Reuters reported that Switzerland’s economic growth decelerated in the second quarter of 2019 to 0.3 per cent from a downwardly revised 0.4  per  cent in the previous period. This is predominantly due to factors including political uncertainties arising from Brexit and the US-China trade war as well as a slowdown in neighbouring Germany, which looks to be heading towards a recession. The export-dependent Swiss economy has been impacted by this lack of demand.

Over the summer, the "equivalence" permit (which permitted Swiss and EU investors to freely trade across each other's borders) granted to Switzerland and its stock exchange by the EU expired, following a stall in general economic negotiations. Switzerland retaliated in July 2019 by banning the trading of Swiss equities on EU exchanges. This resulted in banks and fund-managers having to rethink trading strategies relating to Swiss stock. Virtu Financial, one of the world's largest market-makers, analysed USD 36bn of trades up to August 2019 in respect of around 120,000 orders for Swiss stock and observed that the price of trading in small and mid-cap stock increased around 20 per cent. Furthermore, the withdrawal of “equivalence” for Switzerland helps to elucidate the potential implications of Brexit for UK markets in the event that Britain leaves the bloc without a deal in place.

The Swiss National Bank held interest rates steady at minus 0.75 per cent despite a reduction last month by the European Central Bank. Inflation rates slowed to just above zero at its weakest since 2016.


We appreciate the assistance of Marco Häusermann and Markus Kronauer of Niederer Kraft Frey Ltd with the following discussion of Swiss law, regulation and practice.


Switzerland's political system is based on the principles of federalism and direct democracy. The structure consists of three levels: the Swiss confederation; cantons (26); and municipalities (approx. 2,300).

The Swiss legal system is based on civil law. As with other civil law legal systems, Swiss law is divided into public and private law. Private law (such as contracts and company), insolvency and bankruptcy law as well as securities laws and financial market regulation is predominantly dealt with on a federal level. The cantons and, to a more limited extent, the municipalities enjoy autonomy in many areas such as taxes, public law and organisation of the courts, though always within the limits of federal law.


  • 10/20 Non-Bank Lender Rules may apply and limit the number of funds or financial institutions that are able to hold a direct lender position.
  • 13 per cent to 33 per cent tax may apply on the transfer of loans secured by Swiss real estate.
  • Generally, no banking licence is required for foreign parties lending to Swiss companies.
  • The method(s) available for transfers/assignments are provided for in the loan/security documentation. Additional transfer formalities may apply depending on the chosen method but typically these are satisfied by default in the loan documentation.
  • The concept of a security agent is commonly used in Switzerland. It is also common, for additional protection, to put in place a "parallel debt" structure.


Interest payments on a bond issued by a Swiss issuer are generally subject to 35 per cent Swiss withholding tax ("WHT"). Interest payments under a loan agreement may be subject to Swiss WHT if either the 10 Non-Bank Lender Rule and/or the 20 Non-Bank Lender Rule is not complied with.

  • "10 Non-Bank Lender Rule": a loan agreement will be re-classified as a “bond” for the purposes of Swiss WHT where the number of lenders (and, under certain conditions, sub-participants, credit default swap counterparties etc.) exceeds 10. Such Swiss WHT must be deducted on all interest payments received under the relevant loan agreement. To ensure compliance with the 10 Non-Bank Lender Rule, the loan agreement must be drafted to include provisions restricting lenders to make transfers to non-banks (e.g. through the consent right of the borrower) and preventing them from entering   into  "damaging" exposure transfers  (e.g.  sub-participations, credit default swaps or similar transactions if they would give such new lender a direct right against an obligor). Furthermore, Swiss transfer  stamp  duty  may  be due in cases of transfers of loan participations where a Swiss or Liechtenstein securities dealer is involved in the transaction.
  • "20 Non-Bank Lender Rule": all interest payments made by a Swiss borrower under a loan agreement will be subject to Swiss WHT where the aggregate number of creditors (which are not banks) under the relevant debenture (Kassenobligation) exceed 20. Furthermore, a breach of the 20 Non-Bank Lender Rule may trigger Swiss transfer stamp duty in the case of a transfer/assignment of loan participations, or in the case of transfers of loan participations where a Swiss or Liechtenstein securities dealer is involved in the transaction.
  • Similar rules and/or tax ruling requirements apply where there is only a Swiss guarantor/security provider and proceeds from the loan agreement are being directly or indirectly used in Switzerland (as interpreted by the Swiss tax authorities).


No banking licence is required for foreign parties making commercial loans to borrowers in Switzerland. However, this does not apply to consumer loans where licensing requirements will apply.

As from 1 January 2020, the date on which the Swiss Financial Services Act will come into force, loans granted for the purposes of acquiring securities (e.g. margin loans and similar loans) are classified as "financial services", therefore any Swiss and foreign financial service providers will be subject to certain duties in connection with the granting of such loans.


The following options are available:

Transfer of Contract: all or part of the lender's rights and obligations in connection with the loan documents will be transferred to the new lender. Consent to the transfer from other parties to the loan document is required to effect the transfer. Consent is typically provided in advance by virtue of provisions in the loan documentation. This is the standard transfer method under loan agreements which are governed by Swiss law.

