For a typical financing, is there a standard form of credit agreement used which is then negotiated and typically how material is the level of negotiation?
With the exception of low-volume transactions, the Loan Market Association (LMA) standard is frequently used, mostly in downscaled form. Usually, the negotiations focus mostly on the financial terms, while the legal terms are not negotiated in their entirety. In general, only certain legal provisions are materially negotiated (please see question 20 below).
There is no publicly available standard form of acquisition financing governed by Japanese law. However, the model contracts for syndicated loans published by the Japan Syndication and Loan-trading Association are widely referred to in the drafting of acquisition financing documents.
The provisions in financing documents specific to acquisition financing are drafted on a deal by deal basis, including with respect to representations and warranties, covenants, conditions precedent, and events of default, as well as the collateral package. Major banks that are familiar with acquisition financing tend to have and use their own forms of financing documents. When both the lender and the borrower are represented by experienced counsel, negotiations between the lender and the borrower tend to focus on deal-specific issues and the completion of the financing documents could be done efficiently and relatively quickly.
There is no specific form of credit agreement which is used although lines of credit and term loans are often used. Each financing is negotiated individually on the basis of the commercial terms agreed between the parties.
Acquisition financing provided by banks in the Norwegian market is customarily documented by a loan agreement based on the Loan Market Association standard for leveraged acquisition finance transactions, simplified and adjusted to reflect Norwegian law and market conditions.
Norwegian high-yield bond documents are drafted on standard documents commonly used in the Nordic high-yield bond market.
Both the loan agreements and bond terms are subject to negotiation.
Credit agreements covering larger financing transactions with a volume exceeding CHF 50 million are often based on standard forms prepared by the Loan Market Association with a Swiss finish. Depending on the purpose and structure of the financing, the level of negotiation remains material. Smaller transactions are often covered by short and straightforward loan agreements that are based on standard forms used by the respective lenders which often leave limited room for negotiations.
In typical Dutch private equity financings the basis for the credit agreement is in most cases the form for leveraged finance transactions as published by the Loan Market Association. The level of negotiations strongly depends on the size of the deal, type of lenders, type and size of sponsor, sponsor’s strategy for the target group and financial performance of the target group.
Documentation is very bespoke, with sponsors developing their own precedent forms as well as negotiating specific provisions to reflect their strategy for the particular portfolio company
While small, bilateral financings are usually based on the relevant bank’s standard documentation, the large majority of acquisition financings will be based on the LMA standard form leveraged facility agreement. As all market participants are familiar with the LMA standard form documentation, negotiation is usually limited to the commercial terms of the transaction and tailoring the credit agreement as much as possible to the structure of the deal with many of the standard provisions remaining largely untouched.
Yes, the loan agreements are commonly based on the templates of the Loan Market Association, which are subject to further negotiation between the parties. The negotiations concern mainly the provisions regarding representations, undertakings and definitions of an event of default.
Even though no established template is used for credit agreements, there is extensive experience among practitioners (legal advisors, banks and borrowers’ financing teams) in the Portuguese jurisdiction regarding the structure of debt financings and in the negotiation of facility agreements and ancillary agreements thereto.
As the PRC financing market is still developing, the terms of the financings and forms of documentation are often more bespoke than in more developed financing markets. Traditionally, PRC banks used their standard form credit agreements without the involvement of external counsel and permitted minimal negotiation. The terms contained in those standard form loan agreements tend to be broad-brush and lack specificity from a common law standpoint. With the increasing influence of international players in this market and growing demand from private equity sponsors and more sophisticated borrowers, borrower friendly precedents and highly negotiated credit agreements are becoming more prevalent.
Credit agreements negotiated in Finland and with Nordic and international lenders are generally based on the Loan Market Association’s (LMA) template facility agreements, but occasionally somewhat “lighter” Nordic template versions are preferred. The overall structure of the LMA’s facilities agreements is typically not negotiated, but, as in all transactions, relevant matters to the parties and transaction at hand are reflected in the degree of negotiations and in the credit agreement. The negotiations of the term sheet prior to the actual credit agreement negotiations are typically more thorough, and scope of the term sheet and the degree of detail to which it has been negotiated tend to correspond inversely with the materiality of the level of credit agreement negotiations.
