France has been hit by an unprecedented economic crisis as a result of COVID-19, with its GDP contracting by 6 per cent in the first quarter of 2020.  In response, the French government has implemented several financial rescue measures for struggling companies facing critical liquidity shortages.

Of particular relevance to the secondary trading market is the Ordinance n°2020-306 of 25 March 2020 on the extension of expired deadlines, as modified by the Ordinance n°2020-427 dated 17 April 2020 (the "2020 Ordinance"). The 2020 Ordinance freezes the effects of forfeiture clauses which sanction the debtor's failure to perform its obligations within a certain term, when such term expires between 12 March and 24 May.

Temporary measures have also been taken to adapt the legal regime applicable to "out-of-court" and insolvency procedures.

In addition to the tax and social measures taken to limit the economic and social disturbances deriving from the outbreak, the European Commission has authorised the French Government to guarantee, using state investment bank Bpifrance Financement S.A., up to EUR 300 bn of  loans granted to companies facing cash shortages as a result of this crisis.

A solidarity fund of c. EUR 1.7 bn has also been set up to support small companies and independent entrepreneurs whose activities have been stopped or reduced considerably due to COVID-19.

France has enacted the above measures in a series of emergency acts, decrees and ordinances effective for the duration of the public health emergency.


We appreciate the assistance of Emmanuelle Naulais at Brown Rudnick, Paris Office with the following discussion on French, law, regulation and practice.


French law distinguishes between private law (droit privé), which governs the relationships between individuals or private entities, and public law (droit public), which applies to the relationships of public institutions among themselves and to the relationship between these public bodies and private entities.

This distinction is in addition to that between civil and criminal law. The main body of statutes and laws governing civil law are set  out  in  the  Napoleonic  Code  (Code  civil  des  Français)  (the  "Civil  Code"), established  under  Napoleon  I  in  1804  and  the  Code  de Commerce, the French commercial code.

France amended the Civil Code and made minor reforms to the Insolvency Rules in 2016 in order to provide investors with greater flexibility when conducting business in France and also to gradually shift towards a more creditor-friendly legal framework.


  • Banking licence required if a drawing occurs in France.
  • Transfer by way of English law assignment or French law (cession de créance) recommended.
  • Participation used where a revolving facility is traded or new funding is required but there is a risk of banking licence “look through”.
  • Interest paid to a non-French resident is generally free from withholding tax.
  • Notice by a bailiff (huissier) is no longer required for transfers under credit agreements entered into post-1 October 2016.


Conducting credit activity within the French territory where any drawing or rollover of advances occurs in France (by  a  French  or  foreign  incorporated  company)  requires  a banking  licence  pursuant  to  the  French  banking  monopoly regulations. Non-compliance with such regulations may constitute a criminal offence, leading to a fine or imprisonment.

The banking licence requirement does not apply to advance payments, extensions of payment terms, property finance lease arrangement and intragroup treasury operations, pursuant to the French Monetary and Financial Code. Under certain conditions, loans to small companies outside of a group are also permitted.

Certain entities are exempt from the requirements of the French banking monopoly regulations, such as insurance and reinsurance companies, certain pension funds, UCITS and AIF.

Ordinance n°2017­1432, adopted on 4 October 2017 (the "2017 Ordinance"), introduced a  new  type  of  AIF into  French  law,  the  Organisme  de Financement  Spécialisé  ("OFS"), which is permitted to acquire, grant and manage loans and is financed through the issue of  shares, stocks or debt instruments (titres de créances). Importantly, the 2017 Ordinance also allowed foreign entities conducting activity similar to that of credit institutions, AIF, UCITS, OFS or securitization vehicles to acquire unmatured loan receivables from French credit institutions, AIF, UCITS, OFS or securitization vehicles.

In certain situations, it may be possible to structure a loan transfer to fall outside of the territorial scope of the French regulations, provided that the transaction is concluded between two non-French entities, by way of assignment governed by English law and outside of France i.e. funds are not to be made available or used in France.


The main methods of loan transfer are: 

  1. by way of an English law assignment;
  2. French law cession de créance, which is similar to an English law assignment in that it assigns rights but not obligations; or
  3. French law cession de contrat which assigns the  rights  and  obligations  of  an  existing  lender  to  the  new lender.

It is possible to become a lender of record in respect of a fully funded and matured term loan using an English law assignment or a French Law cession de créance without triggering a banking licence requirement. However, transfers effected by way of English law novation may trigger a banking licence requirement and may be at risk of losing rights to security in French insolvency proceedings. 

In respect of loans where there are future obligations to lend, such as revolving loans or a new money facilities, to avoid triggering banking licence requirements, the transfer should be effected by way of participation.

cession de créance is valid without borrower consent (unless consent is expressly required under the credit agreement), provided it is in writing. The  cession de créance will be enforceable:  

  1. against the borrower on the date of notification of assignment; and 
  2. against third parties on the date the  contract is signed.  

