A&O Shearman advises Codere Group on successful landmark recapitalization

The recapitalization involved the first-ever successful use of the “syndicate majority” exemption with a 50.1% majority in a Spanish restructuring plan together with the application of a class formation in accordance with the intercreditor agreement waterfall.

The restructuring was implemented using a Spanish restructuring plan along with a Luxembourg share pledge enforcement pursuant to which the ownership of the operating group was transferred to a new Luxembourg-registered holding company wholly owned by the Group’s super senior noteholders. The restructuring also involved the staggered exercise of the security agent’s distressed disposal powers pursuant to an English law intercreditor agreement to effect the debt-for-equity swap for the ‘in-the-money’ noteholders and the release of the ‘out of the money’ secured debt.

Although Codere’s restructuring plan ultimately received the support of over 99% of the super senior creditors, Codere successfully argued that all secured creditors affected by the plan should be deemed to have voted in favor if the plan was approved by at least 50.1% of the ‘in the money’ super senior plan creditors. In support of this innovative argument, Codere submitted that the plan creditors across different classes acted in accordance with the priority and ranking under the intercreditor agreement (section 435.3 of Spanish Insolvency Act) pursuant to which they had contractually agreed to vote as a “syndicate”. Therefore, all plan creditors were bound by the lower contractual majority requirement in the intercreditor agreement (as opposed to the higher statutory majority requirement).

Codere issued around EUR128 million of new first priority notes as part of the transaction, which were fully subscribed by the holders of its super senior notes. Out-of-the-money warrants were also issued as a form of consent fee to the junior secured noteholders who provided their consent to the transaction.

The multi-jurisdictional A&O Shearman team was led by Ignacio Ruiz-Camara, co-managing partner of A&O Shearman Spain, restructuring partner Javier Castresana both in Madrid, with London restructuring partner Tim Watson and U.S. Finance partner Brad Weyland. They had support from specialist practice groups across the firm’s Spanish, English, Luxembourg, Italian and other offices including restructuring, bankruptcy, corporate, U.S. corporate finance and tax. The core restructuring deal team included senior associate Lara Ruiz in Madrid, restructuring), associates Akshita Pandit and Sonia Bennett in London, with U.S. corporate finance associates Irene Mainar Borao and Silvia Montanya.

The core deal team worked closely with the Group’s management, other specialist teams at A&O Shearman including Luxembourg tax partner Patrick Mischo and counsel Johanna Tschurtschenthaler, Luxembourg corporate and banking partners Sylvain Cailleau and Andreas Hommel, counsel Alann Le Guillou and senior legal adviser Khalil Boudhinaand Spanish tax partner Ishtar Sancho and senior associate Juan Jose Sanchez.

The A&O Shearman teams also worked closely with Houlihan Lokey who were the financial adviser to the Codere Group.