Definitive global law guides offering comparative analysis from top-ranked lawyers
CHAMBERS GLOBAL PRACTICE GUIDES
Banking & Finance 2025
Definitive global law guides offering comparative analysis from top-ranked lawyers
Contributing Editor Maura O’Sullivan A&O Shearman
Global Practice Guides
Banking & Finance Contributing Editor
Maura O’Sullivan A&O Shearman
2025
Chambers Global Practice Guides For more than 20 years, Chambers Global Guides have ranked lawyers and law firms across the world. Chambers now offer clients a new series of Global Practice Guides, which contain practical guidance on doing legal business in key jurisdictions. We use our knowledge of the world’s best lawyers to select leading law firms in each jurisdiction to write the ‘Law & Practice’ sections. In addition, the ‘Trends & Developments’ sections analyse trends and developments in local legal markets. Disclaimer: The information in this guide is provided for general reference only, not as specific legal advice. Views expressed by the authors are not necessarily the views of the law firms in which they practise. For specific legal advice, a lawyer should be consulted. Content Management Director Claire Oxborrow Content Manager Jonathan Mendelowitz Senior Content Reviewers Sally McGonigal, Ethne Withers, Deborah Sinclair and Stephen Dinkeldein Content Reviewers Vivienne Button, Lawrence Garrett, Sean Marshall, Marianne Page, Heather Palomino and Adrian Ciechacki Content Coordination Manager Nancy Laidler Senior Content Coordinators Carla Cagnina and Delicia Tasinda Content Coordinator Hannah Leinmüller Head of Production Jasper John Production Coordinator Genevieve Sibayan
Published by Chambers and Partners 165 Fleet Street London EC4A 2AE Tel +44 20 7606 8844 Fax +44 20 7831 5662 Web www.chambers.com
Copyright © 2025 Chambers and Partners
Contents
INTRODUCTION Contributed by Maura O’Sullivan, Michael Chernick, Caroline Chapman and John Chua, A&O Shearman p.5 AUSTRIA Law and Practice p.10 Contributed by Fellner Wratzfeld & Partner Rechtsanwälte GmbH Trends and Developments p.28 Contributed by Fellner Wratzfeld & Partner Rechtsanwälte GmbH
FRANCE Law and Practice p.141 Contributed by King & Spalding Trends and Developments p.159 Contributed by King & Spalding
GERMANY Law and Practice p.165 Contributed by Freshfields GREECE Law and Practice p.182
ASIA-PACIFIC Trends and Developments p.32 Contributed by Joint-Win Partners BERMUDA Law and Practice p.35 Contributed by Wakefield Quin Limited
Contributed by Machas & Partners Trends and Developments p.199 Contributed by Machas & Partners
INDONESIA Law and Practice p.205
Contributed by Makarim & Taira S. Trends and Developments p.220 Contributed by Makarim & Taira S. ISRAEL Law and Practice p.226 Contributed by Arnon, Tadmor-Levy
BRAZIL Law and Practice p.48 Contributed by Panucci, Severo e Nebias Advogados Trends and Developments p.64 Contributed by Panucci, Severo e Nebias Advogados
CAYMAN ISLANDS Trends and Developments p.74 Contributed by Appleby CHILE Law and Practice p.79 Contributed by Cuatrecasas
ITALY Law and Practice p.239 Contributed by CBA Studio legale e tributario
JAPAN Law and Practice p.256 Contributed by Mori Hamada
CHINA Law and Practice p.98
KENYA Law and Practice p.270
Contributed by Beijing DHH Law Firm Trends and Developments p.114 Contributed by Beijing Docvit Law Firm CYPRUS Law and Practice p.119 Contributed by Scordis, Papapetrou & Co LLC
Contributed by Africa Law Partners Trends and Developments p.287 Contributed by Africa Law Partners
LATVIA Law and Practice p.290 Contributed by BERG
CZECH REPUBLIC Trends and Developments p.136 Contributed by HAVEL & PARTNERS
LIECHTENSTEIN Law and Practice p.305 Contributed by Schurti Partners Attorneys at Law Ltd
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Contents
LUXEMBOURG Law and Practice p.319
PORTUGAL Law and Practice p.487 Contributed by Cuatrecasas Trends and Developments p.505 Contributed by PLMJ
Contributed by GSK Stockmann Trends and Developments p.338 Contributed by Maples and Calder
MACAU SAR, CHINA Law and Practice p.346 Contributed by Lektou
SINGAPORE Law and Practice p.511
Contributed by Drew & Napier LLC Trends and Developments p.529 Contributed by WongPartnership LLP SLOVENIA Law and Practice p.536 Contributed by Schoenherr Slovenia SPAIN Law and Practice p.559 Contributed by Cases & Lacambra Contributed by Harvest Advokatbyrå Trends and Developments p.595 Contributed by Harvest Advokatbyrå SWITZERLAND Law and Practice p.601 Contributed by Lenz & Staehelin THAILAND Law and Practice p.617 Contributed by Chandler Mori Hamada Trends and Developments p.635 Contributed by Chandler Mori Hamada SWEDEN Law and Practice p.580
MALAYSIA Law and Practice p.358 Contributed by Zi Li & Partners MAURITIUS Law and Practice p.375 Contributed by Bowmans Trends and Developments p.390 Contributed by Bowmans MEXICO Law and Practice p.392 Contributed by Nader Hayaux & Goebel
