Germany enters 2026 with a different mindset and a new focus on restructuring. StaRUG (Stabilisierungs- und Restrukturierungsrahmen für Unternehmen), the country’s principal restructuring framework, has emerged as a flexible route for German corporates and stressed sectors looking for a pre-insolvency tool that can redesign balance sheets to rescue viable distressed companies and preserve value.
In response, management teams are now weighing carve-outs, targeted closures and reinvestment, while lenders are increasingly measuring success by sustainable deleveraging rather than short-term fixes and resets. Investors, for their part, are seeking deal-ready opportunities that offer clear returns and a credible path to growth.
For its part, the federal government is looking to engineer a business environment that attracts domestic and foreign investment and supports transformation through policy measures and incentives.
The scale of the task facing both business and policymakers, however, is substantial and revitalizing Germany’s economy depends in part on navigating increasingly complex geopolitical risks and rising trade tensions between the EU, the U.S. and China.
The drivers for wider use of restructuring to overhaul the economy are equally significant. A refinancing wall that is expected to mature in 2026-27 is fast approaching, while higher-for-longer interest rates and sustained margin pressure are testing companies’ ability to protect liquidity, operations and governance.
At the same time, trade measures and tariffs are adding operating-cost and supply-availability risks to global value chains that are eroding the reliability and economics of import and export routes.
Faced with these dynamics, more companies are beginning to turn to StaRUG to recapitalize core businesses and bring in new money or special-situations equity where investment can accelerate their plans.
To succeed, leadership teams are developing detailed restructuring plans that focus on liquidity, creditor co-ordination, forum planning and a clear explanation of how value will be preserved and ultimately grown.
The keys to a successful StaRUG process
Effective, well-run StaRUG processes share certain core components. They start with a rolling 13-week cash forecast, a refinancing map that looks at least 12 months ahead, and clear governance rules so that decisions can be taken quickly. This approach gives management more headroom for planning and assessing options. It also reduces the risk of the business sliding into a mandatory insolvency filing.
Another common feature is funding, which needs to be clearly aligned with the rescue plan. Private credit, now a key provider of debt to mid-cap and PE-backed German businesses, can typically finance larger, complex rescues quickly and flexibly, but usually at higher cost to reflect the bespoke structuring for each borrower and the speed of execution. By contrast, traditional banks continue to take the lead on senior secured refinancing and often require guarantees.
Central to an effective StaRUG is disciplined plan design. Management should prioritize early collection of operational and financial data and propose realistic timelines that are credible with creditors and other stakeholders.
Lenders, especially banks, are now asking for earlier access to financial information as part of their loan terms. They are also looking for more control over any collateral to protect themselves if the business fails. Crucially, they are assessing the risks of advancing new capital before existing loans mature. Where approvals for plans are likely to be complex, companies should consider focusing on securing flexible interim financing to give themselves the headroom to maintain business continuity and protect value.
Deciding on the forum and cross-border recognition are other fundamental questions in complex restructurings with an international dimension. These should form part of the planning at the earliest opportunity. The forum is determined by the company’s center of main interests (COMI). There is a presumption that COMI corresponds to the company’s registered office, although evidence may be adduced to refute that presumption. In order to reverse this, it is necessary to prove that the actual center of management and supervision, as perceived by third parties, is located elsewhere.
Within the EU, formal public insolvency proceedings have automatic recognition. However, recognition for preventive frameworks, such as a non-public StaRUG, requires tailored planning.
For StaRUG to be recognized in overseas jurisdictions, teams should consider planning for contingencies, including producing bilingual documentation and a detailed record showing that creditors in different countries are being treated fairly and on an equal footing.
How StaRUG is being deployed
StaRUG, which has been in effect since 2021, is frequently used in mid- to large-cap balance-sheet restructurings where the creditor group can be defined early and engagement can be organized.
Its key strengths are that outcomes need to be approved by 75% by value in each voting class that is affected by the plan, along with the introduction of cross-class cram-down, to deliver complex capital changes, including debt-to-equity swaps and new financing, and a forum that allows German businesses to implement their plans domestically rather than having to rely on foreign courts.
