A mid-size technology and distribution group operating across Israel and two European markets arrived at a point of acute financial pressure. Secured lenders, trade creditors, and a minority bondholder were each pursuing separate collection tracks. Without a coordinated strategy, the group's operating subsidiaries faced simultaneous enforcement actions that would have destroyed the residual value available to any creditor class.
This case study examines how a coordinated insolvency proceedings strategy under Israeli law preserved going-concern value for a multi-entity group facing competing creditor claims. The approach combined a court-supervised restructuring plan with structured creditors meeting processes and disciplined proof of debt submissions. Resolution was achieved within approximately eight months of the initial filing.
The following sections cover the client challenge, the legal strategy chosen, key milestones, complications encountered, and three transferable lessons for cross-border matters of a similar nature.
Client profile and the challenge of fragmented creditor pressure
The client was a privately held group with operating entities incorporated in Israel and holding structures registered in two EU jurisdictions. Its principal revenues came from technology distribution contracts, with secondary income from a logistics subsidiary.
The financial difficulty arose from a combination of delayed receivables, a currency mismatch on a euro-denominated bondholder facility, and a deteriorating relationship with the group's largest secured lender. By the time engagement began, three separate legal proceedings had already been filed in Israeli courts by different creditor parties.
The central challenge was sequencing. Each creditor had distinct legal standing under Israeli insolvency legislation. The secured lender held first-ranking security over the principal Israeli operating entity. The bondholder's position was structurally subordinated but contractually complex. Trade creditors were numerous, geographically dispersed, and held varying proof of debt positions.
Uncoordinated enforcement would have triggered cross-default clauses across the group. This would have accelerated the bondholder facility and exposed the EU holding structures to parallel proceedings in their home jurisdictions. The lost opportunity was significant: the group's core technology contracts retained genuine market value. Liquidation would have recovered a fraction of that value. A well-structured restructuring plan offered a materially better outcome for all creditor classes.
For a broader overview of the firm's insolvency and restructuring work in the region, see our insolvency and restructuring services in Israel.
Legal strategy: a court-supervised restructuring plan with creditor class separation
The strategic decision was to apply for court-supervised insolvency proceedings under Israeli insolvency legislation rather than pursue an out-of-court workout. Several factors drove this choice.
First, the number of creditors made a consensual bilateral negotiation unworkable within a realistic timeframe. Court supervision provided a moratorium that stopped the existing enforcement actions. This created the breathing room necessary for value-preserving negotiations.
Second, Israeli insolvency legislation provides a structured mechanism for class-based voting on a restructuring plan. Separating creditor classes – secured, unsecured, and subordinated – allowed each group's distinct economic interests to be addressed in parallel rather than in sequence.
Third, the appointment of an administrator (court-appointed insolvency officer) gave the process external credibility. This was important for the European creditors, who were unfamiliar with Israeli proceedings and initially resistant to the local process.
The restructuring plan itself proposed a partial debt-for-equity conversion for the bondholder, a revised repayment schedule for the secured lender secured against a ring-fenced asset pool. Additionally. A lump-sum settlement fund for trade creditors distributed through proof of debt verification. The liquidator function was deliberately excluded from the initial strategy – preserving the business as a going concern was the explicit objective throughout.
Key milestones and complications encountered
The proceedings moved through several distinct phases over approximately eight months.
The initial court application secured a provisional moratorium within the first two weeks. This halted the separate enforcement actions and established a single procedural track. The administrator was appointed shortly afterward and immediately began reviewing the group's asset and liability position.
The creditors meeting was convened approximately six weeks after the moratorium order. This session was procedurally demanding. A subset of trade creditors, coordinated through a European legal representative, challenged the valuation methodology used for the secured asset pool. The dispute delayed the tabling of the formal restructuring plan by approximately three weeks.
Proof of debt submissions from the bondholder raised a secondary complication. The bondholder's facility agreement contained a governing law clause selecting English law. The interaction between English law contract provisions and Israeli insolvency legislation required careful navigation. The relevant question – whether the bondholder's contractual priority rights were enforceable within an Israeli restructuring – was resolved through a hearing before the economic division of the Beit Mishpat HaMachozi (Israeli District Court). The court confirmed that contractual subordination provisions were binding within the restructuring plan.
By month five, the restructuring plan had received the required creditor class approvals. The secured lender and the bondholder voted in favour. The trade creditor class approved by a sufficient majority after the proof of debt process was completed and a modest increase to the settlement fund was negotiated.
Court confirmation of the plan followed in month seven. Implementation of the initial distribution to trade creditors and the first tranche of the revised repayment schedule to the secured lender was completed by month eight.
For matters involving parallel corporate disputes arising within Israeli restructuring proceedings, our corporate disputes practice in Israel provides specialist support at the intersection of insolvency and shareholder conflict.
To explore how a restructuring strategy of this type could apply to your situation, contact us at info@ferrazwhitmore.com.
Three transferable lessons for cross-border restructuring matters
Lesson 1: Establish a single procedural track early. In multi-creditor situations, the most destructive dynamic is parallel enforcement. Each enforcement action destroys value and consumes management bandwidth. Securing a moratorium through formal insolvency proceedings – even before a restructuring plan is fully developed – stops this dynamic. The cost of the application is modest relative to the value preserved by halting uncoordinated creditor action.
Lesson 2: Address governing law conflicts before the creditors meeting. Cross-border matters frequently involve creditors whose instruments are governed by a different legal system from the jurisdiction of the insolvency proceedings. Identifying these conflicts early – and obtaining judicial clarification where necessary – prevents them from derailing the creditor voting process. In this matter, the English law governing law clause was a known risk from day one. Addressing it through a preliminary hearing before the creditors meeting removed it as a procedural obstacle.
Lesson 3: Creditor class design determines plan feasibility. How creditor classes are constructed shapes the voting arithmetic and the economics of the plan. Mixing secured and unsecured creditors in a single class typically produces an outcome that serves neither group well. Separating classes by economic position and legal priority allows each group's genuine interests to be addressed directly. This increases the probability of achieving the required approvals without litigation over the plan terms.
A comparable approach to multi-creditor restructuring in a different regional context is examined in our case study on corporate restructuring in the UAE.
About Ferraz & Whitmore
Ferraz & Whitmore is an international law firm based in Lisbon, advising business clients across 46 jurisdictions. Our insolvency and restructuring practice supports international groups, institutional lenders, and creditor committees navigating multi-creditor proceedings in Israeli and regional markets. We work with clients who need a lawyer in Israel with cross-border capability – one who can manage the interaction between local insolvency legislation and foreign law instruments. Engaging a law firm in Israel with dual civil and common law expertise is particularly important where bondholder facilities, English-law security documents, or EU holding structures are involved. The firm's restructuring attorneys have appeared before Israeli courts and advised on administrator appointments, restructuring plan submissions, and creditors meeting processes across the Middle East and Asia-Pacific region. To discuss your restructuring situation, contact us at info@ferrazwhitmore.com.
Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. Ferraz & Whitmore assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@ferrazwhitmore.com.