The Higher Court found that the mid-September decision to start receivership was based on a condition which was not met because of the previous actions of secured creditors of T-2. Moreover, the condition for starting receivership was wrongly applied in the first place.

Based on a complaint from T-2 and its owners, the Higher Court found that the secured creditors could not claim the company was insolvent because it was more than two months in arrears on its payments of claims from before the start of court-mandated debt restructuring.

As a reason for this it stated that the condition for insolvency could not be claimed because the secured creditors could demand repayment only from the assets against which they held a lien and not all assets of the debtor.

The creditors had claimed that the condition for insolvency was met as T-2 failed to repay their debt from current cash flow, which however was not part of the lien they held against T-2 assets.

Moreover, the Higher Court found that the secured creditors had moved to seize the assets given to them as a lien by T-2 and thereby prevented the debtor from selling the asset itself to repay its debts. As such they are not entitled to claim that the company is arrears on payments from cash flow.

The court added that this was in line with insolvency legislation in place at the time debt restructuring at T-2 was launched in early 2013.

While legislation has since changed, enabling a different interpretation, this would require the active participation of secured creditors in debt restructuring procedures, which was not the case in restructuring at T-2.

In the case of active participation, the secured creditors have to consent to the assets under lien being used by the company to raise money in return for having a say in restructuring proceedings and getting payment from cash flow. This possibility was envisaged under a new insolvency proceedings law which took effect in late 2013.

The Bank Asset Management Company (BAMC), which brought the receivership motion together with the banks Hypo Alpe Adria Bank and Banka Celje, said it would review the ruling before deciding on how to proceed.

The bad bank had demanded receivership after assuming some EUR 90m in soured loans taken out by T-2 at NLB and NKBM banks.

T-2 is the second biggest broadband internet provider in Slovenia, holding 18% in the market, according to data from the Agency for Communication Networks and Services for the first quarter of the year.

The company is the biggest provider of fibre to the home (FTTH) in Slovenia (49.3%) and the second biggest IP television provider (33.6%).