The Court of Ancona (11 October 2016) ruled that the debtor can continue to draw from existing revolving facilities, to be considered as pending contracts that do not require an authorization by the Court

The case

A company in a pre-filing for concordato preventivo pursuant to Art. 161 sixth para. IBL and thereafter files a petition to the Court pursuant to Art. 182-quinquies IBL in order to be authorized to continue to draw from revolving credit lines already in force before the concordato pre-filing.

The issues

The issue is to determine if existing revolving facilities should be considered (i) as banking contracts entered into before the concordato filing or pre-filing, which can continue to be performed regularly during the procedure or (ii) as super-priority new loans which need to be authorized by the Court pursuant to Art. 182-quinquies IBL.

The issue arises with respect to the new provision of Art. 182-quinquies third para. IBL introduced in 2015 (regarding new “urgent” loans) allowing the debtor to be authorized also for continuing to draw from existing revolving facilities.

The decision of the Court

The Court considered that it was not required to rule on the petition filed by the debtor, based on the following reasoning:

  • revolving facilities are contracts entered into before the concordato filing or pre-filing, which can continue to be performed regularly according to Art. 169-bis IBL in the course of the ordinary administration, thus giving rise to new super-priority claims;
  • no authorization pursuant to Art. 182-quinquies IBL is required because these are not new loans, but mere variations of the same pending contracts, within a pre-set credit limit;
  • if they were considered new loans, the conclusion would be unacceptable because revolving facilities should be considered as terminated as a consequence of the concordato filing or pre-filing and could be “reinstated” only following an authorization by the Court;
  • 182-quinquies IBL is meant to help the debtor in carrying on its business during the procedure by allowing new loans, and not to terminate existing facilities;
  • the mandatory reports by the debtor to the Court and to the Judicial Commissioner set forth by art. 161, eighth para. IBL do provide sufficient disclosure on the debtor’s financial conditions during the procedure and on the amount of new super-priority claims arising.

Commentary

The issue has been addressed by some local Courts precedents, reaching conflicting conclusions. Among these, some can be recalled: (i) that of the Court of Benevento (4 February 2016), ruling that the authorization of the Court according to Art. 182-quinquies IBL is required, and (ii) those of the Court of Rovigo (26 November 2015 and 1st August 2016) in line with the decision presented here.

The Court of Ancona confirms the case law which was also predominant before the recent reforms of 2015 and sets aside doubts raised by a possible interpretation of the new provisions.

The ruling of the Court is also in line with other precedents (see Court of Alessandria 18 January 2016) which in a broader perspective, with respect to pending contracts, allows more flexibility to the debtor in the management of the business during the procedure.