SPAIN Law and Practice Contributed by: Alfonso López-Ibor and Olivia López-Ibor, Lopez-Ibor Abogados
3.1.5 Lenders’ Share in Security Over Domestic SPVs It is not usual in aircraft finance transactions to take security over the shares of a domestic SPV set up to own the financed aircraft. Lenders usually prefer to take security directly over the specific asset. Pledges over shares are recognised in Spain pursuant to Articles 1857, 1863 and 1865 et seq of the Spanish Civil Code. 3.1.6 Negative Pledges Although there is no specific legal provision referring to the negative pledge in Spain, it is possible for the parties to include negative pledge clauses. A nega - tive pledge is considered a contractual obligation and does not establish a property right (jus in rem). 3.1.7 Intercreditor Arrangements Inter-creditor arrangements are commonly entered into when different classes of creditors are involved, especially in syndicated finance. Contractual subor - dination of debt by inter-creditor agreements where senior and junior creditors agree on the priority of pay - ment is only enforceable between the parties. 3.1.8 Syndicated Loans The concept of agency and the role of an agent are recognised in Spanish law under the mandate con - tract rules provided in the Civil Code. However, bank agency contracts are not specifically regulated by ad hoc legislation. The security interest must be granted in favour of all the secured parties and be duly accepted by all of them. However, lenders under a syndicated loan usu - ally appoint one lender/creditor to be the agent of the whole syndicate and stipulate its rights and obliga - tions contractually. The effect of this is that the agent is the title holder of the security for the purposes of registration and enforcement. 3.1.9 Debt Subordination The parties may contractually agree to subordinate a debt in relation to other existing debts (contractual subordination).
Also, a lender may lend to several companies at differ - ent levels in a group (structural subordination). 3.1.10 Transfer/Assignment of Debts Under Foreign Laws The transfer or assignment of all or part of an out - standing debt under an English or New York law-gov - erned loan is permissible and recognised in Spain. 3.1.11 Usury/Interest Limitation Laws Spanish law has a general prohibition on usury that is provided in the Law of 23 July 1908 on the nul - lity of usurious loan contracts. Whether a situation is deemed usurious hinges on two factors: the interest rate being significantly above the market rate, or the debtor agreeing to the interest rate under circum - stances of financial distress. 3.2 Security 3.2.1 Typical Forms of Security and Recourse Given the formalities and costs associated with estab - lishing Spanish security, such as a Spanish law air - craft mortgage, it is uncommon for such security to be granted in aviation finance transactions. Since Spain’s accession to the Cape Town Convention (1980), most lessors and banks deem the creation of international interests sufficient for protection. 3.2.2 Types of Security Not Available All types of security creating property rights (jus in rem) can be taken over an aircraft and engines. With respect to warranties and insurances, contractual assignment in Spain does not create a definitive form of security that is enforceable against third parties. 3.2.3 Trust/Trustee Concepts See 2.2.5 Recognition of the Concepts of Trust/Trus- tee . 3.2.4 Assignment of Rights to an Aircraft by a Borrower to a Security Trustee A borrower may assign its rights to the aircraft or under a lease (including in relation to insurances) pursuant to an aircraft mortgage or security assignment. See 3.2.2 Types of Security Not Available .
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