PORTUGAL Law and Practice Contributed by: Manuel Requicha Ferreira and Diana Avillez Caldeira, Cuatrecasas
reporting obligations to the Bank of Portugal, and to the standard anti-money laundering (AML) regulations. 3.4 Restrictions on the Borrower’s Use of Proceeds Apart from those already mentioned, there are no restrictions on how a borrower may use the proceeds from a loan or debt security. However, it should be noted that it is market practice to stipulate contractu- ally that the capital granted to a borrower may not be used for purposes other than those specified in the facility agreement. 3.5 Agent and Trust Concepts Portuguese law does not recognise the concepts of parallel debt and trusteeship. Therefore, the benefi- ciary of the security needs to have a valid underlying obligation duly secured by the security. Accordingly, the lenders would in principle need to be registered as holders of the security. However, the security agreement and/or indenture, as well as the intercreditor agreement, usually state that the security should be granted to, and enforced by, the security agent in its capacity as agent (acting on behalf of the other secured creditors) and a joint and several creditor thus entitling it, as beneficiary of the security, to enforce the same. Consequently, it may be necessary to demonstrate that the security agent has been duly and expressly authorised for this purpose by each of the creditors. Alternatively, the lenders may ask to have the security registered in their own name, to be able to enforce it directly. 3.6 Loan Transfer Mechanisms Loans can be transferred through an assignment of credits or contractual positions. Usually, parties prefer the assignment of credits mechanism, which, contrary to the assignment of contractual position, does not require the consent of the borrower. Limitations can be established for the assignment, including ones related to tax (given that foreign lenders may be more expensive in terms of taxation if there is a gross-up obligation) and regula- tory requirements.
The assignment, made by private contract between the assignor and the assignee, involves the transfer of the security package that is associated with it. If the security includes mortgages, a public deed or pri- vate document with signature recognition is required as a formality for the transfer. Depending on the type of security, there may be further steps to effect the transfer of the security, including registration with the real estate registry office for mortgages, and with the bank for bank account pledges and the commercial registry for quota pledges. 3.7 Debt Buyback Debt buyback by the borrower is typically not per- mitted in the finance documents, as it may trigger subordination of the debt in the case of insolvency. Alternatively, and as a way of overcoming this limita- tion, the borrower is usually entitled to repay the loan early, partially or in full. 3.8 Public Acquisition Finance There are no specific rules regarding “certain funds” similar to those contained in the City Code on Takeo- vers and Mergers. An offeror in a public takeover bid is only required to have deposited the funds, or to present a bank guarantee for payment, when applying to register the takeover bid with the Portuguese Securities Market Commission. Debt financing can be used to fund the offer consideration, but such financing must always be in the form of a bank guarantee or a deposit in favour of the target company’s shareholders. Thus, in such cases, there will need to be a direct commitment of the lenders towards those shareholders. In addition, when public takeover bids are at stake, there is usually a financial intermediary (although this is no longer mandatory) that co-ordinates all financial arrangements with the offeror. In this context, cer- tain fund provisions are not commonly used in public acquisition finance transactions. 3.9 Recent Legal and Commercial Developments The major change in recent years having the most significant impact on legal documentation is the inser-
492 CHAMBERS.COM
Powered by FlippingBook