NETHERLANDS Law and Practice p.407 Contributed by CMS
NIGERIA Law and Practice p.425 Contributed by Dentons ACAS-Law (Adepetun, Caxton- Martins, Agbor & Segun)
Trends and Developments p.443 Contributed by Stren & Blan Partners NORWAY Law and Practice p.450 Contributed by BAHR Trends and Developments p.462 Contributed by BAHR
UAE Law and Practice p.640 Contributed by BSA LAW
US VIRGIN ISLANDS Law and Practice p.657 Contributed by Dudley Newman Feuerzeig LLP USA Law and Practice p.667 Contributed by A&O Shearman Trends and Developments p.684 Contributed by Davis Polk & Wardwell LLP USA – RHODE ISLAND Trends and Developments p.691 Contributed by Partridge Snow & Hahn LLP
PANAMA Law and Practice p.467
Contributed by Morgan & Morgan Trends and Developments p.482 Contributed by Morgan & Morgan
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INTRODUCTION
Contributed by: Maura O’Sullivan, Michael Chernick, Caroline Chapman and John Chua, A&O Shearman
A&O Shearman is a global law firm with nearly 4,000 lawyers and specialists worldwide. A&O Shearman has one of the largest and most international teams of banking and finance lawyers of any global law firm and one of the leading debt finance practices in the world, known for ground-breaking deals and struc- tures that eventually become market standards. The firm provides clients, including major banks, private credit funds and financial sponsors with a full-service offering for a broad range of debt finance products for syndicated and private credit transactions, includ-
ing senior, second-lien and asset-based credit facili- ties, mezzanine and holdco debt, recurring revenue financings, bridge and bank/bond financings, high- yield bond offerings, securitisation take-outs, debtor- in-possession and exit financings and restructurings. A&O Shearman’s global team spans major financial centres including New York, London, Paris, Amster- dam, Frankfurt, Milan, Madrid, Luxembourg, Singa- pore, Hong Kong, and Sydney, creating a cross-bor- der network to support its clients’ success.
Contributing Editor
Co-authors
Maura O’Sullivan is a partner in the debt finance practice at A&O Shearman. She focuses on acquisition financings, leveraged lending, restructurings, debtor-in- possession financings and asset-
Michael Chernick is a partner in the debt finance practice at A&O Shearman. Michael has over 30 years of experience in the US leveraged finance market, representing leading investment and commercial banks,
based finance. Maura has extensive experience representing financial institutions and direct lenders in structuring and executing acquisition financings, leveraged lending, and first- and second-lien structures. She also has significant expertise in restructuring transactions, debtor-in-possession financings and asset-based finance. Maura has also worked extensively in cross-border financings (including in connection with cross-border acquisitions).
alternative capital providers and other financial institutions in bank financing and debt capital markets transactions. He has extensive experience in public and private leveraged and investment- grade acquisition finance (including bridge financings), refinancings and recapitalisations, second-lien and asset-based lending. Michael also advises on securities, capital markets, bank finance, and corporate transactions, representing corporations and financial institutions in bank financings, public and private offerings and high- yield debt offerings.
Caroline Chapman is a knowledge counsel in the debt finance practice in A&O Shearman’s London office. Caroline focuses on a broad range of legal and market issues, with a particular focus on leveraged finance
transactions in the European market, including those with a high-yield element, and unitranche financings. She also delivers and manages training on a range of technical banking topics to clients and lawyers within A&O Shearman.
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INTRODUCTION Contributed by: Maura O’Sullivan, Michael Chernick, Caroline Chapman and John Chua, A&O Shearman
John Chua is a senior associate in the debt finance practice at A&O Shearman’s New York office. John represents leading financial institutions, investment funds and private equity firms (including private
Allen Overy Shearman Sterling US LLP 599 Lexington Avenue New York, New York 10022-6069 United States of America Tel: +1 212 848 4000 Email: mosullivan@aoshearman.com Web: www.aoshearman.com credit arms) in a wide range of financing transactions, including leveraged and investment- grade committed financings and refinancings, private capital transactions, syndicated bank loans, acquisition finance and asset-based finance. John has extensive experience advising lenders on complex cross-border financings across a variety of industries. He regularly counsels clients on the structuring, negotiation, and documentation of credit facilities in the BSL market as well as direct lending.
