In an order rendered on December 18, 2018, Madrid Commercial Court no 1 allowed a debtor under an insolvency order to sign and homologate a refinancing agreement after the opening of the insolvency proceedings.

This is a landmark decision that has been added to the few cases where Spanish courts have examined whether refinancing agreements can be homologated after an insolvency order. The option had been allowed during compliance with the arrangement as a mechanism to prevent it being breached, whereas other courts had been more hesitant to recognize to companies under an insolvency order to homologate refinancing agreements, by arguing that the option is only within reach of companies outside insolvency proceedings.

The decision by Madrid Commercial Court no 1 concluded that there are three scenarios in which the homologation of refinancing agreements by debtors under insolvency orders would be possible and useful: (i) agreements signed before the insolvency order although homologation was applied for after it; (ii) agreements after the insolvency order which are only binding on financial creditors and enable the removal of technical insolvency to end the insolvency proceeding; and (iii) agreements seeking the refinancing of claims arisen after the insolvency order, which was the case in this proceeding.