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Subordinated loans (or subordinated loans, subordinated loans) belong to the mezzanine capital of companies and are financial instruments which, in the event of liquidation or bankruptcy, fall short of other claims against the debtor company.
Basically, a subordinated loan is like a normal loan deal.
Subordinated loans are credit agreements which, in the event of insolvency, are only serviced after the claims of the other creditors. In this regard, they are “subordinate” to these claims. A subordinated loan is a loan that is treated as subordinated in the event of bankruptcy, as it is serviced after the other liabilities.
Subordinated loans
Subordinated loans (or junior debt, subordinated loans) are part of the mezzanine capital of companies and are financing instruments which, in the event of liquidation or insolvency, fall short of other claims against the debtor company. Corporate finance is generally a loan that is fully repayable under Section 488 (1) of the German Civil Code (Senior Debt) and therefore has no preferential conditions in favor of other lenders.
Both belong to the loans and therefore, from the perspective of the lending company debt. The shareholders of the borrowers (“shareholder loan”), but also other lenders such. B. Funding institutions or investment companies can be considered as lenders. For start-ups, the Kreditanstalt für Wiederaufbau awards subordinated loans. Subordinated loans are usually not hedged and have a high interest rate due to their high default probabilities.
Collateral is usually not provided because the claims are very late (in the case of liquidation or insolvency) and only then are recoverable. In the case of the commercial sale of mezzanine financing instruments, which are not “financial instruments” within the meaning of section 1 para. 11 KG, such as the silent partnership, the non-securitized name right, the participation loan and the subordinated loan, a license pursuant to 34c GWO was sufficient.
In the case of subordinated loans, repayment is subject to the condition that, in the event of the insolvency or dissolution of the borrower, they must be repaid only after fulfillment by other (senior) lenders. Withdrawal of subordination therefore means that in the event of the dissolution or insolvency of the creditor, the claim in question will only be fulfilled if all corporate creditors within the meaning of Sec. 39 (2) no. 2 no. 1 but before or on an equal footing with shareholders’ repayment claims in the sense of Art 2 No. 2 No. 2 No. 2 No. 2 AktG.
Accordingly, obligations agreed under section 39 (2) sentence 2 SV are not to be accounted for.
There is also a distinction between simple and qualified subordination.
The mere subordination statement states that the claims are behind the claims of all other lenders. The subordination can not only extend to current, but also to future claims.
In the case of mere subordination, the withdrawn claim may be fully or partially repaid once all priority claims have been met. Subordination takes place behind other debt only, while qualified capital requires subordination to equity. In addition, the claim may be enforced only on the basis of the net profit or liquidation amount or on the free assets exceeding the other debts of the Company, and only after all the creditors of the Company have been satisfied, and on an equal footing with the deposit reimbursement claims of the co-partners.
In the case of balance sheet over-indebtedness according to 19 of the Ordinance on the insolvency according to §§ 92 AktG, 64 AktG, 130 a and 177 a commercial register. In the case of liquidation or bankruptcy, in the case of a subordination agreement, the following ranking applies: Subordinated loans, shareholder loans, If after fulfillment of the usual obligations, liquidity or insolvency assets are still available, the subordinated liability must first be repaid before the shareholders recover their capital.
Subordination does not result in the cessation of an obligation, so that in accordance with Section 266 (3) (a) of the German Commercial Code, it must continue to be shown as a liability in the consolidated balance sheet. However, since the decision of the Federal Court of Justice of 01.01.2001 the over-indebtedness is no longer to be accounted for with a mere subordination (“debt capital”) or with a limited (shareholder loan) (§ 19 Abs. 2 InsO).
Subordinated loans may be taken into account with a share of at least 50% of their amount in order to improve the rating of the economic equity.