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INTRODUCTION Contributed by: Maura O’Sullivan, Michael Chernick, Caroline Chapman and John Chua, A&O Shearman
Overview: Investor Demand Drives an Active Market To date in 2025, global leveraged finance activity has been characterised by cautious optimism, under- pinned by the expectation of a gradual reduction of policy interest rates and monetary easing. Market participants are closely monitoring the impact of per- sistent geopolitical tensions and evolving trade poli- cies. The beginning of 2025 saw an increase in M&A- related loan activity compared to H2 2024 as well as sustained high volumes of repricings, refinancings and dividend recapitalisations. However, momentum faded as the year progressed, especially in March, due to increased macroeconomic uncertainty, particu- larly around the potential impact of tariffs and global capital market volatility. The return of protectionist trade measures, particularly in the USA, the potential for retaliatory actions, and the slower than expected reduction in interest rates in 2025 (with central banks (in particular, the US Fed) signalling a “higher for longer” approach) have introduced increased volatility. This environment is expected to keep overall funding costs elevated for borrowers and may limit the pace of new issuance, especially in the context of M&A and leveraged buyout activity, which has yet to fully recov- er to pre-pandemic highs. The macroeconomic and political uncertainties that dampened market activity during the second half of 2022 and throughout 2023 and 2024 have not abated and have now increased post-March 2025 as a result of the adoption of Ameri- can protectionist policies. Debt financing options available to borrowers in 2025 have continued to rebalance with the return of the broadly syndicated market following the slowdown it experienced in the second half of 2022 and in 2023, and the continued expansion and strength of private credit. As a result, borrowers have increasingly sought to capitalise on the competitive tension between the syndicated and private capital markets by opting to run some transactions on a dual-track basis with both syndicated and private credit options. Borrowing costs remain elevated in 2025, and there is still a valuation gap in the M&A market between the prices at which sellers are willing to part with their assets (often purchased at high multiples) and the price at which purchasers are willing to buy. The scarce exit
opportunities for private equity sponsors are apparent in statistics showing that the average hold time for portfolio companies has steadily increased since 2019 (Pitchbook). In response, private equity sponsors have increasingly turned to alternative strategies to gener- ate returns for LPs, with issuances of leveraged loans for dividend recapitalisations remaining at elevated levels in 2025 from 2024. The market outlook currently remains tentatively hopeful, with interest rates expected to come down in the second half of the year, alongside promising signs from private equity sponsors of improved M&A pipe- lines as they look to deploy accumulated dry powder. The secondary loan market remains stable supported In the USA, the first half of 2025 experienced a rise in M&A-related loan issuance, with a more balanced mix between new M&A-related loan issuances and refi- nancing or repricing transactions. Of this, M&A-related loan issuance in the USA reached USD109.9 billion, up 44% from USD76.1 billion in the first half of 2024. US LBO loan issuance alone was USD45.1 billion, a 28% increase from USD35.3 billion in the prior year- to-date period, while non-LBO M&A loans totalled USD64.7 billion, up 58% from USD40.9 billion. Refi- nancing activity in the US markets, however, declined to USD157.8 billion, down 27% from USD217.0 bil- lion in the first half of 2024, reflecting a shift away from the record refinancing and repricing volumes that characterised the prior year. Dividend recapitalisation loan issuance in the USA remains sustained but also moderated, totalling USD38.7 billion, a 14% decrease from USD44.7 billion in the same period of 2024. In the European market, refinancing remained the larg- est use of proceeds in H1 2025, with volume at a simi- lar level to that seen in the same period in 2024. As in the USA, overall M&A-related loan volume has been higher as a percentage of primary issuance – and in Europe at least, we have seen LBO activity represent a higher proportion of overall M&A than it did in the same period last year. In absolute terms, EUR24.6 bil- lion of M&A-related issuance in H1 2025 is more than the market saw in all of 2024 (Pitchbook). by high loan investor demand. Trends in an Uncertain Market
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INTRODUCTION Contributed by: Maura O’Sullivan, Michael Chernick, Caroline Chapman and John Chua, A&O Shearman
In 2025, the competitive interplay between the broadly syndicated loan (BSL) market and the private credit market continues to shape pricing, covenant struc- tures, and deal flow. Throughout 2024 and into 2025, the supply/demand imbalance in both the BSL and private credit markets has kept significant downward pressure on interest rate margins and overall pricing terms. Borrowers have been able to obtain favour- able pricing and looser covenant terms in both the broadly syndicated and private credit markets. In the BSL market, cov-lite structures remain the norm, with roughly 90% of new deals in the USA featuring them. Direct lending clubs, which help facilitate larger trans- actions when the BSL market is less accessible, are prominent in 2025 and allow private credit providers to pool resources for multi-billion-dollar deals, espe- cially when market volatility restricts BSL access. As competition with syndicated lenders continues, club deals offer sponsors certainty, speed, and flexible structuring, including features such as delayed-draw term loans and payment-in-kind options, making them a preferred choice for large financings that previously would have relied on BSLs or high-yield bonds. In the USA, direct lending made up about 49% of new LBO loan volume in Q2 2025, down from 56% in 2024 and 88% at its 2023 peak. In Europe, most LBOs by number are still funded by direct lenders, though BSL loans tend to be larger on average. With increased competition from the BSL market, private credit providers in both the USA and Europe are seeking alternative structures to maintain returns, for exam- ple, arranging holdco PIK financings in some capital structures. In 2025, the US market for lower-rated borrowers has continued its resurgence, though with some modera- tion compared to the sharp risk-on sentiment seen in 2024. Borrowers with a B- rating or lower from at least one credit rating agency remain a significant portion of refinancings, but their share has stabilised as investor risk tolerance finds a new equilibrium accounted for. In the first half of 2025, B- and lower-rated issuers accounted for approximately 45% of refinancing vol- ume, a slight decrease from the 51% peak in Q2 2024 but still well above the levels seen in 2023.
