The insolvency of the SIGNA Group is the largest ever insolvency in Austria with debts reportedly exceeding EUR14 billion.

Recently, the three largest holding companies of the group started debtor in possession restructuring proceedings which allowed management to continue the day-to-day running of the businesses during insolvency proceedings. Due to an error in the timing of the proceedings, the non-operationally active top holding company (SIGNA Holding) was forced to end self-administration.

The timing problem 

The timing of the insolvency applications of the three group holding companies meant that (due to the statutory deadlines) SIGNA Holding's restructuring plan would be voted on before the creditors of the affiliated holding companies had voted on their restructuring plans. Confirmation of the acceptance of their plans was required for the restructuring of SIGNA Holding which could not proceed without it.

Key takeaways

• Debtor in possession proceedings are only viable if the tight statutory time frame can be adhered to.
• When restructuring several affiliated companies in debtor in possession restructuring proceedings, generally the bottom-up principle should be applied - ie applications for subsidiaries should be filed first, so that the required consents are in place before the vote on each restructuring plan takes place. 

To discuss the issues raised in this article in more detail, please contact a member of our Restructuring & Insolvency team.