Pivot to Recovery™: Swiss Debt Restructuring Moratorium
COVID-19 continues to severely impact international trade, investment and the health of the global economy. In this context, the Swiss legal framework provides tools that are valuable. The Debt Enforcement & Bankruptcy Act (DEBA) allows companies and creditors to file for debt moratoria, which provides a tool for distressed companies to potentially improve outcomes in tough financial situations.
According to a study of the World Bank Switzerland ranks 46th out of 190 countries when it comes to resolving insolvencies. It is clear that during recent years of relative economic prosperity, Swiss businesses did not make use of the full potential of debt restructuring legislation. In the current economic context, a perspective encompassing all possible options may help to protect businesses entering distressed situations.
Alvarez and Marsal (A&M) and the Swiss Turnaround Association (STA) have analysed and commented on the outcomes of Swiss debt moratorium cases between January 2019 and September 2020. We retrieved data from the Swiss Official Gazette of Commerce (SOGC), information obtained from more than 70% of Swiss composition courts and from administrators that were engaged in Swiss debt moratorium cases during the period of the study.
In the months and years ahead, Swiss businesses will need to consider all available options to deal with distressed situations responsibly, preserving value for creditors and other stakeholders an increasing the probability of more successful turnarounds. Our analysis highlights the range of paths that are available to business executives, stakeholders and investors involved in complex situations of distress.