Syndicated delayed draw term loans (DDTLs) have also become an increasingly prominent feature of US deals and are especially attractive to private equity sponsors pursuing buy-and-build strategies. While DDTLs have long been a staple of private credit, their adoption in the syndicated market has accelerated, with a growing share of large-cap US transactions now including a DDTL component. This shift reflects both the competitive pressure from private credit and the desire of sponsors for greater flexibility and cer- tainty of execution. While DDTLs have been seen in some European BSL deals, they are not as popular as in the USA and have remained the “sweet spot” for the private credit markets. Dividend recapitalisation activity soared in the US market to USD25.3 billion in the first quarter of 2025 alone, more than double 2024 Q4’s USD11.3 billion. The volume of dividends taken out of businesses by private equity sponsors has also risen in Europe, with EUR14.5 billion of total loan issuance supporting divi- dend recaps in H1 2025, compared to EUR8.5 billion during the same period in 2024 (Pitchbook). Further, as private equity sponsors seek alternative exit strat- egies, particularly where their investment time frame is coming to an end, portability features (ie, where a change of control will not trigger an event of default or mandatory prepayment subject to certain conditions) are increasingly making their way into credit docu- mentation. As riskier borrowers have returned to the market, the average leverage ratio for non-investment-grade bor- rowers in 2025 in the USA is 4.9x (through June), up slightly from 4.7x in 2024 (reflecting the full calendar year). While this marks a continued upward trend, lev- erage remains below the 2021 peak of 5.3x, reflect- ing a still-cautious approach by US lenders compared to the pre-pandemic era (PitchBook | LCD). Despite some tightening in credit spreads, high benchmark rates have kept interest costs elevated. Even though interest spreads trended down in 2024, the continued high benchmark rates have led to an average interest coverage ratio of 3.1x (LCD) in 2024 and 3.0x in 2025 (through June). Overall, the 2025 market environment continues to favour borrowers in terms of covenant flexibility and leverage capacity, but the pressure from high rates is placing greater scrutiny on coverage met-
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INTRODUCTION Contributed by: Maura O’Sullivan, Michael Chernick, Caroline Chapman and John Chua, A&O Shearman
rics and underlying credit quality. In Europe, first lien debt is on average levered at 4.71x, but transactions with leverage of 6x or higher represented the lowest percentage of deals since 2016 (LCD). Liability management transactions (LMTs) remain a prominent feature of the US leveraged finance land- scape, as borrowers continue to grapple with elevated borrowing costs, ongoing liquidity concerns and a looming maturity wall, particularly among lower-rat- ed issuers. In the USA, the pace of LMTs – including uptiering, drop-downs, and double-dip structures – has remained robust, with market participants expect- ing distressed LMTs to at least match, if not moderately exceed, the record-setting pace of 2024. This ongoing activity is driven by constrained exit opportunities for sponsors and the need for flexibility in managing capi- tal structures (PitchBook | LCD; Creditor Rights Coali- tion). In Europe, although there are examples of LMTs, they remain relatively rare and the ability to execute such transactions out of court varies depending on the jurisdiction and legal framework. Lenders are increasingly adding protections in docu- ments to address risks from looser terms and cove- nants. Co-operation agreements have become a com- mon tool for lenders to minimise the risk of LMTs, but borrowers are attempting to push back by including anti-cooperation language in documents, which is, in turn, strongly resisted by lenders. Legal developments in case law have not slowed the momentum of LMTs as once previously thought. For example, the Fifth Circuit Court of Appeals ruling in Serta Simmons, in December 2024, finding the 2020 up-tiering transac- tion was not a valid “open market purchase” under the credit agreement and that related indemnities in the Chapter 11 plan were not permitted, has caused par- ties to pivot to other provisions but has not stopped uptiering transactions (eg, Better Health). According to reporting as of this date, LMTs are on pace to sur- pass last year. In 2025, sustainability-linked leveraged loan facilities continue to grow and tie the interest margin charged to compliance with certain key performance indica- tors (KPIs). Global issuance of sustainability-linked leveraged loans in 2025 remains robust but did not surpass the record Q1 volumes achieved in 2024.
Standard practices emerging include independent third-party verification of compliance with KPIs and fixed timeframes for KPI implementation when flex- ible ESG amendment features are included (where KPIs are set at a later date following closing). Pricing structures tied to KPIs allow for both margin increase and decrease. Advisory bodies such as the LMA and LSTA have helped guide developments in standard provisions with updates to their sustainability princi- ples and guidelines. In Europe, where leveraged loan margin ratchets based on ESG KPIs have been estab- lished for longer than in the USA, H1 2025 saw a nota- ble drop in the issuance of qualifying sustainability- linked loans compared to the same period in 2024. It is important to note, though, that the majority of Euro- pean leveraged loans featuring these margin ratchets would not have satisfied the criteria for sustainability- linked loans as set out by the LMA. However, if we look at green loans (which have a specific ESG-related purpose) and qualifying sustainability-linked loans in Europe, issuance for 2024 had increased 26% on the preceding year (AFME). Conclusion Over the past year, the leveraged loan market has experienced a significant resurgence in activity fuelled by robust investor demand and record CLO issuance. Despite this momentum, the pace of new-issue activ- ity – particularly for M&A and LBO financings – remains measured despite the initial spurt from the start of 2025, constrained by persistent macroeconomic uncertainty, elevated borrowing costs, and limited exit opportunities for private equity sponsors. The imbalance between strong demand and limited net supply has resulted in increasingly borrower-friendly terms for those transac- tions that do reach the market, while refinancing and opportunistic transactions continue to dominate overall volumes. Looking ahead, there is cautious optimism that, should macroeconomic conditions remain stable, and interest rates continue to ease, M&A activity will accelerate, narrowing the valuation gap between buy- ers and sellers and unlocking a new wave of primary issuance. For borrowers facing high debt service costs, the prevalence of liability management transactions and creative refinancing solutions is expected to persist as companies seek to manage upcoming maturities and optimise capital structures in a competitive, evolving market landscape.