Eligibility is straightforward. StaRUG is available if the company faces “imminent illiquidity”. Put simply, this means that there is a pre-insolvency risk that payments are likely to be missed as they fall due while the company is not yet illiquid or over-indebted. Should the company become illiquid or over-indebted, directors must file for insolvency without delay under Germany’s Insolvency Code.
In practice, the company must show concrete evidence that a StaRUG plan will work. Boards should therefore keep a meticulous record of actions, backed by hard data and reports that cover cash analyses, the testing of alternative approaches and creditor dialogue. The latter involves formal negotiations and regular consultation with creditors to ensure the plan is fair, its implications are clear and no creditor is worse off.
As parties have become more sophisticated in their use of StaRUG, boards are increasingly expected to provide evidence of the viability of their plans from the outset. That shift puts the onus on management to deliver greater predictability, and in turn raises questions about how effectively StaRUG provides for it. In parallel, stakeholders want clearer evidence that StaRUG’s tools work in corporate groups, where structures are inherently more complex and harder to disentangle.
These two areas are expected to be priorities for policymakers this year. A government evaluation of StaRUG is expected in the next few months alongside a separate review by the European Commission this July. The German government review is expected to examine how creditor class formation should work in practice, when cross-class cram-down should be used, how group restructurings can run in parallel or in sequence, and in which situations shareholder consent is required and how it should work. It will also address questions about the scope of directors’ duties.
Where the opportunities—and the risks—will surface
Companies are expected to reshape portfolios and repair balance sheets more actively over the coming months. This is likely to result in more carve-outs and targeted disposals of non-core units.
There are several sectors where restructuring is likely to be active and investment opportunities may be attractive. In commercial real estate and construction, valuations are still being repriced and pressure on developers and contractors remains significant, although there are early signs of stabilization. For chemicals and other energy-intensive industries, higher energy and feedstock costs and capital spending required to comply with regulations are still weighing on performance. In retail, weak demand, rising wages and energy bills, and inventory mismatches are continuing to squeeze margins.
Set against this backdrop, chemicals and other businesses that use a lot of energy show how financing choices can affect resilience to market turbulence and cost pressures. Earnings fall when higher power and feedstock costs cannot be fully passed through in customer contracts and when decarbonization or efficiency upgrades require upfront spending.
In these cases, a blended restructuring solution can help. Banks can provide senior secured facilities, guarantees and working-capital lines, while private credit can add speed and flexible structures to fund turnaround capex and short-term cash needs.
Early and frequent engagement with lenders, key suppliers and customers helps boards and management teams to test the investment case against how energy prices could move, using real financing and supply assumptions and what can be passed on to customers under the terms of existing contracts, before any money is invested.
Risks for capital providers and how to manage them
For investors and lenders in distressed assets, the risks most likely to derail value are practical and usually predictable. Regulatory authorizations—from foreign investment screening to subsidy-control reviews—can extend timetables and change deal economics, so parties should build in extra time and expect requests for additional information or even resubmissions.
Energy price volatility can disrupt cash flows, and capital expenditure required for ESG and regulatory obligations (as mentioned earlier in relation to energy-intensive industries) is often larger and may be needed sooner than expected. To mitigate these risks, capital providers should consider building buffers, stress-testing multiple investment scenarios, and putting aside ring-fenced funds for any essential upgrades that may arise.
Engaging with employee works councils should also be prioritized. These consultations should, in our view, focus on explaining how any proposed investment supports job preservation. Framed this way, consultation is more likely to foster support rather than create uncertainty or delays.
Where the likelihood of completion is uncertain, structures such as earn-outs, material adverse change (MAC) clauses, “leakage protections”, and “amend-and-extend” financing can help protect value before the deal completes.
The best opportunities will be in assets with a clearly defined scope, robust implementation plans and supportive stakeholders, backed by data that shows how the business intends to return to stability and future growth. Those who combine forensic due diligence with flexible deal structures are likely to be most effective. Equally, sellers that prepare early, price energy and ESG capex realistically, and deal with approvals and workforce consultation from the outset are more likely to have a quicker exit.
The key goal on both sides is predictability. The more it is embedded in the scope, the plan and the restructuring process, the less value is likely to be lost before and during implementation.
