1. Structure of Spanish Restructuring

Spain has two tracks:

A. Restructuring Plans (Planes de reestructuración) - Book II TRLC - Pre-insolvency
For likelihood, imminent, or current insolvency. Court sanctioned (homologación). This is where cramdown lives.

B. Convenio - Insolvency Proceedings (concurso) - Book I
Composition agreement. Cramdown of shareholders does not yet exist in concurso, so not common for creditors to propose.

Cramdown means: Court can approve plan even if not all creditors / shareholders approve, and extend effects to dissenting parties.

2. Three Levels of Cramdown under TRLC

Level 1: Intra-class cramdown (Syndicate cramdown)

If 2/3 of creditors in a class vote in favor (3/4 for secured class), the class is deemed to approve. Dissenting individual creditors in that class are bound.

For syndicated loans: If 2/3 or 3/4 of syndicate approves, individual votes will be counted as voting in favour unless syndicated debt forms separate class.

Level 2: Cross-class cramdown (creditors)

This is the core. Under new law, it is possible to extend effects of restructuring plan to a class that has not approved plan (cross-class cramdown) if homologated by court and:

Condition A: Approval by simple majority of creditors' classes, provided that at least one of them is a class of claims that in insolvency would have been classified as special or general privilege (secured or privileged); OR

Condition B: Approval by at least one class that in insolvency would have been classified as "in-the-money" - i.e., would receive some payment on liquidation valuation. Some interpretations require that dissenting classes are not worse than relevant alternative.

Plus mandatory safeguards:

• Best Interests of Creditors Test: Dissenting class cannot receive less than liquidation value.
• Absolute Priority Rule (Relative in Spain): Spain follows absolute priority with exceptions: Senior classes must be paid in full before junior gets anything, BUT deviation allowed if necessary to achieve plan goals and not unfairly prejudiced - Art 655.3 TRLC says creditors must not be damaged in unjustified manner.
• Secured creditors cannot be crammed down in secured part: Secured creditors that voted against plan when its class voted against cannot be subject to cramdown in secured part of debt. Protection of secured creditors very high.

Level 3: Shareholder Cramdown (Equity cramdown) - NEW

For first time, new rules include shareholders cramdown. A restructuring plan approved by creditors containing measures affecting shareholders (debt-for-equity, capital dilution, expulsion) may be imposed on shareholders even if general meeting voted against, only when debtor is in imminent or current insolvency (not mere likelihood).

For current or imminent insolvencies (but not likelihood), creditors can cramdown debtor and shareholders, meaning creditors can impose terms including capitalization of claims diluting or expelling current shareholders. Aims to prevent out-of-the-money shareholders hijacking negotiations.

Under old law, there was no equity cramdown mechanism. Debtor could bargain with right to petition for liquidation.

3. Procedural Requirements

1. Class formation: Based on common interest - secured, unsecured, public creditors, intercompany.
2. Valuation: Courts expect defensible methodologies - going-concern value, DCF, liquidation value, reconciled and tested against best-interest test.
3. Restructuring expert (Experto en reestructuración): Independent expert report on plan feasibility and valuation.
4. Homologation: Court sanction required to: (1) cramdown holdouts, (2) obtain protection from clawback, (3) protect new money / interim financing.

4. Landmark Case Laws - Post Ley 16/2022

This is where Spanish law is being tested now:

1. Celsa Group - Juzgado Mercantil No.2 Barcelona - 2023 - THE Landmark - EUR 2.8 Billion

Europe's second largest steel producer. Turnover €6.1B in 2022. Debt €2.8B held by GoldenTree, Cross Ocean, Sculptor (bought at discount), Goldman Sachs.

• Creditors proposed own restructuring plan under new law after shareholders tried to use public money to repay debt at discount.
• Shareholders judicialized debt, argued company not insolvent, debt contingent, shareholders not out-of-the-money.
• Commercial Court dismissed challenges, confirmed insolvency, allowed restructuring plan and consequently cramdown to proceed.
• Sanctioned creditor-proposed plan: €1.2B 5-year bond, €200M equity injection, €600M subordinated loan, €200M RCF. Ownership transferred to financial creditors.
• First non-consensual restructuring under reformed law, first time judicial cramdown imposed on secured syndicated creditors. Demonstrates possible for creditors to propose and execute plan without debtor consent.

Legal point: Court held creditors were "formally" but not "materially" secured due to security structure, thus could be crammed.

2. Single Home - 2023

First case of likelihood of insolvency + cross-class cramdown. Real estate developer. Court approved plan despite one class of unsecured creditors voting no, because majority of classes including privileged approved, and best interests test met. Established precedent for likelihood cases.

3. Xeldia / Celsa satellite - 2022-2023

Group of Spanish SMEs. Showed hotel restructuring application: Ability to impose plan on dissenting creditors provided statutory cross-class conditions satisfied - sufficient number of classes including in-the-money creditors, and dissenting classes treated no worse than relevant alternative.

4. Ezentis, Hedima, Haciendas Bio, Pharmex, Reverté - 2023 batch

Series of first-year decisions under new law:

• Ezentis (telecom): Creditors crammed down shareholders using imminent insolvency route.
• Haciendas Bio: Likelihood case failed - court said for likelihood, shareholder cramdown not available, only creditor cramdown.
• Iberian Resources: Valuation dispute - court required both DCF and liquidation valuation.

5. Old Celsa Scheme 2013 (English Scheme)

In 2013 Celsa used English Scheme to cram down 9% secured creditors opposing scheme. Judge said creditors were formally but not materially secured, meaning they couldn't enforce security. This led to reform - now Spain can do it domestically.

5. How Spanish Cramdown Differs from US Chapter 11 / UK

• No absolute priority like US: Spanish absolute priority is more flexible.
• No equity cramdown in concurso: Only in restructuring plans.
• Secured part untouchable: Unlike US where secured can be crammed, Spain protects secured portion.
• Valuation litigation: Like Celsa, valuation disputes are central - need independent expert.

6. Practical Checklist for Cross-Class Cramdown

To succeed under Art 638-655 TRLC:

1. At least 2 classes: Secured + unsecured.
2. Get 2/3 majority in each consenting class.
3. Ensure at least one consenting class is privileged or in-the-money.
4. Provide liquidation comparison - prove dissenting class gets >= liquidation.
5. If targeting shareholders: Prove current or imminent insolvency, not mere likelihood.
6. File expert report + DCF.