“It’s complicated” – this phrase certainly applies to the structuring of securitisation transactions in general, and even more so to cross-border deals. Here, EU Directive (EU) 2026/799 provides a solution. Without directly addressing securitisation – and independently of the ongoing revision of the European securitisation framework – the EU legislator has turned its attention to harmonising insolvency and restructuring law across member states. The directive entered into force on 21 April 2026, with its provisions required to be transposed into national law by 22 January 2029.
Harmonisation of Numerous Aspects of Insolvency Law
Directive (EU) 2026/799 governs, among other things:
- Avoidance actions,
- Tracing of assets belonging to the insolvency estate,
- Duty of directors to file a request for the opening of insolvency proceedings,
- Appointment of creditors’ committees,
- Transparency requirements in national insolvency law, and
- Introduction of so-called pre-pack proceedings.
Depending on national implementation, these measures could contribute to greater harmonisation and transparency, thereby reducing legal uncertainties in cross-border transactions. While the high level of creditor protection typical of the German legal system is not fundamentally called into question, the challenge, as so often, lies in the details. In particular, the national design of pre-pack proceedings could prove decisive for the structuring of securitisation transactions in Germany.
Pre-Pack Proceedings and Risks for Collateral Enforcement
Pre-pack proceedings involve pre-insolvency provisions for a preparation phase of the sale of a debtor’s business, or part thereof, as a going concern so that such a sale can be executed quickly in a liquidation phase. These provisions are new to German insolvency and restructuring law and will primarily affect the practical enforcement of secured creditors’ rights and the extent of control over enforcement of collateral. This places greater focus on collateral enforcement for all creditors of secured financing, such as securitisation transactions.
Future Structuring of Securitisation Transactions
The pre-pack procedure allows for the pre-insolvency suspension of the enforcement of contractually agreed collateral. For structurers of securitisation transactions, this raises the question of the extent to which, and under what conditions, a collateral will contribute to potential enforcement proceeds in the event of the debtor’s insolvency. While creditors will not be left empty-handed – the principle of creditor protection underpins the entire directive – the effort required to manage collateral enforcement within securitisation transactions is likely to increase.
We will keep you informed in due course about further developments in the legislative process for the national implementation of Directive (EU) 2026/799 on the harmonisation of certain aspects of insolvency and restructuring law.