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The government will be the last to collect if companies go bankrupt

| News | Corporate Law and M&A

Ignacio Aparicio Ramos explains in an article published by Vozpópuli that the Government is rescuing strategic companies with participative loans, which implies that in a bankruptcy situation, an order of payment is established and the participative loans are collected after the common creditors

The government is rescuing strategic companies from the coronavirus crisis with participative loans, a formula which, as its name suggests, allows the State to participate in the evolution of the company, charging variable interest according to its results. However, this type of debt is one of the last to be collected if the company becomes insolvent and enters into bankruptcy proceedings.

"When there is an insolvency situation, an order of payment is established, and the participating loans are collected after the common creditors. In practice, as they are the last to be paid, they do not usually recover the whole of the loan. In fact, if they do recover a part of it, they will be lucky", explains Ignacio Aparicio, managing partner of the Andersen business area.

It is "like a soft loan" for those who receive it, says Aparicio, because "it allows the company's debt capacity to be increased, it has longer repayment and grace periods, and it adjusts the payment of interest according to the evolution of the company".

The full article can be read in Vozpópuli.

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