Click here to download the Loans and Secured Financing 2020 report, published by Getting the Deal Through.

Jurisdictions covered

The following 14 jurisdictions are covered in this report:

Belgium; Cayman Islands; Egypt; Greece; India; Indonesia; Japan; Kenya; Luxembourg; Mexico; Spain; Switzerland; United Kingdom; United States.

Questions

The set of questions relating to the topic of loans and secured financing and answered by the guide for each jurisdiction covered include:

Loans and secured financing

• • What are the primary advantages and disadvantages in your jurisdiction of incurring indebtedness in the form of bank loans versus debt securities?
• • What are the most common forms of bank loan facilities? Discuss any other types of facilities commonly made available to the debtor in addition to, or as part of, the bank loan facilities.
• • Describe the types of investors that participate in bank loan financings and the overlap with the investors that participate in debt securities financings.
• • How are the terms of a bank loan facility affected by the type of investors participating in such facility?
• • Are bank loan facilities used as ‘bridges’ to permanent debt security financings? How do the structure and terms of bridge facilities deviate from those of a typical bank loan facility?
• • What role do agents or trustees play in administering bank loan facilities with multiple investors?
• • Describe the primary roles and typical fees of the financial institutions that arrange and syndicate bank loan facilities.
• • In cross-border transactions or secured transactions involving guarantees or collateral from entities organised in multiple jurisdictions, which jurisdiction’s laws govern the bank loan documentation?

Regulation

• • Describe how capital and liquidity requirements impact the structure of bank loan facilities, including the availability of related facilities.
• • For public company debtors, are there disclosure requirements applicable to bank loan facilities?
• • How is the use of bank loan proceeds by the debtor regulated? What liability could investors be exposed to if the debtor uses the proceeds contrary to regulations? Can investors mitigate their liability?
• • Are there regulations that limit an investor’s ability to extend credit to debtors organised or operating in particular jurisdictions? What liability are investors exposed to if they lend to such debtors? Can the investors mitigate their liability?
• • Are there limitations on an investor’s ability to extend credit to a debtor based on the debtor’s leverage profile?
• • Do regulations limit the rate of interest that can be charged on bank loans?
• • What limitations are there on investors funding bank loans in a currency other than the local currency?
• • Describe any other regulatory requirements that have an impact on the structuring or the availability of bank loan facilities.

Security interests and guarantees

• • Which entities in the organisational structure typically provide collateral and guarantee support for bank loan financings? Are there limitations on which entities in the organisational structure are permitted to provide such support?
• • What types of obligations typically share with the bank loan obligations in the collateral and guarantee support? If so, are all such obligations equally and ratably covered by the collateral and guarantee support?
• • Which categories of assets are commonly pledged to secure bank loan financings? Describe any limitations on the pledge of assets.
• • Describe the method of creating or attaching a security interest on the main categories of assets.
• • What steps are necessary to perfect a security interest on the main categories of assets? What are the consequences of failing to perfect a security interest?
• • Can security interests extend to future-acquired assets? Can security interests secure future-incurred obligations?
• • Describe any maintenance requirements to avoid the automatic termination or expiration of security interests.
• • Are security interests on an asset automatically released following its sale by the debtor? If so, are the releases mandated by law or contract?
• • What defences does a guarantor have against claims for nonfulfilment of guarantee obligations? Can such defences be waived?
• • Describe any parallel debt or similar requirements applicable in a secured bank loan financing where an agent acts for multiple investors.
• • What are the most common methods of enforcing security interests? What are the limitations on enforcement?
• • Describe the impact of fraudulent conveyance, financial assistance, thin capitalisation, corporate benefit and similar doctrines on the structure of bank loan financings.

Intercreditor matters

• • What types of payment or lien subordination arrangements, or both, are common where the debtor has obligations owing to more than one class of creditors?
• • What creditor groups are typically included as parties to the intercreditor agreement? Are all creditor groups treated the same under the intercreditor agreement?
• • Are junior creditors typically stayed from enforcing remedies until senior creditors have been repaid? What enforcement rights do junior creditors have prior to the repayment of senior debt?
• • What rights do junior creditors have during a bankruptcy or insolvency proceeding involving the debtor?
• • How do the terms of the intercreditor arrangement change if creditor groups will be secured on a pari passu basis?

Loan document terms

• • What forms or standardised terms are commonly used to prepare the bank loan documentation?
• • What are the customary pricing or interest rate structures for bank loans? Do the pricing or interest rate structures change if the bank loan is denominated in a currency other than the domestic currency?
• • Have any procedures been adopted in bank loan documentation in your jurisdiction to replace LIBOR as a benchmark interest rate for loans?
• • What other bank loan yield determinants are commonly used?
• • Describe any yield protection provisions typically included in the bank loan documentation.
• • Do bank loan agreements typically allow additional debt that is secured on a pari passu basis with the senior secured bank loans?
• • What types of financial maintenance covenants are commonly included in bank loan documentation, and how are such covenants calculated?
• • Describe any other covenants restricting the operation of the debtor’s business commonly included in the bank loan documentation.
• • What types of events typically trigger mandatory prepayment requirements? May the debtor reinvest asset sale or casualty event proceeds in its business in lieu of prepaying the bank loans? Describe other common exceptions to the mandatory prepayment requirements.
• • Describe generally the debtor’s indemnification and expense reimbursement obligations, referencing any common exceptions to these obligations.