FCC Proudreed Properties 2005 HSBC SG CORPORATE ...

(a) to obtain an order for, or payment of, a sum of money by the debtor to the creditor;
(b) to set aside a contract for non-payment of amounts owed by the debtor; or
(c) to enforce the creditor’s rights against any asset of the debtor (including pursuant to any security
arrangements).
Contractual provisions such as those contained in the Commercial Mortgage Loan Agreement that would
accelerate the payment of the relevant Borrower’s obligations upon the occurrence of a bankruptcy event
are not enforceable under French law.
An administrator may renounce or set aside ongoing contracts (including the Occupational Leases). The
administrator can be required to decide, within a maximum of two months following the start of the
observation period, whether to continue the performance of the relevant agreement or to allow the
agreement to be terminated. If the administrator elects to continue an agreement, the administrator must
ensure that the tenant fully performs its contractual obligations arising after such election is made. It is
however possible that the administrator could elect to terminate the Occupational Leases in these
circumstances.
French bankruptcy law assigns priority to the payment of certain creditors, including the French treasury,
employees, secured creditors and post-petition creditors (see ‘‘Enforcement of Obligor Security’’ above ).
If the court orders a judicial reorganisation, it can prohibit the sale of an asset that it deems to be essential
to the continued business of the debtor (including the Property Portfolio) and postpone the payment of
debts owed by the debtor.
In a judicial liquidation of an Obligor, the judicial liquidator would realise the Secured Property (in the
case of a Borrower) on account of the creditors. He would use, to that effect, powers given to him by
insolvency legislation including that of selling the Secured Property or the shares (as relevant) by private
treaty (vente de gré à gré) pursuant to article L.622-18 of the French Commercial Code or organising a
speedy sale at auction. The aim of the procedure is to maximise the revenue accruing from the sale of the
assets.
In a judicial liquidation, all the debts of the insolvent Borrower would be accelerated, the Borrower’s
assets would be sold by the liquidator, and the proceeds would be distributed to the creditors according
to their respective ranking (preferred, secured or unsecured). Preferred claims (i.e. legal costs of the
liquidator, certain employees’ wages, certain taxes and all unpaid sums arising from the continuation of
the activity of the companies during the observation period) will rank ahead of secured creditors. Unless
the liquidator has remained inactive for more than three months, secured creditors such as the Issuer may
not enforce the security themselves.
The time between the beginning of the insolvency procedure and the distribution of the proceeds to the
creditors could be shorter than between a call by the Issuer under its security and the final distribution of
the proceeds after a court sale and a procedure for the allocation of the price. This is due not only to the
fact that auction sales at the insistence of a creditor are relatively slow, but also to the fact that in an
insolvency, the various ranking of creditors are determined more quickly than in the procedure which
follows an auction sale.
The judicial liquidation procedure is controlled by the judicial liquidator and the insolvency court and not
by the creditors of the company. A mortgagee can propose a prospective purchaser to the liquidator or
he can offer to co operate (including via paid advertisement, for instance) in the advertisement of the sale
or in the search of prospective purchasers in order to expedite the process of enforcement and distribution
of the liquidation proceeds.
At the end of the observation period, should the court rule out liquidation of the debtor, then it would
adopt one of the two following recovery plans:
(a) a continuation plan (plan de continuation), under which an insolvent company would continue as an
individual entity and such plan may provide for delayed payments. The Obligor Security would
continue to secure the rescheduled indebtedness but could only be enforced in the event that the
Obligor defaults in the payment of any of the debts as rescheduled. Upon failure by the debtor to
comply with its obligations under the continuation plan, any creditor may request the termination of
the plan. Such termination would result in the commencement of liquidation proceedings and would
not permit a direct enforcement by the Management Company; or
52