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AUSTRIA
Czech Republic
Germany
Slovak
Vienna
Austria
Law and Practice Contributed by: Markus Fellner, Stefan Sallat and Florian Henöckl Fellner Wratzfeld & Partner Rechtsanwälte GmbH
Hungary
Italy
Slovenia
Croatia
Contents 1. Loan Market Overview p.12 1.1 The Regulatory Environment and Economic Background p.12 1.2 Impact of Global Conflicts p.12 1.3 The High-Yield Market p.12 1.4 Alternative Credit Providers p.13 1.5 Banking and Finance Techniques p.13 1.6 ESG/Sustainability-Linked Lending p.13 2. Authorisation p.14 2.1 Providing Financing to a Company p.14 3. Structuring and Documentation p.15
6. Enforcement p.22 6.1 Enforcement of Collateral by Secured Lenders p.22 6.2 Foreign Law and Jurisdiction p.22 6.3 Foreign Court Judgments p.23 6.4 A Foreign Lender’s Ability to Enforce Its Rights p.23
7. Bankruptcy and Insolvency p.23 7.1 Impact of Insolvency Processes p.23 7.2 Waterfall of Payments p.24
7.3 Length of Insolvency Process and Recoveries p.24 7.4 Rescue or Reorganisation Procedures Other Than Insolvency p.24 7.5 Risk Areas for Lenders p.25 8. Project Finance p.25 8.1 Recent Project Finance Activity p.25 8.2 Public-Private Partnership Transactions p.25 8.3 Governing Law p.26 8.4 Foreign Ownership p.26 8.5 Structuring Deals p.26 8.6 Common Financing Sources and Typical Structures p.26 8.7 Natural Resources p.26 8.8 Environmental, Health and Safety Laws p.27
3.1 Restrictions on Foreign Lenders Providing Loans p.15 3.2 Restrictions on Foreign Lenders Receiving Security p.15 3.3 Restrictions and Controls on Foreign Currency Exchange p.15 3.4 Restrictions on the Borrower’s Use of Proceeds p.15 3.5 Agent and Trust Concepts p.15 3.6 Loan Transfer Mechanisms p.15 3.7 Debt Buyback p.16 3.8 Public Acquisition Finance p.16 3.9 Recent Legal and Commercial Developments p.17 3.10 Usury Laws p.17 3.11 Disclosure Requirements p.17 4. Tax p.17 4.1 Withholding Tax p.17 4.2 Other Taxes, Duties, Charges or Tax Considerations p.17 4.3 Foreign Lenders or Non-Money Centre Bank Lenders p.17 5. Guarantees and Security p.18 5.1 Assets and Forms of Security p.18 5.2 Floating Charges and/or Similar Security Interests p.20 5.3 Downstream, Upstream and Cross-Stream Guarantees p.20 5.4 Restrictions on the Target p.20 5.5 Other Restrictions p.21 5.6 Release of Typical Forms of Security p.21 5.7 Rules Governing the Priority of Competing Security Interests p.21 5.8 Priming Liens p.21
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AUSTRIA Law and Practice Contributed by: Markus Fellner, Stefan Sallat and Florian Henöckl, Fellner Wratzfeld & Partner Rechtsanwälte GmbH
Fellner Wratzfeld & Partner Rechtsanwälte GmbH is one of Austria’s leading business law firms, both at national and international levels. Currently, Fellner Wratzfeld & Partner (fwp) employs approximately 70 lawyers and associates and 140 employees in to- tal. The firm successfully applies a dual consultancy approach: relying on both legal expertise and well- founded business know-how. Its major fields of spe- cialisation include banking & finance, corporate/M&A,
capital markets law, restructuring and insolvency, real estate and construction law, public business law, en- vironmental law & planning law, infrastructure and public procurement law, litigation and arbitration, as well as competition and antitrust law. As a member of the international law firm networks TerraLex and the Association of European Lawyers, fwp can rely on an international network spanning more than 110 countries.
Authors
Markus Fellner was admitted to the Austrian Bar in 1998 and has been a partner at Fellner Wratzfeld & Partner since 1999, now heading the firm’s banking and finance practice group. He specialises in banking and
Stefan Sallat was admitted to the Austrian Bar in 2016, and has been an attorney-at-law with Fellner Wratzfeld & Partner from 2017 to 2022 and from June 2025 onwards. From March 2022 until May 2025 he was General
finance, insolvency law and restructuring, corporate/ M&A, and dispute resolution. Markus has published a considerable number of articles and essays on topics related to these areas of expertise, including capital maintenance rules in Austria, M&A, and business restructuring and insolvency. He speaks German, English and Italian.
Secretary of an international bank located in Carinthia, Austria. He has particular experience and knowledge in the areas of banking and finance, and dispute resolution. Stefan speaks German and English.
Florian Henöckl is a senior attorney- at-law in the insolvency and restructuring group at Fellner Wratzfeld & Partner. He also specialises in banking and finance, as well as corporate/M&A. Florian was
admitted to the Austrian Bar in 2021 and recently published a multi-jurisdictional commentary on cross-border restructuring regimes.
