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Loans & Secured Financing GETTING THROUGH THE DEAL Loans & Secured Financing Loans Financing & Secured In 18 jurisdictions worldwide Contributing editor George E Zobitz 2016 2016 Loans & Secured Financing 2016 Contributing editor George E Zobitz Cravath, Swaine & Moore LLP Publisher Law The information provided in this publication is Gideon Roberton general and may not apply in a specific situation. [email protected] Business Legal advice should always be sought before taking Research any legal action based on the information provided. Subscriptions This information is not intended to create, nor does Sophie Pallier Published by receipt of it constitute, a lawyer–client relationship. [email protected] Law Business Research Ltd The publishers and authors accept no responsibility 87 Lancaster Road for any acts or omissions contained herein. Although Business development managers London, W11 1QQ, UK the information provided is accurate as of August Alan Lee Tel: +44 20 3708 4199 2015, be advised that this is a developing area. [email protected] Fax: +44 20 7229 6910 Adam Sargent © Law Business Research Ltd 2015 Printed and distributed by [email protected] No photocopying without a CLA licence. Encompass Print Solutions First published 2015 Tel: 0844 2480 112 Dan White First edition [email protected] ISSN 2059-5476 CONTENTS Global overview 5 Japan 60 George E Zobitz and Christopher J Kelly Masayuki Fukuda Cravath, Swaine & Moore LLP Nagashima Ohno & Tsunematsu Cayman Islands 6 Kenya 65 Rob Jackson and Zoë Hallam Sonal Sejpal, Mona Doshi and Akash Devani Walkers Anjarwalla & Khanna Dominican Republic 11 Netherlands 71 Manuel Troncoso Hernández Elizabeth van Schilfgaarde, David Viëtor, Diederik Vriesendorp OMG and Taida Pasic NautaDutilh Egypt 16 Mahmoud Bassiouny and Mohamed Elharmy Nigeria 76 Matouk Bassiouny Onyinye Chukwu, Oluwatoyin Nathaniel and Ukamaka Okoli G Elias & Co France 22 Eric Fiszelson, Vincent Hatton and Virginie Barbier Panama 82 Herbert Smith Freehills Paris LLP Ivette E Martinez S Patton Moreno & Asvat Germany 28 Stephan Brandes, Philipp von Ploetz and Andreas Herr Russia 87 SZA Schilling, Zutt & Anschütz Rechtsanwalts AG Dmitry Gubarev, Svetlana Gareeva and Maria D Shkrabina Orrick, Herrington & Sutcliffe LLP Greece 34 Athanasia G Tsene Switzerland 92 M & P Bernitsas Law Offices Patrick Hünerwadel and Marcel Tranchet Lenz & Staehelin Hong Kong 40 Simon Deane and Chris Wong United Kingdom 97 Deacons Azadeh Nassiri and Sophy Lewin Slaughter and May Indonesia 46 Ibrahim Sjarief Assegaf, Ahmad Fikri Harahap, First Deddy United States 103 Ariyanto and Luciana Fransiska Butarbutar George E Zobitz and Christopher J Kelly Assegaf Hamzah & Partners Cravath, Swaine & Moore LLP Italy 55 Maurizio Delfino and Martin Pugsley Delfino e Associati Willkie Farr & Gallagher LLP – Studio Legale 2 Getting the Deal Through – Loans & Secured Financing 2016 NautaDutilh NETHERLANDS Netherlands Elizabeth van Schilfgaarde, David Viëtor, Diederik Vriesendorp and Taida Pasic NautaDutilh Loans and secured financings 7 Describe the primary roles and typical fees of the financial institutions that arrange and syndicate bank loan facilities. 1 What are the primary advantages and disadvantages in your jurisdiction of incurring indebtedness in the form of bank In syndicated facilities, one or more banks may be appointed as arrangers. loans versus debt securities? The arrangement fee is generally determined on the basis of the aggregate amount of the commitments and varies between 0–150bps (investment There are no jurisdiction-specific advantages or disadvantages for incur- grade) and 175–450bps (leveraged). Another customary role is the role of ring debt by way of bank loans or debt securities. If debt securities are documentation agent. The documentation agency fee is often a set amount offered to the public (non-professional market parties), prospectus require- that is not linked to the size of the deal, but rather based on the complexity ments apply. of the transaction (eg, complexity of the capital structure, number of obli- Also, from a tax perspective, there are no specific advantages or dis- gors and jurisdictions involved, scope of the security package). advantages for incurring debt by way of bank loans or debt securities. In neither case will there be withholding tax on interest payments. 