Bonds

One Square is the specialist and proven market leader for the restructuring of German bonds.

With our team of proven capital market experts, we assist issuers who are no longer able to meet their obligations under the bonds they have issued in adjusting the relevant bond terms. In doing so, we make use of the various possibilities offered by the German Bond Act (SchVG 2009) and are able to adapt the existing capital market financing to the operational performance of the companies in coordination and cooperation with the bondholders.

Due to the effects of the Corona crisis and the resulting sales shortfalls, many companies are unable to meet the agreed interest and debt service and to repay or refinance their bonds on time. So far – more than 30 cases – our team has always succeeded in finding constructive solutions that both meet the needs of the issuers and have met the approval of the bondholders.

From our many years of experience in bond restructuring, we know all institutional investors and many private investors who have invested in bonds. Therefore, we have so far always succeeded in mobilising the necessary quorums or presences at the bondholders’ meetings of at least 25% of the outstanding bond volume for an adjustment of the bond terms and conditions and in achieving the necessary majorities of 75% of the represented bond volume.

It was and is thus possible to restructure even complex capital structures with publicly listed bonds and to create the conditions for a sustainably successful continuation of the company.

As common representative of the bondholders, we also represent the interests of the creditors in many cases and ensure appropriate representation in restructurings both outside and in insolvency. Whena company files for insolvency, the so-called weak common representative, who only has information rights and duties, becomes a strong common representative, who exercises all the rights and duties of the bondholders in the insolvency.

One Square has been chosen as the common representative by bondholders of numerous bonds and consistently looks after the interests of the bondholders. Especially in insolvency proceedings, the bond is often the largest financial liability. The bundling of interests, the representation with one voice and the appearance as a united group gives the common representative and thus the bondholders the position and importance that you, as often the largest creditor, deserve.

The common representative is obligated solely to the bondholders. The information for bondholders that One Square represents as common representative can be found under References.

One Square is the specialist and market leader for the restructuring of promissory notes (“Schuldscheindarlehen”).

The Schuldscheindarlehen market in Germany is one of the largest financing markets with a volume of over €250 billion and annual new issues of €20 to 30 billion. A promissory note loan is not a capital markets instrument, but a bilateral loan agreement as defined by section 488 of the German Civil Code (BGB) based on joint documentation. The promissory notes are mostly unsecured and without covenants. The promissory note contract itself is highly standardised and kept simple. The denomination is usually €500,000, which is why it is mainly institutional investors such as commercial banks, Landesbanken, Volks- & Sparkassenbanken, insurance companies and the like who subscribe to promissory notes.

Due to this structure, promissory notesare a “fair weather instrument” from a restructuring perspective. If adjustments to the terms and conditions of the promissory note (term, interest rate, etc.) are necessary, this can only be done unanimously due to the nature of the promissory note as a bilateral credit relationship. This causes considerable problems in the event of a necessary restructuring of the liabilities side, as unanimity can rarely be achieved. There are almost always individual promissory note creditors, usually with small volumes, who adopt a refusal attitude and hope for redemption.

This problem is exacerbated against the backdrop of the tradability of the promissory note. We regularly see hedge funds and distressed investors buying into the capital structure on the secondary market via the promissory notes. These investors usually pursue different objectives from the primary lenders and consistently use this strong position. The entry of these investors further complicates the heterogeneous investor base and makes it difficult not only to communicate and form a uniform opinion, but above all to find constructive solutions in the interest of all parties involved.

One Square has by far the most experience in managing large, heterogeneous and complex creditor groups such as promissory note creditors and bondholders. In many cases, we have proven that, on the one hand, we consistently defend the interests of the creditor groups we represent, but on the other hand, we always seek compromises that are acceptable to all sides and achieve consensual solutions.

Our services in detail:

• Advising and supporting promissory note issuers in the optimal integration of promissory note investors in the context of a financial restructuring (early preparation, intensive consistent communication, market transparency, trust)
• Bundling of communication via a common information platform, organisation of a unified representation of interests of key promissory note representatives and coordination of creditor strategy
• Support and representation of promissory note investors in the negotiation of a financial restructuring with management, other creditor classes, their respective advisors or other parties in general
• Assessing the economic impact of the various scenarios and options, including any M&A processes or otherwise, and together with the various other advisors to the issuers and Schuldschein investors

With the introduction of the so-called StaRUG ( Act on the Stabilisation and Restructuring Framework for Businesses) on January 1, 2021, however, a possibility was created to restructure financial liabilities with majority decisions (75%) even outside of insolvency and thus to force investors who hold small positions and abuse their blocking minority into constructive solutions in a legally binding way. Further details can be found under the StaRUG tab.

Our typical clients are issuers of promissory notes who need to adjust their capital structure.