Assignment: allows for the transfer of rights, but  not  the  transfer of obligations, under the contract. Consent to the transfer from other parties to the loan document may be required to effect the assignment and should be considered on a case-by-case basis. As with transfers mentioned above, consent is typically provided for in advance by virtue of provisions in the loan documentation.

Sub-Participation: sub-participations are permitted under Swiss law. However, unless all requirements established by the Swiss Federal Tax Authority's practice are met, sub-participants may also qualify as lenders under the 10/20 Non-Bank Lender Rules.


Swiss law does not recognise the concept of a trust. However, the Hague Convention on the Law Applicable to Trusts is applicable to transactions in Switzerland, meaning that foreign trusts may be considered valid and recognisable.

Parallel debt structures are commonly used but have yet to be tested in the Swiss courts.

The rights of a security agent to enforce its rights will depend on the nature of the security:

  • Pledge: the doctrine of accessory (Akzessorietätsprinzip) applies to pledges under Swiss law. As such, a pledgee must be the creditor holding the secured claim. A pledge must be granted to the lender(s) and cannot vest in a third party acting as a security holder in its own name and right. However, the lender(s) can be represented by a third party (security agent) acting on their behalf.
  • Security assignment or security transfer: the doctrine of accessory (Akzessorietätsprinzip) does not apply, therefore a security agent can enter into the security agreement and hold the security in its own name and on its own account, for the benefit of the other lender(s).


Generally, there is no WHT payable on loan interest payments or Swiss transfer stamp duty payable in relation to the transfer of loans.

However, there are instances where Swiss WHT or Swiss transfer stamp duty will apply:

    • Where the financing is in breach of the 10/20 Non-Bank Lender Rules (as detailed above).
    • Swiss federal and cantonal real estate source taxes may become due on interest payments to foreign investors if secured by Swiss real estate. This would require a Swiss borrower to withhold these taxes at source from the gross interest payments on that part of the loan which is secured by Swiss real estate. The applicable combined tax rate would be between 13 per cent and 33 per cent (as determined by the canton or commune where the real estate is situated). If a double taxation treaty between Switzerland and the jurisdiction of the relevant lender is in place, a full exemption or a reduced tax rate may be applicable.


Thomas Cook Group Plc and some of its associated UK entities entered Compulsory Liquidation on 23 September 2019 as reported in our September Trade Alert.  Below is a summary of the status of certain guarantors of the GBP 875,000,000.00 Revolving Credit Facility ("RCF"), the EUR 750,000,000.00 6.35% Senior Notes due 2022 (the "2022 Notes") and the EUR 400,000,000.00 3.875% Senior Notes due 2023 (the "2023 Notes"):

  • France: The French official legal gazette published the judicial recovery proceedings (redressement judicaire) in respect of Thomas Cook SAS (guarantor under the 2022 Notes) and other French entities (not guarantors) on 11 October. The deadline for filing claims against the French Thomas Cook entities is 11 December 2019 for French creditors or 11 February 2020 for non-French creditors. Please contact Marta de Franciscis and Emmanuelle Naulais for further information.
  • Scandinavia: The Scandinavian entities, including Thomas Cook Airlines Scandinavia (Denmark), Thomas Cook Europe AB and Ving Sverige AB (both in Sweden) (collectively referred to as the Ving Group) have not entered insolvency proceedings. These entities are guarantors under the    2023     Notes. It was announced on 30 October 2019 that Strawberry Group (hotel magnate Petter Stordalen's investment vehicle), Altor Fund V and TDR Capital won the bid for Thomas Cook Northern Europe and the Nordic airline. The buyers advised that they had agreed a financial reconstruction package for the Ving Group that would provide around USD 618m in liquid funds and guarantees. Reports suggest that Strawberry Group and Altor Fund V will hold 40 per cent of the stock of the new group respectively whilst TDR Capital will hold the remaining 20 per cent.
  • Germany: On 14 October 2019, the European Commission approved the 6 month EUR 380m bridging loan granted to Condor by the German government and federal state of Hesse. Condor Flugdienst GmbH is a guarantor under the RCF, the 2022 Notes and the 2023 Notes and Condor Berlin GmbH is guarantor under the 2022 Notes and the 2023 Notes.
  • Belgium: It was reported on 11 October 2019 that Wamos, the Spanish airline company, tour operator and travel agency, acquired 62 of 91 Neckermann stores in Belgium. The former management team at Thomas Cook Retail Belgium BV (the parent of Thomas Cook Belgium NV, guarantor under the 2022 Notes) is expected to play a key role in Wamos Benelux (the new company that will be formed).

Creditex and Markit announced on 30 October 2019 that the 2022 Notes and 2023 Notes were valued at 9.125 per cent in an initial auction to settle the credit default swaps (covering around USD 274m of debt) which were triggered last month after Thomas Cook filed for Chapter 15 bankruptcy protection in the US. The final price for the 2022 Notes and 2023 Notes was 10.125 per cent.

