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Uk Austria Australia CHAMBERS Global PracticeAUSTRALIA GuidesAUSTRIAUK BankingBanking andand FinanceFinance UK – Law & Practice Contributed by Winston & Strawn London LLP 2016 UK LAW & PRACTICE Contributed by Winston & Strawn London LLP Authors: Zoë Ashcroft, Stewart Worthy, James D Simpson, Daniela Cohen Law & Practice Contributed by Winston & Strawn London LLP CONTENTS 1. Loan Market Panorama p.3 6. Enforcement p.9 1.1 Impact of Economic Cycle and Regulatory 6.1 Enforcing Collateral p.9 Environment p.3 6.2 Governing Law, Submission to Foreign 1.2 The High Yield Market p.4 Jurisdiction and Waiver of Immunity p.9 1.3 Alternative Credit Providers p.4 6.3 Judgments and Arbitral Awards by 1.4 Evolution of Banking and Finance Techniques p.4 Foreign Courts p.10 1.5 Recent Developments p.4 6.4 Other Matters Impacting a Foreign Lenders Ability to Enforce its Rights p.10 2. Authorisation p.4 7. Bankruptcy and Insolvency p.11 2.1 Requirements and Procedures p.4 7.1 Company Rescue or Reorganisation Procedures p.11 3. Structuring and Documentation Considerations p.5 7.2 Impact of Insolvency Processes on Lenders 3.1 Foreign Lender Restrictions: Granting Loans p.5 Rights to Enforce p.11 3.2 Foreign Lender Restrictions: Granting of Security p.5 7.3 Payment of Creditors p.11 3.3 Foreign Currency Exchange Restrictions p.5 7.4 Risk Areas for Lenders p.12 3.4 Agent and Trust Concepts p.5 8. Project Finance p.12 3.5 Loan Transfer Mechanisms p.5 8.1 Introduction to Project Finance p.12 3.6 Debt Buy-back p.5 8.2 Public-Private Partnership Transactions p.12 3.7 Public Acquisition Finance p.5 8.3 Government Approvals, Taxes, Fees and Charges p.13 4. Tax p.6 8.4 Responsible Government Body p.13 4.1 Withholding Tax p.6 8.5 Structuring the Project Company p.13 4.2 Other Taxes, Duties and Charges p.6 8.6 Acquisition and Export of Natural Resources p.14 4.3 Limits to the Amount of Interest p.6 8.7 Environmental, Health and Safety Issues p.14 5. Guarantees and Security p.6 9. Islamic Finance p.15 5.1 Assets Available and Forms of Security p.6 9.1 Overview p.15 5.2 Floating Charges and Other Security Interests p.7 9.2 Regulatory and Tax Framework p.15 5.3 Downstream, Upstream and Cross-stream 9.3 Islamic Bank and Takaful Operator Regulation p.16 Guarantees p.8 9.4 Framework for Shari’a-compliant Bodies 5.4 Restrictions on the Target p.8 and Transactions p.16 5.5 Release of Security p.8 5.6 Rules Governing the Priority of Competing Security Interests p.8 2 LAW & PRACTICE UK Contributed by Winston & Strawn London LLP Authors: Zoë Ashcroft, Stewart Worthy, James D Simpson, Daniela Cohen Winston & Strawn London LLP handles cross-border cor- public and private companies, and private equity portfolio porate lending, project finance, mergers and acquisitions, companies in investment grade, leveraged, and mezzanine joint ventures, competition and trade regulatory matters financings, including acquisition, working capital, asset and dispute resolution across a range of industry sectors, based and reserved based facilities covering many indus- including oil and gas, infrastructure, renewable energy, tries, including automotive, manufacturing, retail, and oil power, financial services, manufacturing, and luxury con- and gas. A substantial part of the practice is cross-border. sumer/retail products and services. Its London team’s ex- Many of its clients are expanding into the emerging mar- perience encompasses advising commercial banks and in- kets of Eastern Europe, Central Asia, Russia/CIS, the Mid- vestment banks, finance companies, private equity funds, dle East and Africa. Authors Zoë Ashcroft has over 25 years of experi- James D Simpson is a partner and ence handling complex cross-border co-chair of the firm’s global project finance corporate and finance transactions. She is practice. He has more than 30 years of cor- a co-founder of the firm’s London office, porate transaction experience, focused on heads the corporate finance team and is a the power, energy and infrastructure member of the global Executive Commit- sector, including project development, tee of Winston & Strawn LLP. Her experience includes privatisations, mergers and acquisitions, debt and equity representing banks and borrowers in cross-border financings, government work, and restructurings. Based in investment grade and leveraged facilities, including Europe since 1992, he has considerable privatisation and acquisition finance, general corporate lending and asset transactional experience in Central and Eastern Europe, based and reserves based loans. Zoë has experience over Russia/CIS, the Middle East, and Africa. Simpson has several business sectors, including energy, financial extensive experience in project finance and infrastructure services, luxury goods, retail and manufacturing. She has (including power, water/waste water, ports, airports and significant experience advising in relation to cross-border motorways), oil and gas, and renewables and clean energy, US/UK transactions and on facilities