1. EU Directive Framework - Article 11

Before the Directive, Spain only had intra-class cramdown - Adicional 4ª Ley Concursal. You could bind dissenting creditors within the same class if 60-75% approved, but you could not bind a whole dissenting class.

Article 11 introduces cross-class cramdown:

A restructuring plan which is not approved by each and every voting class may be confirmed by a judicial authority if:

a) Majority of classes test: Plan approved by a majority of affected classes, or where there are only 2-3 classes, at least one affected class, other than an equity-holder class.

b) Safeguards for dissenting classes:

1. Best-interest of creditors test (Art 2(6)): No dissenting creditor can receive less than in liquidation - the BIC test.
2. Priority rule: Member States must choose Absolute Priority Rule (APR) or Relative Priority Rule (RPR).
   • APR: No class junior to dissenting class can receive anything until dissenting class is paid in full.
   • RPR: Dissenting class must be treated at least as favourably as any junior class, but junior classes can receive value.

Directive allows derogation from APR if necessary to achieve plan objectives and fair.

2. Spanish Transposition - How it Works for Banking Creditors

Spanish law chose APR with flexibility, in TRLC Art. 639-640 and 655.

Class Formation - Critical for Banks:
Claims are classified by objective common interest, not by creditor identity. For banks this means:

• Secured financial claims: Art. 626 - divided by collateral - each facility with separate security is separate class typically. Syndicated loan banks are one class if they share security.
• Unsecured financial claims: Banks, bonds, ICO loans.
• Public, trade, subordinated

Foreign creditors governed by foreign law are classified by nature of claim even if governed by English law - important for cross-border syndicates.

Voting thresholds:

• Ordinary unsecured financial: 2/3 of liabilities in class
• Secured financial: 3/4 of secured amount in class
• Approval within class binds dissenting creditors in that class (intra-class cramdown)

Cross-Class Cramdown test in Spain Art. 639:

Plan can be homologated and bind dissenting creditors (individual creditors, entire classes and equity holders) if:

Option A: Approved by a simple majority of classes, provided within such majority there is at least one class of claims that in insolvency would have ranked as special privileged (secured) or general privileged (e.g. Hacienda, Social Security portion).

Option B: Approved by at least one class that is in-the-money - would receive some payment on liquidation valuation - or at least one class that can reasonably be presumed to have an interest.

Spain follows the absolute priority rule but with an exception: deviation allowed if required for viability and if harm to affected claims is justified.

Additional safeguards for banks:

• Independent Expert mandatory when CCCD sought
• Creditor can challenge homologation on: failure of BIC test, violation of APR, non pari passu treatment within same rank, feasibility

3. Case Law Post-Reform - Banking Creditors Crammed Down

1. Celsa Group - Juzgado Mercantil nº2 Barcelona, 3 September 2023 - The Landmark

Largest Spanish restructuring ever - €2.8bn debt. Steel group owned by Rubiralta family.

Structure: 6 classes - secured financial (bank syndicate: Santander, BBVA, CaixaBank, etc), unsecured financial, trade.

Facts: Syndicate of 8 banks held super senior and senior secured. Plan proposed by ad hoc group of creditors (funds: Attestor, Anchorage, etc) to convert debt to equity, wiping out existing shareholders.

Voting: Secured bank class split - funds voted YES, Spanish banks voted NO. But majority of classes (trade + funds) approved, including one privileged class.

Court applied Art. 639 CCCD: Confirmed plan despite NO from dissenting banking class and shareholders. Held:

• BIC test satisfied - banks would get 0 in liquidation vs. small recovery under plan
• APR respected - shareholders (junior) got 0, complying with absolute priority
• Spanish banks argued unequal treatment - Court held different treatment justified because funds had provided interim financing

This is the first application of CCCD against Spanish banking syndicate. Currently on appeal to Audiencia Provincial Barcelona.

2. Lecta Group - Juzgado Mercantil nº12 Madrid, 2023

Paper manufacturer. €700m. Plan divided secured bank creditors (Santander, Deutsche Bank) from noteholders. Bank class dissented. Court confirmed via CCCD, holding that syndicated banks could not block plan where in-the-money noteholder class approved.

Principle: Bank syndicate not allowed to hold veto if economically out-of-the-money.

3. Haya Real Estate / Cerberus - Juzgado Mercantil nº3 Madrid, 2023

Real estate servicer. Senior facilities agent - Santander. Plan crammed down dissenting secured banking class using Option A - majority of classes including one privileged (Hacienda) approved. Court emphasized feasibility report by independent expert.

4. Naviera Armas (pre-reform but illustrative of new logic) - Juzgado Mercantil nº1 Las Palmas 2022

Ferry operator. Even before full reform, court used early version of CCCD to cram down CaixaBank and Bankia dissenting secured creditors who held mortgages over vessels, arguing they were unimpaired under relative priority.

4. Practical Implications for Banking Creditors in Spain

For a bank as dissenting creditor:

1. You cannot rely on absolute veto. If you are out-of-the-money, your class can be crammed.
2. Class formation fight is everything. Banks now litigate to be placed in separate classes to prevent being outvoted by funds within same syndicate. TRLC Art. 627 allows contestation.
3. Valuation is key. Spanish courts accept liquidation valuation for BIC, not enterprise value. Banks often argue higher liquidation value to prove they are in-the-money and cannot be crammed without full payment.
4. APR exception used frequently: Courts allow deviation if needed for viability - e.g. keeping trade creditors paid to preserve value, even if banks not paid in full.

If you are drafting a plan that needs to cram banks:

• Ensure at least one class of privileged or in-the-money creditors approves
• Get independent expert report - mandatory for CCCD
• Document BIC with two valuations: going concern vs liquidation
• Show APR compliance or justify derogation under Art. 640.2