If the borrower has provided consent in advance of the assignment, notice to or acknowledgement from the borrower is not necessary. However, this is subject to any specific consent requirements in the credit agreement. In any event, the borrower should be notified to ensure enforceability and transferability of any collateral which may secure the debt being assigned.


Since the introduction of a legal regime creating a security agent in 2017, a security agent can be appointed for the purpose of taking, registering, managing and enforcing security it holds in its name for the benefit of the creditors.

The rights and properties acquired by the security agent must be held separately from its own assets to prevent them from being seized other than in relation to claims arising from the security agent's conservation or management.  Provided the security agent is a French entity, the commencement of safeguard, reorganisation, judicial liquidation or professional reinstatement proceedings will bear no effect on the assets held in its capacity as security agent. The security agent may, without the need of a special power of attorney from the creditors, carry on any action to protect their interests and file any proof of claim.

Under the French fiducie trust arrangement, a party may transfer, by way of security, ownership of identified assets (including shares), rights or security interests (existing or future) to a fiduciaire to hold in a segregated estate until the obligations under the underlying credit agreement have been discharged. In transferring ownership and creating a segregated estate, the fiducie creates an insolvency-remote structure. Interestingly, in 2019 the then holding company of French womenswear brand Camaïeu opened safeguard proceedings as a strategy to prevent enforcement of the fiducie on its shares in Camaïeu. Although the safeguard was ultimately withdrawn, the case serves an important reminder that credit agreements and the fiducie trust arrangement need to be carefully assessed to ensure that the fiduciaire has rights to all the security in the form and substance expected by the creditors

Parallel debt structures are also sometimes used in secured syndicated facilities. Under a parallel debt structure, instead of covenanting  to  pay  the  secured  obligations  to  the beneficiaries  under  the  trusts, the  obligor  acknowledges  a separate debt of the same amount to a security agent. Such parallel debt is incurred as a security for repayment of the principal debt and is deemed to be reduced in the same proportions if and to the extent that the principal debt is repaid.

In Belvedere S.A. (Cour de Cassation, Com., 13 September 2011, No. 10-25533), the French Supreme Court upheld the validity of such parallel debt structures.


A  French insolvency administrator, a creditors' representative (mandataire judiciaire) or the criminal prosecutor may challenge any transaction which is not in the best interests of the company for up to 18 months from completion of the transaction until the opening of insolvency proceedings.

An English law novation may have the effect of re-setting the applicable hardening period.


Interest paid to a non-French resident is generally free from withholding tax. However, if such payments are made to a non-cooperative state i.e. countries which France considers not to apply international standards with respect to exchanges of tax  information such as Panama, the Seychelles, and the British Virgin Islands, withholding tax applies at a rate of 75 per cent applies.


Formal notification to, or written acknowledgment from, the borrower is sufficient for the transfer of the receivable to be enforceable.

Notice by a bailiff (huissier) is no longer required for credit agreements, including assignment agreements, entered into post-1 October 2016, regardless of whether a loan agreement was executed prior to that date.



As part of its plan to cope with the economic crisis that has arisen due to the spread of COVID-19, the ECB has implemented the Pandemic Emergency Purchase Programme whereby the ECB will purchase assets already eligible to the Asset Purchase Programme, i.e. government bonds, securities issued by European supranational institutions, corporate bonds, asset-backed securities and covered bonds, but on a wider scale, within an overall envelope of EUR 750 bn. It seems too early to appraise the accurate benefit of this plan on the French economy as of now.


The Plan d'Action pour la Croissance et la Transformation des Entreprises ("Loi PACTE") dated 22 May 2019 represents substantial reform of French corporate law. Among the measures, is the removal of the 5 per cent shareholding threshold formerly required for shareholders to be entitled to grant shareholder loans, facilitating company financing by minority shareholders.

The Loi PACTE also enables a company to grant loans to its executive officers such as the president of simplified joint-stock companies ("SAS") as well as the managing directors (directeurs généraux) and deputy managing directors (directeurs généraux délégués) of SAS and joint-stock companies which were curiously excluded under the previous regime.


The French Conseil d’Etat has granted Brown Rudnick's client, Warwick Capital, a favourable decision in a case initiated by a disgruntled minority shareholder attacking the decision of the Foreign Ministry to authorise the acquisition of Porcher Industries by Warwick Capital. Porcher Industries is a global manufacturer of materials from advanced high performance fibers which supplies the French Ministry of Defence, employing 2000 people in France, US and Brazil.

The decision is important as it sets out the principle that, where funds need to be examined from a KYC/AML perspective, it is the controlling entities (i.e. the general partner/manager and those in control thereof) that should be covered by any enquiries, not the limited partner and their indirect shareholders.