Fellner Wratzfeld & Partner Rechtsanwälte GmbH Schottenring 12
A-1010 Vienna Austria Tel: +43 1 537 700 Fax: +43 1 537 7070 Email: office@fwp.at Web: www.fwp.at
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AUSTRIA Law and Practice Contributed by: Markus Fellner, Stefan Sallat and Florian Henöckl, Fellner Wratzfeld & Partner Rechtsanwälte GmbH
1. Loan Market Overview 1.1 The Regulatory Environment and Economic Background
On 17 March 2025, the Kreditdienstleister- und Kredit- käufergesetz (Credit Service Provider and Credit Pur- chaser Act; KKG) came into force in Austria, imple- menting the Non-Performing Loans Directive (Directive (EU) 2021/2167). The KKG is aimed at supporting the development of secondary markets for non-perform- ing loans in Austria and the European Union by remov- ing obstacles to the transfer of non-performing loans from credit institutions to credit purchasers, putting in place appropriate safeguards and, at the same time, protecting borrowers’ rights. 1.2 Impact of Global Conflicts Fuelled by increasingly expensive energy and the resulting high inflation in the wake of the Ukraine war, consumer prices in Austria rose significantly. In the EU, inflation is currently close to the European Central Bank (ECB) Governing Council’s medium-term target of 2%.Therefore, the ECB significantly reduced key interest rates in the last few months. The deposit rate, which is important for banks and savers, now stands at 2.0%, while the main refinancing rate is 2.15%. Hamas’ attack on Israel and the following Middle East conflict have further exacerbated global tensions. Together with Russia’s war against Ukraine, this fur- ther armed conflict has the potential to have a sub- stantial impact on the financial markets, increasing risks in many areas and, as a result, the vulnerability of the financial system is still ongoing. 1.3 The High-Yield Market The Austrian marketplace (Vienna Stock Exchange) has not developed a high-yield market as active as those in other jurisdictions. Predominantly, new issues of bonds admitted to trad - ing on the Vienna Stock Exchange comprise issu- ance programmes of credit institutions. There is also a limited number of mid-cap issuers and numerous foreign issuers, largely aiming at admission of their instruments to the (non-regulated) multilateral trad- ing facility (Vienna MTF), which does not require the approval and publication of a prospectus in line with the Prospectus Regulation. There is, nevertheless, a solid share of classic corpo- rate bonds which are largely issued by listed blue chip
Credit institutions must comply with the applicable capital requirements (Basel III). As with everywhere in Europe, the regulatory framework (in particular, the determination of risk-weighted assets and of own funds) has had a significant impact on overall strat- egy in the banking sector, which increasingly aims at deleveraging banks’ balance sheets (in particular, by way of disposal of non-core assets). The geopolitical and global economic situation remains extremely uncertain. The weak economic outlook, high inflation and the massive rise in interest rates are impacting the ability of private households, companies and governments to pay their debts. Tight- er financing conditions make it more difficult for bor- rowers to obtain a loan. In 2022, the Austrian Financial Market Authority (FMA) issued a regulation that defines sustainable lending standards for the financing of residential real estate ( Verordnung für nachhaltige Vergabestandards bei der Finanzierung von Wohnimmobilien , KIM-VO) which made the granting of private real estate loans even more difficult. The aim of this regulation was to limit the systematic risks to financial market stability in case of debt financing for residential real estate and to prevent potentially difficult situations in the real estate market. Since coming into force the KIM-VO and the upper limits for the granting of residential property financing have been the subject of controversial debate. The KIM-VO expired on 1 July 2025. However, the restrictions on the granting of residential real estate financing remain in place in a different form. The FMA issued a circular on the sound granting of private resi- dential real estate loans (“WIK Circular”). In this circu- lar, the FMA upholds the requirements of the KIM-VO as recommendations to the banks. The WIK Circular expressly does not constitute a regulation. It reflects legal opinions and the FMA’s recommendations for conduct derived from them.
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AUSTRIA Law and Practice Contributed by: Markus Fellner, Stefan Sallat and Florian Henöckl, Fellner Wratzfeld & Partner Rechtsanwälte GmbH
1.5 Banking and Finance Techniques In terms of banking and finance techniques, Austrian borrowers rely primarily on local banks (to a signifi- cant degree on their respective “house bank”) for their financing. In those cases, the complexity of the loan and security documentation as well as reporting obli- gations and (financial) governance are fairly limited (and frequently rely on in-house standard documen- tation). In addition, the Austrian lending market has seen an influx of both foreign lenders and Austrian banks seek- ing to provide financing as a syndicate in a club deal, or aiming at syndication of their relevant loans to inter- national banks; in those scenarios, significantly more complex and voluminous loan documentation (based on the standards made available by the Loan Market Association adapted for Austrian needs) has become more common. 1.6 ESG/Sustainability-Linked Lending Regarding ESG (environment, social and governance), four core regulations are to be observed. • Under Regulation (EU) No 573/2013 (Capital Requirements Regulation (CRR)), large institutions that have issued securities admitted to trading on a regulated market of an EU member state are required to disclose information on sustainability risks. In addition, far-reaching requirements for the inclusion of sustainability risks in the risk manage- ment and supervision of institutions have already come into force. • Regulation (EU) 2019/2088 (Disclosure Regulation) obliges financial market participants to disclose, on the one hand, their concepts for integrating sus- tainability risks into their investment decision-mak- ing process and, on the other hand, the adverse effects of investment decisions on certain sustain- ability factors. These extended information and transparency obligations, thus also provide for an expansion of sustainability-relevant accounting. • Regulation (EU) 2016/1011 (Benchmark Regulation) ensures better information on the “carbon foot- print” of an investment portfolio. • Regulation (EU) 2020/852 (Taxonomy Regulation) undoubtedly forms the “core” of the EU’s Sustain-
companies, which do not constitute a true alternative to bank loans for the larger market. 1.4 Alternative Credit Providers Traditionally, the Austrian lending market has been dominated by credit institutions licensed in Austria. Alternative credit providers such as insurance compa- nies are not regularly seen as original lenders in trans- actions, but rather rely on acquiring existing exposure from credit institutions which handle the origination. Austria is a strongly regulated banking market where a banking licence is required both for commercial lend- ing as well as the commercial acquisition of receiva- bles (factoring). The latter will only be fully exempted from the licence requirement if, and to the extent effected for, the purpose of that acquisition is secu- ritisation to special purpose securitisation vehicles (ie, companies specialising in acquiring loan expo- sure and transferring it to their financing providers, frequently in the form of bond issues). Limited exceptions apply in the context of small-cat- egory financings, such as crowdfunding. In addition, the Austrian regulator ( Finanzmarktaufsicht or FMA) has developed a practice according to which the offering of certain very limited alternative structures to classic loan agreements (subordinated loans, sale and lease-back structures, etc) does not require a banking licence. Non-Bank Lenders Other than that, Austrian banking legislation will (with only a few exceptions, for example, where applicable with regards to banking secrecy) not apply to certain companies rendering banking services if and to the extent that these pertain to their original and permit- ted operations; these include insurance companies, pension funds, non-profit organisations, societies, certain non-EU securities firms as well as alternative investment funds. In market practice, these exceptions have not led to significant competition for banks. Rather, in specific areas (eg, where insurance companies wish to act as lenders for investment purposes), credit institutions are involved for purposes of origination and pass-on loan portfolios.
