Update: German Bond Act Not Applicable in Q-Cells and Pfleiderer Restructuring

Last week’s decision of the Frankfurt Court of Appeals (Oberlandesgericht) in the Pfleiderer bond restructuring has now been published. The Court of Appeals did follow the reasoning of the District Court in the Q-Cells matter, on which I had reported in more detail in my previous post.

The Court of Appeal refused to apply the new German Bond Act, since this would amount to an unconstitutional retroactive effect for the legislation introduced in 2009 on bonds, such as the Pfleiderer and Q-Cells bonds, that were issued before August 2009. In practice, bonds issued by German corporates abroad before that date through foreign subsidiaries, can only be restructured by unanimous vote. The procedures that allow changes with a 75% majority vote are not available.

Even though technically, last week’s decision applied to Pfleiderer only, by implication, the Court of Appeals also confirmed the first instance ruling on Q-Cells. Q-Cells have given up any hope of rescuing their bond restructuring scheme, in the light of the reasoning in the Pfleiderer matter. According to press reports over the week end, Q-Cells are expected to file insolvency proceedings this week.

Update: For a German language summary, see my comments in Financial Times Deutschland on April 3, 2012. Joachim Jahn is covering the issue for Frankfurter Allgemeine Zeitung.


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