The scheme offers a credible implementation alternative, but no “one size fits all” solution exists for German credits.
German credits in sectors such as real estate, automotive, and energy face a worsening macro backdrop. At the same time, the available toolkit for financial restructurings has expanded, offering multiple options without the need for recourse to insolvency proceedings.
Since Germany implemented the EU Preventive Restructuring Directive and introduced its national scheme (the Corporate Stabilisation and Restructuring Act, or StaRUG) in early 2021, the StaRUG has become a credible implementation alternative, and one of the key options for non-consensual implementation planning. In 2021, only a few dozen German schemes were implemented for small and medium-size enterprises (SMEs), a testament to Germany’s economic strength and hot capital markets. This allowed debtors to refinance but often at a high cost. As the last quarter of 2022 and 2023 foreshadow a bleaker outlook from both a macro and an interest-rate perspective, next year is likely to bring a significant uptick in restructuring activity for German credits and a heightened focus on the StaRUG.