8 In cross-border transactions or secured transactions involving guarantees or collateral from entities organised in 2 What are the most common forms of bank loan facilities? multiple jurisdictions, which jurisdiction’s laws govern the Discuss any other types of facilities commonly made available bank loan documentation? to the debtor in addition to, or as part of, the bank loan facilities. In cross-border transactions with multiple jurisdictions, English law or New York law generally governs the bank loan documentation. The most commonly made facilities available are term loan facilities, revolving credit facilities, overdraft facilities and bank guarantees or facili- Regulation ties. Overdraft facilities and bank guarantees or facilities are commonly made available either individually on a bilateral basis or in the form of an 9 Describe how capital and liquidity requirements impact the ancillary facility by way of utilisation of a lender’s commitment under a structure of bank loan facilities, including the availability of club deal or syndicated revolving credit facility. related facilities. In December 2010 the Basel Committee on Banking Supervision published 3 Describe the types of investors that participate in bank loan its final standards on the revised capital adequacy framework, commonly financings and the overlap with the investors that participate known as Basel III. The European CRD IV legislative package implements in debt securities financings. Basel III and consists of the Capital Requirements Directive (the CRD IV Investors in bank loans are predominantly traditional banks. Direct lend- Directive) and the Capital Requirements Regulation (CRR). The CRR pro- ing by pension funds, insurance companies and hedge funds is, however, vides for the majority of the capital and liquidity (and other prudential) becoming more popular, in particular when the financing is related to com- requirements applicable to banks in the Netherlands. CRD IV entered into mercial real estate. force on 1 January 2015 and the full application of all measures thereunder (including any national implementation thereof in the Netherlands) will 4 How are the terms of a bank loan facility affected by the type have to be completed before 1 January 2019. of investors participating in such facility? CRD IV intends to increase the quantity and quality of capital, and Institutional investors typically invest in non-amortising term loan facili- introduces new capital buffers. It requires banks to hold sufficient capital ties. Sometimes they require call protection by requiring a make-whole upon authorisation and, following authorisation, banks must hold suffi- payment in the case of an early voluntary prepayment. cient capital to meet the solvency requirements in relation to their credit risks, market risks and operational risks. CRD IV also introduces a new 5 Are bank loan facilities used as ‘bridges’ to permanent debt liquidity framework, consisting of a liquidity coverage ratio (LCR) and a security financings? How do the structure and terms of bridge net stable funding ratio (NSFR). The LCR will be progressively imple- facilities deviate from those of a typical bank loan facility? mented as of 1 October 2015, and addresses the sufficiency of high-quality liquid assets in order to meet short-term liquidity needs under a specified These structures are not very common in the Netherlands. acute stress scenario. The NSFR aims for banks to cover their long-term assets with sufficient stable funding. Finally, CRD IV introduces a lever- 6 What role do agents or trustees play in administering bank age ratio, projecting the required own funds of the bank compared to its loan facilities with multiple investors? on-and off-balance assets. Both the NSFR and the leverage ratio will likely Loan documentation invariably provides for a facility agent and a secu- not apply before 1 January 2018. rity agent. The facility agent facilitates the process of administering the Bank loan facilities may impact the foregoing requirements and vice facilities on a daily basis. The security agent holds the security package versa. Depending on the risks arising from a certain bank loan facility, the for the benefit of the lenders. The agents only owe duties to the investors bank may be required to hold more capital to cover these risks. A bank may (although, as a matter of Dutch law, there may also be situations in which also seek to mitigate these risks, for instance via collateral or other form they need to observe the interests of the debtor). The loan documenta- of security arrangement. The LCR, when applicable, could entail that a tion contains a number of exculpatory provisions to limit the scope of the bank may on the one hand seek to maintain or increase its high-quality agent’s relationship with the investors and with the borrower, as well as liquid assets (such as cash) and on the other hand decrease its short-term extensive indemnification and reimbursement provisions. net liquidity outflows (for instance by limiting or delaying drawdowns under a bank loan facility). www.gettingthedealthrough.com 71 © Law Business Research Ltd 2015 NETHERLANDS NautaDutilh
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