VALLOUREC GROUP S.A. ("Vallourec")

Vallourec is a Paris-based company specializing in the manufacture of steel pipe products for industrial application, including in the oil and gas industry. On 7 April 2020, Vallourec announced that it was cutting 900 jobs, as the oil industry is hit by slumping fuel demand and crashing prices during the pandemic. The news comes after the company emerged as the worst performing company in March 2020 on the Bloomberg Barclays High Yield Index

Vallourec had, in February 2020, announced its plan to strengthen its balance sheet and extend its liquidity through a EUR 800m capital increase, leading to a bond-price rally. However this may prove difficult in the current market as primary issuance has come to a standstill since the COVID-19 crisis. According to Bloomberg, Vallourec's 2023 notes were quoted at 76 cents on the euro as of 9 March 2020 whilst its stock fell by a third to the lowest on record.  

RALLYE S.A. ("Rallye")

Rallye is a French holding company chaired by Jean-Charles Naouri operating a chain of retail stores through its various subsidiaries. It has an international presence, serving customers in France, Latin America, Poland, and Asia. The heavily indebted company was placed under court protection from creditors in May 2019 under the French safeguard process and, on 1 March 2020, had its ten year debt repayment plan approved by the Paris Commercial Court. Last month, Rallye also secured a new EUR 215m facility from Fimalac to allow the repayment of certain derivatives transactions. Further information about Rallye's safeguard plan and debt position can be found in Issue Number 21 and Issue Number 24 of the Trade Alert.

On 28 April 2020 Rallye announced that it would be reducing its general manager's remuneration by 25 per cent for the months of April and May 2020 in response to the unprecedented impact of the pandemic on the company.  The news comes despite Rallye's main asset Casino, also controlled by chief executive Jean-Charles Naouri, posting healthy first-quarter sales of EUR 8.3bn on 23 April 2020, representing a 6.4 per cent rise. Casino had been battling investor concerns over its high debt and in March 2020 agreed to sell 567 of its Leader Price stores as well as three warehouses to German discount rival Aldi in a deal with an enterprise value of EUR 735m.  


Merlin, together with its group companies, is a global leader in location-based, family entertainment and is one of the world’s largest attractions operators, with sites in the UK, Europe, North America and Asia including LegolandAlton Towers and Madame TussaudsEntertainment is one of many sectors impacted by COVID-19, with attractions across the world closed to limit the spread of the virus. 

Merlin, which was put on negative watch by Standard & Poors on 31 March 2020, released a statement on 7 April 2020 providing an update in light of ongoing business disruption caused by COVID-19. Following the temporary closure of its attractions, Merlin took steps to reduce its cost base, access government support and delay discretionary capital expenditures. Merlin announced that based on measures taken to date, it will reduce its annualised cost base by at least GBP 400m. Furthermore, it advised that as at 28 March 2020, the group maintained total liquidity of over GBP 500m (following the drawdown of its GBP 400m revolving credit facility together with other cash reserves).

At the end of February 2020, Merlin’s loans were trading below par for the first time since its buyout loans were freed to trade in 2019 (following its leveraged buyout by a  Blackstone-led consortium in October 2019 which took the company private in a deal worth USD 7.5bn). As part of the leveraged buyout, Merlin took on more than USD 3bn of debt including pricing (i) EUR 370m of 2027 notes with a coupon of 4.5 per cent; (ii) USD 410m of 2027 notes with a coupon of 6.625 per cent; and (iii) a GBP 2.193bn loan. This loan was described by Reuters as including “some of the most aggressive terms seen in the market to date” and one senior investor noted that “Merlin is seen as the latest benchmark on aggressive docs”. Furthermore, the “aggressive transfer restrictions” were also noted.


VFS Global is an outsourcing and technology services specialist for governments worldwide. The group manages administrative and non-judgemental tasks relating to visas, passports and identity management, as well as other citizen services for governments. However, due to the global travel disruption caused by COVID-19 and numerous government clients suspending visa related services, VFS is feeling the COVID-19 related effects.

On 30 March 2020, S&P Global Ratings lowered the long-term issuer rating on VFS Global to 'B' from 'B+'. The downgrade reflects the weaker than excepted recovery in travel and the expected decline in revenue and EBITDA for VFS Global group company Kiwi VFS Sub I S.a r.l., resulting in a significant increase in leverage over 2020. If global travel disruptions continue for longer than expected, leverage will increase and liquidity issues may arise, VFS Global's rating will likely be lowered further.


Formed following the merger of Park Resorts and Parkdean Holidays in November 2015 and owned since August 2017 by the Onex Corporation, the principal business of Parkdean is the operation of its 67 holiday parks in the UK. In total, Parkdean owns over 31,000 pitches across its portfolio and employs up to 6,800 people during peak season.

