Today the new German Bondholder Act (Gesetz zur Neuregelung der Rechtsverhältnisse bei Schuldverschreibungen aus Gesamtemissionen) has become effective. The new law replaces an existing law of 1899, which was generally considered outdated, incomplete, inflexible and unclear in many respects. In particular, the old law did not permit any comprehensive restructuring of German law-governed bonds.
On this basis, the new law has been awaited by the market for many years. It will be of fundamental importance in connection with the issuance of new bonds and future amendments to outstanding bonds (including bonds outstanding today, if the bondholders opt for the application of the new rules). The new law has brought German bondholder rules in line with international standards. In particular, it has significantly expanded the scope of permitted majority decisions that have binding effect upon all bondholders, and will, thereby, facilitate the restructuring of bond obligations going forward.
The attached memorandum gives an overview of the main changes and improvements introduced by the new law, as well as some of the remaining pitfalls.
If you have any questions, please feel free to contact any of your regular contacts at Cleary Gottlieb.
