statement of principles for a global approach to multi-creditor workouts

INSOL INTERNATIONALwww.insol.orgSIXTH PRINCIPLE: Proposals for resolving the financial difficulties of thedebtor and, so far as practicable, arrangements between relevant creditorsrelating to any standstill should reflect applicable law and the relativepositions of relevant creditors at the Standstill Commencement Date.Commentary:The objective of the information-gathering, due diligence andevaluation processes during the Standstill Period is to enable therelevant creditors to evaluate the debtor’s position, to assess anyproposals which the debtor may put to them and to satisfythemselves that they are receiving equitable treatment relative tothe other relevant creditors.Inevitably they will wish to compare what may be offered to themwith what they might expect from a formal insolvency or fromother options open to them (eg, the sale of their debt). Thiscomparison may simply be based on their individual assessmentof likely realisations in an insolvency or upon professionalaccounting and legal advice.It is common for the accountants or other financial advisers actingfor the relevant creditors to provide comparative advice of thisnature and the accountants very often base their adviceon insolvency models they produce in respect of the debtor orthe debtor group which operate by reference to certain statedlegal and accounting assumptions (eg, as to the validityof security, guarantees, rights of recourse, rights of set-off etc.)and are based on the information produced through the duediligence process.26