Let`s go through the basics of subordination using a home credit line (HELOC) as our main example. Keep in mind that these concepts are still valid if you have a home loan. (9) „Debt change“ – change of debt according to section 1379 bGB. The Supreme Court (OGH, May 4, 2005, 8 In its decision, 31/05z) interpreted in detail the extent of a contractual change in the debt and found that changes in the interest rate, the reduction of the loan amount and the conversion to a foreign currency loan are merely changes in the debt within the meaning of Section 1379, which do not affect the existence of a hedging instrument put in place to guarantee that debt. In addition, the conversion of a revolving facility into a loan constitutes a change in the debt and, according to the supreme court`s consistent jurisprudence, does not constitute a „reorganization“ within the meaning of Section 1378. „Junior“ or secondary debt is referred to as subordinated debt. Debts that have a greater right to assets are priority debts. A consumer association has requested a cease action against the application of certain provisions contained in the terms and conditions of an Austrian company operating in the renewable energy and photovoltaic sector. To finance its activities, the defendant took out eligible subordinated loans. In accordance with the clause under review, the lenders` claims were subordinated not only to the claims of other creditors in the event of the defendant`s insolvency, but also pari passu with the shareholders` claims on the repayment of the principal. In addition, the lenders waived their claims on the repayment of principal and interest to the extent that the satisfaction of these claims would render the defendant over-indebted or insolvent (i.e., where the performance of such claims would require the insolvency of the defendant). This waiver was found to be effective as long as the defendant was embarrassed in a „financial crisis“ that was defined in more detail, even referring to some important financial indicators. (6) If you have any questions of subordination, we are here to help.

Make an appointment with us today. While this decision was taken with a clear sigh of discharge by the Austrian crowdfunding community, which largely depends on the admissibility of subordinated loans to borrow with consumers, it also has a considerable impact on standard bank credit operations, particularly in restructuring situations. distribute the buyer and leave the money already paid by the buyer, which is interpreted as rent. (5) This requirement has a regulatory context. The Federal Law on Alternative Forms of Financing creates a legal framework for alternative financing of companies outside the jurisdiction of the Austrian Financial Markets Supervisory Authority. In order to ensure that the loan subordinated to other financial instruments is not contrary to regulated banking activities, Parliament has decided to delineate subordinated loans negatively, in accordance with the banking law (within the meaning of Schedule 1 of the 2013/36/EU Directive) for which an unconditional right of repayment is inherent in regulated standard deposits or transactions. Junior debt is called „subordinated debt“ and debt, which has a higher right to all assets, is priority debt. Often, the borrower does not have sufficient resources to pay off all debts and less indebted debts can be repaid with little or no debt.

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