Bloomberg News

U.K. Should Reform Insolvency Law, High Yield Association Says

May 01, 2007

The U.K. should reform its insolvency legislation in three key areas to make company restructurings more efficient and fairer and maintain London's status as a financial center, a lobby group for high-yield lenders said.

The European High Yield Association wrote to the U.K. Treasury with recommendations for changes to the 1986 Insolvency Act, it said on its Web site. ``High-profile'' restructurings such as those of British Energy, Eurotunnel Plc, Marconi Corp., Jarvis Plc (JRVS) and Polestar Group, could have benefited from the reforms, it said.

Company debt is no longer held by small groups of banks that have similar interests when a borrower is struggling. Lenders are able to sell on their loans or turn to the derivatives market to buy protection against a borrower's inability to meet its obligations, and the debt is widely traded in a variety of forms among different groups of institutional investors.

``Now is the time to address insolvency reform,'' said Executive Director Gilbey Strub. ``The next round of corporate rescues is going to be vastly more complex given the explosive growth in leveraged lending in Europe since 2001 and in the sheer number, variation and complexity of debt instruments that have emerged since then.''

The association's submission calls for curbs on the power of customers and suppliers, ``fast judicial resolution'' of rows over valuations and an end to the veto now wielded by creditors or shareholders who no longer have an economic interest in the business.

The letter was reported earlier by the Financial Times.

To contact the reporter on this story: John Glover in London at johnglover@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net.


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