Nov.04.2005

Japanese Bankers Association

Study Group Releases Findings on Guidelines for Multi-Creditor Out-of-Court Workouts

The Follow-up Study Group on the Guidelines for Multi-Creditor Out-of-Court Workouts (Chair: Shinjiro Takagi, Professor of Law at Chuo University; Secretariat: JBA) published a report describing future tasks based on past experience concerning the Guidelines and amended the Q&A concerning the Guidelines on November 4. The following outlines its position.

1. Main future tasks
- Coordination between concerned parties
Multi-creditor out-of-court workouts require the consent of, in principle, "all" concerned creditor financial institutions to be implemented. However, this is actually impractical. Therefore, legislation and other measures need to be established to ensure smooth coordination among parties and promote quick business revitalization.
2. Amendments to the Q&A concerning the Guidelines
(1) "Financial restructuring to adjust capital composition," such as debt equity swaps, may be included in the grace/forgiveness in multi-creditor out-of-court workouts.
(2)In drafting revitalization plans, "future cash flows based on the plan" should be stated in business plans in addition to the "prospects for assets, liabilities and profits/losses."
(3) Servicers and funds, in addition to financial lenders, are included in the scope of "concerned creditors" (creditors whose claims will be affected by the establishment of revitalization plans).
(4)Government financial institutions may remain main creditors or concerned creditors in multi-creditor out-of-court workouts after Urgent Economic Measures are settled.
(5) In addition to certified accountants and lawyers, "experts who are knowledgeable about and experienced in drafting revitalization plans" are included in the "advisors" that are selected by creditor meetings.
(6)The Guidelines are applied not only to large companies but also to small and medium-sized companies.