There are certain differences between the Liquidation Recovery Analysis prepared by AlixPartners in August 2019 (the "AP Report") and what actually occurred following the winding-up petition for 26 UK companies within the Thomas Cook Group ordered by the High Court on 23 September 2019, including:

  • Insolvency status of group: The AP Report assumes the entire group will enter liquidation-style insolvency proceedings. However, the French and German entities are under protective measures and the Scandinavian entities continue to operate.
  • Aircraft: The AP Report assumes that Thomas Cook owns 22 aircraft. However, CAPA-Centre for Aviation reports that as at 23 September 2019, the group owns 11 aircraft.
  • Airport slots: The AP Report attributes no value to airport slots. Pursuant to the Court of Appeal's ruling relating to Monarch, airport slots were considered an asset of the airline. The ACL announced on 26 September 2019 that Thomas Cook Airlines' operating licence remains valid therefore it continues to hold slots that may have value. KPMG, as Special Manager, set a deadline of 16 October 2019 for bids for the slots and it is thought that carriers including EasyJet, IAG (the owner of British  Airways) and Wizz Air made offers. Reports suggest that any deal is expected to be completed by mid- November. Thomas Cook's Gatwick slots are particularly lucrative and could be worth tens of millions of pounds. It is reported that Thomas Cook owns 15 daily slot pairs during the summer and 8 daily slot pairs in the winter at Gatwick - around 3.5 per cent of the total slots at Gatwick during the summer.

The British government announced plans to introduce new legislation to improve the ability to bring stranded holiday makers home. Transport minister Grant Shapps envisages a system whereby failed airlines are placed in special administration. This would enable the airline to continue to operate to fly passengers home and prevent a repeat of "Operation Matterhorn" whereby the Civil Aviation Authority ("CAA") had to create a temporary fleet of aircraft to repatriate around 150,000 customers to the UK. This follows the review commissioned by the UK Government into airline insolvency and passenger protection after a similar repatriation exercise was carried out by the CAA after the collapse of Monarch. The final report was published by the government in March 2019.

As at the date of publication, no date has been announced for the submission of claim forms in the Thomas Cook liquidation proceedings.

Please contact Louisa Watt, Ben Klinger, Iden Asl or Hannah Geddes for further information on Thomas Cook's compulsory liquidation and any trading queries.



French retailer Casino announced on 22 October 2019 that it was negotiating the extension of its credit lines in France and intended to raise EUR 1.5bn in new financing to refinance its existing debt.  Furthermore, the group also announced that it was working with certain banks to agree a new syndicated revolving facility for EUR 2bn expected to mature in October 2023.

Casino's third quarter results showed a slowdown in sales growth with group sales increasing by just 1.5 per cent compared to 2.3 per cent in the second quarter. This was a result of store closures and a poor trading performance in France. The company has struggled with competition from online retailers as well as pricing wars among its domestic competitors and, in September, it announced plans to sell Leader Price, its discount store chain, to German supermarket Aldi.

Despite Casino's financial struggles, it has kept to its 2019 goal of a 10 per cent rise in operating profit in France and CFO David Lubek has said the company has a clear strategy and that he is confident going forward.


FCC presented its Q1-Q3 financial results on 30 October 2019 which showed revenue increase of 5.2 per cent to EUR 4.57bn in the third quarter of 2019 compared to the same period the previous year. Net attributable profit rose to EUR 233m - an increase of 32.4 per cent based on the previous year, due to growth in all areas of the business. FCC's net debt was EUR 3bn - 11.5 per cent more than in December 2018.

This growth is expected to continue as FCC has several large projects in the pipeline including the remodeling of the Santiago Bernabeu stadium in Madrid (for a reported EUR 475m) as well as the construction of the Mersey Bridge in the UK.


KrisEnergy, a Singapore oil and gas company, announced on 22 October that, as a result of its financial condition, it would not be able to pay all of its financial obligations as they fall due. The company will therefore not be paying out the principal or the interest on either its USD 130m 4 per cent senior unsecured notes which are due in 2022 or its USD 200m 4 per cent senior unsecured notes due in 2023. It will also not be paying out the principal under its USD 139.5m senior secured zero-coupon notes which are due in 2024

KrisEnergy's debt, which totalled around USD 558.8m as at 30 June, includes a USD 200m revolving credit facility with DBS Bank which will mature on 30 June 2020 as well as term loans from HSBC and Standard Chartered Bank, Singapore Branch. The company had previously said on 21 August that it would stop paying the principal and the interest on the HSBC and Standard Chartered Bank term loans. It received a letter from HSBC for the acceleration of their facility agreement on the same day.

In   September,  the   High  Court  of Singapore granted KrisEnergy court protection until 14 November to allow it to restructure its debt without facing legal action from its creditors in Singapore. The company has said that while it works on its restructuring proposal, it will conserve any available cash so that it can meet its funding requirements during the restructuring period.

The company's shares were suspended on 14 August and it has advised its shareholders, noteholders and any potential investors looking to deal in its securities to exercise caution when doing so.


Please contact Iden Asl, Hannah Geddes, Lucy Hartland, Chloë Kealey or Lois Child with any queries regarding this month's Trade Alert.