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In this blog post you will find further details (and hyperlinks to court documents) regarding the legal process in Moldova related to the recovery process against the borrower Metropolis City SRL, relating to three projects in the Chisinau Metropolis District.
ProjectsProject Start PeriodCollateralMetropolis 4DJune 202012 monthsCadastral numbers 0100119.459.01.001-0100119.459.01.083 (43 units)Metropolis 4ANovember 202012 monthsCadastral numbers 0100119.448.01.001 to 0100119.448.01.061 (36 units)Metropolis Business ApartmentsFebruary 202112 monthsCadastral numbers 0100119465.01.021-0100119465.01.060 and 0100119465.01.101-0100119465.01.140 (80 units)
Metropolis City SRL accelerates restructuring
Administrator: Gîrleanu Natalia
Judge: Padulari Valeriu
“Metropolis City” had its headquarters at Dacia 59 in the city of Chisinau, in a newly constructed office building in the developing Metropolis district. In March 2023, Metropolis City SRL changed its legal headquarters to St. Nicolae 112, Balti city (the address of the former school). This change seemed strange, since it was inexplicable why a company engaged in the development and construction of several buildings in the Metropolis district of Chisinau should change its headquarters to Balti city, 140 km and two hours away from the center of its activities. The situation became clear with the publication of the following court decision on the court portal and in the Official Gazette of the Republic of Moldova:
Order of the Central Chamber of the Court of Báltsi dated 15 May 2023 No. 2i-12/2023 – Acceleration of the reorganization procedure of SRL “Metropolis City”.
From the document, we can see that on March 9, 2023 (the day after the change of address), Metropolis City SRL applied for an accelerated debt restructuring process at the local court of that small city. Debt restructuring is a process in which a company in financial difficulty agrees with its lenders to renegotiate more favorable or flexible terms to avoid bankruptcy.
There were multiple hearings in court in late June and early July 2023, during which all creditors were required to present and prove their debt claims for approval by the Trustee.
A petition was filed for recognition of a debt of 3,527,899.28 euros (equivalent to 68,476,525.02 lei) owed to investors represented by Reinvest24 OÜ, as well as a petition for recognition of a debt owed to SRL Reinvest24 Group. To prove the petition and its eligibility, more than 300 pages of documentation had to be submitted to the court, including agreements, payment confirmations and interest payment schedules.
In this debt restructuring process, a total of 16 companies claimed claims, of which at least eight had the same UBO (Ultimate Beneficial Owner) as Metropolis City SRL. The claims submitted by these creditors were approved on the basis that the accountants of both companies had confirmed the existence of the debts.
The court only approved and included in the schedule of claims the amount of MDL 61,238,773.4. Accordingly, we challenged the non-inclusion of the amount of MDL 7,237,751.62 in the schedule of claims. The judge has not yet ruled on this challenge. Also, the request for approval of the claims submitted by SRL Reinvest24 Group was returned. We have also appealed against this decision, but the case has not yet been heard.
In this case, we also challenged the creditors of SRL Kirsan Com, SRL Avanvo, SRL Kirsan Design, SRL Kirsan Life, SRL My Life Tech and SRL Trans Stroy on the grounds that they are related creditors. Those objections were dismissed. We have appealed the dismissal of those objections, but the Court of Appeal has yet to hear it.
The proposed debt restructuring plan must be approved by a vote of all creditors, with voting rights distributed based on the amount of claims approved. A majority will approve or reject the restructuring plan and repayment schedule.
The Debt Restructuring Administrator and the judge determined that Reinvest24 was an unaffected creditor as it was the largest creditor and therefore could not vote to approve/disapprove the restructuring plan.
Although our investors are the largest holders of claims tendered in this debt restructuring process, the administrators in charge of this process have not given us any voting rights and have classified our claims as “unaffected creditors,” which is typically done for creditors whose claims are not being paid on time and will be paid immediately without any other changes being made to the tendered claims.
However, we note that the Plan, voted at a creditors' meeting exclusively consisting of relevant creditors of SRL “Metropolis City”, was approved by Judge Valeriu Padulari of the Balti Court (Headquarters Central) by Decision 2i-12/2023 of 11 July 2023.
We have filed appeals and motions against the plan. Our motion for stay has been granted. The Trustee has also filed a response to our appeal. We have filed written objections to the arguments presented by the Trustee.
The proposed debt restructuring plan is to make payments to mortgage creditors (Reinvest24 investors) according to the following schedule:
0% – 2023-2024, 30% – May 2024-May 2025, 70% – May 2025-May 2026.
The reorganization plan may also include a request to the court to remove liens from real property used as collateral for the debt. If the court determines the reorganization plan is acceptable as is and removes the liens, the claims of unaffected secured creditors will become unsecured, significantly reducing the likelihood of recovery of their debts.
Our legal team has filed an appeal against this plan and also filed an appeal in court against the removal of the mortgage from the secured assets. The secured assets should remain intact and only secure the investors' claims. There were multiple violations in the procedures followed by the court, judge and administrator, which we are also appealing separately.
Any restructuring plan must include the following:
the proper treatment of classes of creditors who are not adversely affected by the application of a plan pursuant to this Act, classes of creditors who are adversely affected as a result of a reduction in the amount of their claims, a reduction in their guarantees, or other reasons such as installments that are prejudicial to creditors, or whether and to what extent debtors, economic group associates, general partnerships and limited partnership shareholders will be relieved of liability, the amount of recovery provided to all creditors in excess of the estimated amount that they would have received as a result of a distribution in the event of bankruptcy. This amount of recovery must be calculated on the date the plan is proposed.
At the same time, I note that nowhere in the law does it say that a mortgage can be canceled by a restructuring plan. The law provides for the possibility of reducing the mortgage, but not its abolition. In our experience, we have never come across a restructuring plan with the removal of all mortgages and consider such a plan to be illegal for the mortgagee. Hypothetically, Reinvest24 OÜ will continue to be a mortgagee, but if the mortgaged real estate is released from the mortgage and sold, the mortgagee's status will become merely formal. That is why we are now focusing all our efforts on this situation. The rapid development of events and the attitude of the judges make us convinced that these restructuring plans are directed against REINVEST24 OÜ. For this reason, we will file criminal charges, complaints to the judicial department and other competent authorities.
Reinvest24 assumes no responsibility or liability for any errors or omissions in the content of this article. The information contained in this article is provided “as is” with no guarantee of completeness, accuracy, usefulness or timeliness.
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