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AUSTRIA Law and Practice Contributed by: Markus Fellner, Stefan Sallat and Florian Henöckl, Fellner Wratzfeld & Partner Rechtsanwälte GmbH
able Financing Action Plan and further expands on and defines the concept of “sustainability”. The Taxonomy Regulation identifies, among others: • climate change mitigation; • adaptation to climate change; • sustainable use and protection of water and marine resources; • transition to a circular economy waste prevention and recycling; • pollution prevention and control; and • protection of healthy ecosystems as environmental objectives. In order to be considered a sustainable company in the sense of the Taxonomy Regulation, at least one of these environmental objectives must be achieved and no other must be substantially violated (“do not substantially harm”). With regard to disclosure obligations in Austria, the Sustainability and Diversity Improvement Act is of par- ticular relevance. It obliges large companies that are of public interest and have more than 500 employees to report (in the management report or in a separate report) on environmental, social and labour issues as well as on measures to respect human rights and to fight corruption and bribery (ie, the ESG factors). In addition, it is necessary to describe the concepts pur- sued and to indicate the results, the risks as well as the most important non-financial indicators. Although this would appear to cover only a very small number of companies, the “level down” effect – according to which a company can only fulfil its disclosure obligations itself if, among other things, it can rely on corresponding reliable information from its suppliers – means that many smaller companies will also be affected. According to EBA Guidelines on Loan Origination and Monitoring, banks are also required to integrate ESG factors into lending processes. Hence, sustain- ability considerations should be taken into account in the credit risk appetite, credit risk strategy, credit assessment, credit monitoring, collateral assessment and stress tests.
There are also sustainability-linked (alternative) financ- ing instruments which help companies realise their projects while demonstrating their commitment to sustainability. These green forms of financing encour- age the financing of environmentally friendly initiatives, such as renewable energy, energy efficiency projects or sustainable agriculture. The sustainability-linked financing instruments are, for example, crowdfund- ing, impact investing, green bonds or public funding. Green bonds are used specifically for funding environ- mentally friendly projects and are purchased by inves- tors who are interested in sustainable investments. 2. Authorisation 2.1 Providing Financing to a Company There are three basic routes for banks to be author- ised to provide loan financing on a commercial basis to companies domiciled in Austria: • application for an Austrian banking licence pursu- ant to Austrian Banking Act BWG (granted by the Austrian Regulator FMA) or application for a CRR- credit institution’s licence (granted by the ECB – a CRR-credit institution fulfils the criteria of Article 4, paragraph 1, CRR) – this option is certainly not viable for one-off transactions and obtaining an Austrian banking licence or a CRR-credit institu- tion’s licence typically involves meticulous and in- depth preparation over an extended period, in par- ticular in preparation of fulfilling legal requirements for credit institutions and preparing an appropriate business plan (which is subject to review by the competent regulator); • establishment of a branch ( Zweigstelle ) by a CRR- credit institution from another EU member state (by way of so-called passporting; ie, having the competent regulator from the home member state notifying the requisite banking licence to the Aus- trian regulator); or • direct rendering of services under the EU freedom of services, the most common approach for non- Austrian CRR-banks who wish to commercially engage in the lending business in Austria without establishing a permanent presence.