For large and mid cap transactions involving syndicated loans, the most widely used standard form is based on the French law Loan Market Association’s template, with adjustments for leveraged acquisition finance transactions. The resulting documents is subject to negotiations.
For large and mid cap transactions, in-house precedents from private equity funds are widely used.
Due to currently generally sponsor and borrower friendly market conditions, sponsors have in many cases been able to suggest their own sponsor precedent – mostly based on the Loan Market Association’s suggested form but reflecting specific drafting relevant to that sponsor’s investment and business strategies. It is typically agreed already in the term sheet that the agreed terms should be reflected in the sponsor’s precedent and the credit agreement would frequently be prepared by the sponsor’s counsel on that transaction. The level of negotiation on the draft credit agreement depends on whether the lender has completed recent deals with that sponsor (in which case the terms from the recent deal are often treated as agreed) or whether there is no such recent deal (in which case the draft is subject to more lengthy negotiations).
The main lenders of the Greek companies are credit or financial institutions who have standard form agreements that are provided to the borrowers. Generally, the larger the facility and the more creditworthy the borrower, the more willing are the borrowers to accept amendments. Mainly the discussions between the parties involve the commercial terms (interest rate and margin, the interest periods and interest payment dates, the repayment dates and amounts, the security provided, the fees). In the vast majority of the cases, there is small room for negotiation on all the terms of the lending facilities.
The Loan Market Association's standard form leveraged facility agreement is used for most commercial loan financings in Ireland. The level of negotiation on the terms of the LMA facility agreement will vary on a deal by deal basis, but as drafting often follows a pre-agreed term sheet commercial issues are usually agreed at an early stage of a transaction. The LMA form requires a number of Irish law related changes (particularly in relation to insolvency and tax), however, these amendments are not heavily negotiated.
Unlike the UK or US, the Irish market is more traditional in its approach to drafting and the lenders' counsel will usually draft the loan agreement, although the strength of the sponsor can sometimes dictate the ability of a borrower to present a "first draft" of the loan agreement.
The vast majority of the credit agreements are governed by foreign law, and based on the Loan Market Association standard.
Discussions on the Luxembourg elements of the credit agreement are often limited.
The main concerns remain any corporate interests issue relating to the granting of cross stream and upstream guarantees or any potential financial assistance (in particular in acquisition finance). (See the response to question 18 above.)
Documentation is very bespoke, with sponsors developing their own precedent forms as well as negotiating specific provisions to reflect their strategy for the particular portfolio company.
The loan documentation with regard to large-cap transactions is typically drafted in English and based on the Loan Market Association’s (“LMA”) template. In-house precedents from both law firms and banks are often based on the LMA template as well with only certain transaction-specific items being subject to negotiations between the parties.
With regard to small and mid-cap transactions, the loan documents, which are typically on a bilateral basis, are often individually tailored to the practices on the Swedish market and based on precedent documentation previously entered into between the relevant bank and private equity fund (if such precedent exists). These loan documents are often similar to the documents used for large-cap transactions and can be seen as a shorter and less detailed version of the LMA template.
Credit Agreements adopted in the context of the acquisition of a Maltese company are typically regulated by a governing law other than Malta, providing the banking syndicate the comfort of dealing with legal principles and mechanisms that they are more comfortable with. Standard form documentation is typically based on the Loan Market Association templates but are subject to some amendment to reflect the risks and dynamics of the specific transaction.
Standard form of credit agreement is typically used by banks and financiers and these are usually LMA/APLMA standard agreements. Some banks and financial institutions also have their own formats that are standardised either internally or externally by an empanelled Lawyer/Law Firm.
Initially standard forms are customised to fit in the commercial terms agreed between the lender and the borrower. Thereafter, the document is mostly negotiated for restrictive covenants, representation, events of default and indemnities. Materiality of the level of discussion depends on the borrowing entity. Lenders generally want to stick to the standard forms and are reluctant to dilute the standard clauses.