Business Continuity in Times of Distress: Debt Restructuring Agreements and Compositions with Creditors in Italy

39 Pages Posted: 25 Aug 2020

See all articles by Alessandro Danovi

Alessandro Danovi

University of Bergamo (Italy)

Iacopo Donati

University of Florence - Dipartimento di Diritto Privato e Processuale

Forestieri Ilaria

University of Florence - Law Department

Tommaso Orlando

Bank of Italy

Andrea Zorzi

University of Florence

Date Written: July 28, 2020

Abstract

The Italian insolvency framework makes several restructuring tools available to firms and their creditors, so that distress does not necessarily lead to liquidation. This paper analyses two such instruments: debt restructuring agreements (DRAs) and compositions with creditors (CCs), both commonly used to reorganize distressed firms and preserve their continuity. These procedures typically involve large firms, particularly in the case of DRAs where judicial control over negotiations is milder. Firms using DRAs are in less critical economic conditions when they file for restructuring, but they do so after longer periods of distress. Despite their declared aim, the effectiveness of these instruments in terms of business continuity is limited: many firms that use them end up exiting the market, in particular in DRAs. Firms that survive display only partial recovery, which is relatively more intense in CCs. However, the apparently superior performance of CCs is overshadowed by the long duration of restructuring, which may prevent us from observing definitive outcomes.

Keywords: insolvency, firm restructuring, business continuity

JEL Classification: G33, G34, K29

Suggested Citation

Danovi, Alessandro and Donati, Iacopo and Ilaria, Forestieri and Orlando, Tommaso and Zorzi, Andrea, Business Continuity in Times of Distress: Debt Restructuring Agreements and Compositions with Creditors in Italy (July 28, 2020). Bank of Italy Occasional Paper No. 574, Available at SSRN: https://ssrn.com/abstract=3680754 or http://dx.doi.org/10.2139/ssrn.3680754

Alessandro Danovi

University of Bergamo (Italy) ( email )

Piazza Rosate 2
I-24100 Bergamo, 24127
Italy

HOME PAGE: http://www.unibg.it

Iacopo Donati

University of Florence - Dipartimento di Diritto Privato e Processuale ( email )

via delle Pandette, 35
Firenze, Firenze 50127
Italy

Forestieri Ilaria

University of Florence - Law Department ( email )

via delle Pandette, 35
Firenze, Firenze 50127
Italy

Tommaso Orlando (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Andrea Zorzi

University of Florence ( email )

Via delle Pandette, 9
Florence, 50127
Italy

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