On 22 March 2020, following the COVID-19 outbreak, Parkdean announced the closure of all its parks until 1 May 2020 and has offered full refunds to its customers. S&P Global Ratings had already moved Parkdean's parent, Richmond Holdco UK Ltd, to a negative outlook on 19 March 2020 following a second year of underperformance and downgraded its parent from 'B-' to 'CCC+' on 14 April 2020 in the wake of the disruption caused by COVID-19. 

With a highly cyclical business model that generates approximately 60 per cent EBITDA between June and August, it is likely that a prolonged COVID-19 lockdown or phased end to the lockdown will significantly impact further upon Parkdean's already squeezed margins and increase its leverage. 


On 20 April 2020, South African retailer Steinhoff reported that it is too early to determine the exact impact of the pandemic on its performance for the 2020 financial year, as the extent and duration on the current restrictions on trade remain uncertain. Consequently, it has postponed publishing its 2019 annual reportincluding audited consolidated financial statements from 30 April to 30 June. The postponement follows the group's announcement on March 20 that it expects COVID-19 to have a negative impact on its overall turnover and its underlying business performance

The most significant impact on the group is said to have shifted from the supply side to the demand side, with reduced turnover, particularly in merchandise, due to the partial or full closure of a number of its general stores or restrictions in trading hours in a number of European markets. The performance of its fast-moving consumer goods businesses, however, has been more resilient, partially offsetting this impact. The group has said it is implementing cost-cutting measures to protect profitability and optimise liquidity, including reducing operating expenditures, reducing stock of goods impacted by the trading restrictions and stopping all but essential capital expenditure. 

The news of the postponement comes despite Steinhoff jumping 35.29 per cent on The Johannesburg Stock Exchange’s Top-40 index on 14 April as the South African Reserve Bank slashed interest rates to a post-apartheid low of 4.25 per cent, with more reductions likely. By comparison, general retailers gained 4.74 per cent

NETS A/S ("Nets")

In August 2019, it was announced that Scandinavian payment group Nets would sell three parts of its business to Mastercard Inc ("Mastercard") in a EUR 2.85bn transaction. The acquisition by Mastercard would cover the clearing, instant payments and e-billing divisions of Nets' corporate services business. The deal, which was expected to close in the first half of 2020, has now been referred to the EU Commission by six countries, including the UK, for threatening competition in the Nordic Area, the European Economic Area and in Britain. Mastercard must obtain EU approval for the acquisition but has said it still hopes to complete the transaction by the end of the second quarter of 2020

The deal with Mastercard is just one of several recent transactions for Nets as, in March 2020, the company announced its acquisition of Polskie ePłatności, a Polish merchant acquirer, to "strengthen its presence in Poland". The deal is expected to close in the third quarter of 2020

This followed the January 2020 announcement that Nets would acquire Finnish companies Polpatek and Poplapay, a software developer and a payment terminal service provider. The acquisitions are intended to increase Nets' payment application capabilities and payment terminal service offerings with CEO of Merchant Services, Robert Hoffmann, saying that the company's goal is to "become a pan-European payments champion".

On 23 April 2020, S&P Global Ratings downgraded Nets' credit rating from to 'B-' from 'B' to reflect the predicted injury to the company's revenue as a result of the COVID-19 pandemic.


Spain's declaration of a COVID-19 national emergency on 14 March 2020 has had an impact on one of the distinctive requirements of closing transactions in the Spanish market: notarisation before a notario. Notarisation has a number of consequences under Spanish law, including creating an irrebuttable presumption in relation to the date of the document for hardening periods under insolvency. Whilst notaries remain open for business during the emergency as they provide a public service, they are only deemed to do so when acting in respect of "essential" or "urgent" matters. The latter concept is generally being interpreted restrictively so, whilst the granting of financing will be considered essential, notarisation of debt acquisitions will not necessarily

The Spanish government also passed, inter alia, the Royal Decree-Law 8/2020 ("RDL8") and Royal Decree-Law 11/2020 (“RDL11”) in response to COVID-19. The RDL8 established a moratorium period for mortgage debt relating to the main residence of debtors facing specified economic vulnerability, including unemployment and mortgage payments higher than 35 per cent of the family's net income. The RDL11 widened the scope of the moratorium to (i) mortgage debt relating to real estate assets where vulnerable debtors perform their professional activity; (ii) mortgage debt relating to leased real estate assets where the mortgagor is not receiving the rents from the lessees; and (iii) unsecured debt of debtors facing specified economic vulnerability.

During the moratorium period, early maturity clauses will not apply, principal and interest payments (whole or partial) cannot be claimed and no interest (remuneration or default) will accrue.  

For further information about the RDL8 and RDL11, please click here

We appreciate the assistance of Beatriz Causapé of Cuatrecasas with the above discussion of Spanish law, regulation and practice.

Please contact Iden Asl or Andrew Baker with any queries regarding this month's Trade Alert.