London: Many of Britain’s biggest financial firms would back a new panel to help companies restructure their debt, one of London’s top banks said on Wednesday.
Derek Sach, head of Royal Bank of Scotland’s global restructuring group, said a panel to referee difficult debt restructurings and modelled on London’s Takeover Panel would receive support from big City institutions.
“There are plenty of people around the City who would support it, and could take on the chairmanship, and like the Takeover Panel it would work with a lot of secondees from people like us to work for them,” said Sach.
The mooted restructuring panel would be run by restructuring practitioners such as accountants, lawyers and lenders.
The Takeover Panel was set up in 1968, initially on an informal basis, and has since been given a formal role to oversee takeovers in the City of London.
Sach, who first joined RBS from private equity firm 3i in 1992 to set up London’s first dedicated restructuring team. and who has also headed Tesco Personal Finance, said the new panel is a “wonderful idea” and would help streamline restructuring processes.
“If you have a syndicate owed £500 million ($823 million) and one lender is holding out on a deal who is owed £5 million, there is no remotely simple court process to bring that lender into line,” Sach said.
“The only one I know of is a pre-pack administration but to do that for one small lender isn’t really feasible,” he said.
The informal, private approach taken by a panel would often be better suited to restructurings than the courts.
“So many of these processes do not lend themselves to legislation,” Sach said.
London’s financial community gathered last week at the Royal Courts of Justice to watch the first major restructuring court case in London since the start of the economic downturn.
Creditors to IMO Car Wash resorted to a courtroom showdown after failing to agree a restructuring deal.
Updating an approach previously taken by the Bank of England, the panel idea could be criticized for its London focus, Sach admitted.
He added, however, that all restructurings are resolved in a single jurisdiction, even if the banks come from all over Europe.
“It won’t solve everything but that’s no reason not to start it - it would go a long way towards making restructurings in London smoother,” he said.