extended to borrow- as well as telecommunications. He regularly acts for ers in emerging markets, particularly in Africa. project sponsors, lenders (including multilateral financial institutions and ECAs), infrastructure funds, equity Stewart Worthy is a corporate and finance investors, and governments. partner in the London office. His practice focuses on complex cross-border corpo- Daniela Cohen is an associate in the rate and finance deals. He has represented finance department. She represents lender, domestic and international commercial sponsor and corporate borrower clients on banks and investment banks, finance domestic and international corporate companies, private equity funds, public and private lending transactions in the context of companies, and private equity portfolio companies in mergers and acquisitions, asset finance, as investment grade, leveraged, and mezzanine financings, well general corporate lending. She has experience in a including acquisition, working capital, asset based and variety of industry sectors including oil and gas and real reserved based facilities covering many industries, estate. including automotive, manufacturing, retail, and oil and gas. 1. Loan Market Panorama M&A values only behind April 2007). With instability in 1.1 Impact of Economic Cycle and Regulatory some areas of the Eurozone, the UK is an attractive market Environment for many lenders looking to expand their operations. During 2014 and 2015 the UK loan market has continued to recover from the financial crisis, helped by stability (and In general, the market conditions for loan terms are cur- some growth) in the UK economy. Interest rates currently rently considered more borrower and sponsor friendly than remain at historically low levels. According to recent market at any time since the financial crisis. One important trend, surveys, 2014 was the busiest year for the UK loan market in part driven by increasing bank regulation (in particular since 2007 (and July 2015 the second highest point for global capital risk requirements and the resulting increased costs 3 UK LAW & PRACTICE Contributed by Winston & Strawn London LLP Authors: Zoë Ashcroft, Stewart Worthy, James D Simpson, Daniela Cohen of capital), is the continuing growth of the direct lending or • LIBOR, EURIBOR and other benchmarks; alternative credit provider market. • The US Foreign Account Tax Compliance Act (FATCA) and the OECD Common Reporting Standards; 1.2 The High Yield Market • Basel III rules, the Capital Requirements Directive IV The post-crunch credit squeeze drove some non-investment package and the US Dodd-Frank Act; and grade borrowers to raise capital on the high yield debt mar- • Sanctions and anti-corruption laws. kets, which in turn has led to the strengthening and deep- ening of these markets. Investors have been attracted to It is anticipated that the market will also be affected by the the interest rates available on these bonds. As many of the following tax developments: prospective investors in these bonds are based in the US, there has been a move towards US-style, New York law bond • The current rate of UK corporation tax is 20% reducing to structures, with more flexible covenants, so-called ‘cov-lite’ 18% for the financial year beginning 1 April 2020; or ‘cov-loose’ deal terms, and incurrence based tests. • For foreign banking groups operating in the UK through permanent establishments or subsidiaries the bank levy Similarly, an increasing number of leveraged loans have seen rate will decrease from 0.21% to 0.18% from 1 January 2016 the traditional maintenance covenant package disappear in and continue to decrease each calendar year until 2021; favour of the US style ‘cov-lite’ or ‘cov-loose’ terms. There has • A proportionate decrease to 0.9% with effect from 1 Janu- also been a growing use of bonds alongside loans on trans- ary 2016 will be made to the bank levy half rate with cor- actions that might have been fully financed by loans before responding reductions being made each following calendar the financial crisis. While bond/loan combinations remain year until 2021; common, loan providers have begun to compete with US • A bank corporation surcharge of 8% on the profits of bank- lenders, and more recently UK syndicates, offering looser, ing companies within the charge to UK corporation tax is bond-style terms to strong borrowers. to be introduced for accounting periods beginning on or after 1 January 2016. 1.3 Alternative Credit Providers There has been a significant growth in the UK alternative Also noteworthy are various initiatives over the past year to credit provider market, particularly in the mid-market space. stimulate the private placement market in the UK, with the The alternative credit providers group includes a diverse col- aim of making it easier for mid-sized businesses to obtain lection of direct funds, investment funds and debt arms of debt (either by way of loan or note issuance) from investors hedge funds and buy-out houses.
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