can be accessed here.

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