Investing in French Distressed Debt (INSEAD)

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1 MARKET INEFFICIENCIES ENABLING DISTRESSED DEBT INVESTORS TO “BUY LOW”

1.1 REVIEW OF THE BASIC RISKS IMPACTING THE VALUATION OF A DEBT INSTRUMENT

1.2 EXCESS SUPPLY DUE TO FORCED SELLERS (ESPECIALLY JUST AFTER THE DEBTOR’S DISTRESS

BECOMES APPARENT)

1.3 LIMITED DEMAND DUE TOASYMMETRY OF INFORMATION (ESPECIALLY JUST AFTER THE DEBTOR’S

DISTRESS BECOMES APPARENT)

1.4 ILLIQUIDITY DISCOUNT

2 HOW THE REORGANIZATION OF A DEBTOR’S BUSINESS MAY INCREASE ENTERPRISE

VALUE

2.1 HOW REORGANIZATION MAY DECREASE FINANCIAL DISTRESS COSTS

2.2 HOW REORGANIZATION MAY DECREASE AGENCY COSTS

3. INVESTMENT STRATEGIES AVAILABLE IN A FRENCH LEGAL CONTEXT

3.1 PASSIVE INVESTMENT STRATEGIES

3.2 ACTIVE INVESTMENT STRATEGIES NOT AIMING CONTROL

3.3 ACTIVE INVESTMENT STRATEGIES AIMING CONTROL

4 VALUATION OF A FRENCH DISTRESSED DEBT

4.1 IDENTIFYING THE POSSIBLE SCENARIOS

4.2 DETERMINING THE PROBABILITY OF EACH SCENARIO

4.3 DETERMINING THE CASH FLOWS ASSOCIATED WITH EACH SCENARIO

4.4 DETERMINING THE DISTRESSED DEBT INVESTOR’S DISCOUNTING RATE

4.5 DCF ANALYSIS

SCHEDULE: SUMMARY OFAPPLICABLE FRENCH RULES

1 FRENCH PRE-INSOLVENCY AND INSOLVENCY RULES

2 RANKING OF SECURITY INTERESTS IN FRANCE

3 FRENCH LEGAL CONSTRAINTS ON DISTRESSED DEBT ACQUISITIONS

4 ADVANTAGES AND DISADVANTAGES OF SHARE DEALS OVER ASSET DEALSIN

FRANCE

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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