Article

Spain: Law and Practice. Structured Finance & Derivatives 2019 Global Practice Guide.

13/03/2019

Pérez-Llorca has a banking and finance practice at its Madrid offices comprising seven partners and 17 other qualified lawyers.

1. Structured Finance
1.1 Market Overview

In October 2018, the International Monetary Fund (IMF) forecast that Spain’s GDP would grow by 2.7% in 2018 and by 2.2% in 2019, well above the European average of 2% for 2018 and 1.9% for 2019.

The improvement of the economic situation during the last decade, together with long-standing low interest rates in Europe and the expansive monetary policy implemented by the European Central Bank, has led to a substantial increase in bank financing, debt capital market deals, direct lending and structured finance transactions (where project finance has proliferated – especially in the energy and infrastructure markets – along with leveraged and asset finance transactions). The increase in liquidity and competition amongst lenders (primarily banks and debt funds) has led to borrower-friendly structures, especially in sponsor-driven transactions.

2. Acquisition Finance/Leveraged Finance
2.1 Transaction Structure, Players and Legal Regime
Transaction structures

Financial assistance, corporate restructuring and accounting rules play a key role in the Spanish acquisition/leverage finance market and the way in which transactions are structured in Spain. This ultimately requires a case-by-case analysis, inter alia, in order to determine how the existing indebtedness of the target, the financing needs of the target or the equity structure of both the target and/or the buyer can impact the acquisition/leverage financing structure and, along with that, the purpose of the loan or loans (as multi-tranche structures are commonly used in these kind of transactions), the way the indebtedness is scheduled to be repaid and/or the security package that the acquisition/leverage financing deal can benefit from.

Typical acquisition/leveraged finance transactions customarily entail multi-tranche structures, simultaneous corporate transactions (such as mergers, reverse mergers and/or global assignment transactions) and/or debt push-downs.

Although bank facilities still predominate in leverage transactions, there has been a significant increase in both direct lending and capital markets acquisition/leverage financing transactions in Spain in recent years. In general, Loan Market Association (LMA)-based documentation (previously amended to comply with Spanish general market standards and specific rules) is commonly used in Spanish transactions involving international financial sponsors. In sponsorless mid-market transactions, documentation tends to be that of standardised Spanish language agreements.

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