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AUSTRIA Law and Practice Contributed by: Markus Fellner, Stefan Sallat and Florian Henöckl, Fellner Wratzfeld & Partner Rechtsanwälte GmbH
Non-banks may generally only engage in the lending business in Austria if and to the extent that such activ- ity would be exempted from a banking licence for an Austrian entity – eg, by way of the acquisition of loan portfolios by special securitisation purpose entities. Anyone who provides loan financing on a commer- cial basis to companies without the required banking licence is not entitled to any remuneration associated with these transactions, in particular interest and com- missions. Conflicting agreements as well as sureties and guarantees associated with these transactions are legally invalid. 3. Structuring and Documentation 3.1 Restrictions on Foreign Lenders Providing Loans In terms of absolute restrictions on granting loans, subject to the fulfilment of the regulatory criteria (see 2.1 Providing Financing to a Company ), there are no specific restrictions on foreign lenders intending to provide debt financing to Austrian borrowers. 3.2 Restrictions on Foreign Lenders Receiving Security There are no legal impediments or restrictions for receiving securities or guarantees which would devi- ate from the rules that would apply to an Austrian lender. 3.3 Restrictions and Controls on Foreign Currency Exchange There are no restrictions, controls or other concerns on and regarding foreign currency exchange which would deviate from the rules that would apply to an Austrian creditor. 3.4 Restrictions on the Borrower’s Use of Proceeds There are no restrictions on the borrower’s use of pro-
vertrag ), which may be combined with the granting of a power of attorney ( Stellvertretung ), as well as the possibility of certain rights being held by a trustee in its own name but for the account of a third party (trustor). As a consequence, agency and trust concepts are frequently used in the documentation of Austrian law-governed loans in the form of customary security agency agreements. A certain degree of complexity (and potential insecu- rity) is entailed by these structures since Austrian civil law differentiates between so-called accessory secu- rities ( akzessorische Sicherheiten ) and non-accessory securities ( nicht-akzessorische Sicherheiten ), whereby the former provide for a stringent link between the existence/validity of the security and the underly- ing (secured) claim. By way of example, pledge (and mortgage) agreements are strictly accessory so that any defect of the underlying legal relationship (such as the invalidity of the loan claim) as well as the (full) redemption of the claim would automatically result in the lapse of the relevant security right. While struc- tures providing for accessory security rights (such as pledges) being granted to a security agent (which typi- cally hold parts of, but not the entire, loan claim) are customary in Austria these have not been tested (or expressly accepted) by the courts. This risk does not apply to so-called non-accessory security, which includes (inter alia), the transfer of prop- erty for security purposes ( Sicherungsübereignung ). These uncertainties are known by domestic, and widely accepted by foreign, participants in the Aus- trian lending market and the relevant qualifications are customarily included in (enforceability) legal opinions as a standard market practice. 3.6 Loan Transfer Mechanisms Austrian civil law recognises the concept of assign- ment, pursuant to which lenders’ rights (but not obli- gations) may generally be unilaterally transferred from the original or former creditor (assignor) to a new creditor (assignee). However, there are regula- tory limitations to this procedure stemming from the fact that Austrian banking secrecy ( Bankgeheimnis )
ceeds from loans or debt securities. 3.5 Agent and Trust Concepts
Austrian civil law recognises the necessary concepts in order to implement agent and trust structures in Austria in the form of an agency agreement ( Auftrags-
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AUSTRIA Law and Practice Contributed by: Markus Fellner, Stefan Sallat and Florian Henöckl, Fellner Wratzfeld & Partner Rechtsanwälte GmbH
prohibits the disclosure of customer data by banks to third parties; exceptions apply (eg, for the conduct of legal disputes with a borrower or for the purposes of certain investigations by authorities) but these will generally not apply to performing loans. Waiver and consent language – inter alia, permitting disclosure of information on a loan and lender to a potential syn- dicate partner or assignee – is therefore frequently used in non-consumer loans and is standard market practice for loans designed for syndication. Since this is not a satisfactory structure in practice (in particular, with respect to performing loans), the entirety of any rights and obligations arising from a loan agreement may be transferred by way of trans- fer of contract ( Vertragsübernahme ); such transfer requires the consent of all parties involved. It is cus- tomary, however, that the loan documentation con- tains the relevant in-advance consent of the borrower, which is permissible under certain circumstances. Austrian law-governed security rights will typically transfer alongside the underlying legal relationships (and statuary law provides for a claim of the new lend- er to have any such security rights transferred from the former lender). Specific to Austrian law is the possibility of a new creditor, with the consent of the borrower, redeem- ing outstanding debt with the former creditor thereby causing (against payment) an ex lege transfer of any related security rights. This would, however, require that any such outstanding payments that are due, as a result this redemption ( Einlösung ) structure would typically not be a viable option in relation to perform- ing loans. The method is frequently used in restructur- ing scenarios because it permits the swift and secure transfer of security rights. By way of an alternative, Austrian law would also per- mit risk transfer structures not resulting in a transfer of the position of the lender of record (such as sub- participations) which would, however, not imply a technical transfer of a claim or security right. 3.7 Debt Buyback Debt buy-back by a borrower or a sponsor is gener- ally permitted under Austrian law provided that either
a repayment is due or voluntary early prepayments are permitted on a contractual basis. In addition, con- sumer borrowers have (as a general rule) a mandatory right of early repayment. 3.8 Public Acquisition Finance Austrian law does not recognise or regulate the con- cept of “certain funds”. However, public take-over transactions (subject to the Austrian Takeover Code ( Übernahmegesetz ), which implements the European Take-Over Directive) require debt or equity funding for the acquisition of the target shares (under the hypothesis of a full acceptance of an offer) to be available and to be certified by an inde- pendent expert and for that certificate to be included in the published offer documentation. Other than that, in particular, in private transactions, “certain funds” provisions are not mandatory, but may be used by way of contractual arrangement on a case- by-case basis. In terms of documentation, there is a divide in the Austrian lending market. On the one hand, local (also major) Austrian banks frequently provide debt financ- ing to their (existing or new) customers on the basis of in-house standard documentation (in conjunction with their general terms and conditions), which may be considered “short form”. On the other, international banks targeting the Austrian market, as well as Aus- trian banks aiming at the syndication of their lending engagements, increasingly refer to “long form” docu- mentation that is frequently structured and drafted along the lines of the standard provided by the Loan Markets Association (LMA). In the context of public M&A (take-over) transactions, no public filing or other disclosure of the underlying financial documentation is required; the attestation/ confirmation on the available funding of the independ- ent expert to be included in the offer document will suffice as a matter of law.
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