NEW ZEALAND Law and Practice Contributed by: David Weavers, Alex MacDuff, Matt Consedine and Verniel Virtucio, Russell McVeagh
• a European-style unitranche, usually with a super- senior RCF provided by a bank (predominantly provided by offshore funds on larger cap transac - tions); and • mezzanine debt that is either: (a) contractually subordinated to senior debt; or (b) structurally subordinated holdco debt (these transactions have been particularly prevalent in recent times as a means of reducing senior debt at opco level and equity release). Private credit providers prefer drawn term debt with no amortisation. That said, delayed-draw term facilities for future acquisitions and/or capex are often made available, usually for borrowers backed by sponsors and where there is a clear growth path. Private credit providers are less likely to provide revolving facilities and, as a result, unitranche loans tend to be coupled with super-senior revolving facili - ties provided by a bank. Covenant-lite transactions in the style of term loan Bs are rare (but not unheard of) in New Zealand. 3.2 Key Documentation The Asia Pacific Loan Market Association (APLMA, the equivalent of the Loan Market Association in the Asia- Pacific region) has produced a suite of standard-form documents that are applicable for use in the Australa - sian market. The APLMA forms are becoming more commonly used for investment-grade transactions, but less so for leveraged buy-outs (where sponsor- friendly precedents tend to be used) and mid-market transactions. For transactions that involve different classes of creditors, an LMA-style intercreditor agreement will be needed. A market precedent form of intercredi - tor for unitranche/super senior revolving credit facility (ssRCF) transactions has developed organically over the last few years. For other transactions, there is no clear market precedent. Unitranche deals in this market tend to follow the European – rather than US – style.
First out-last out transactions are not common in the New Zealand market, largely due to the lack of depth of creditors and the smaller average deal size by glob - al standards. In general terms, strong sponsor-backed borrowers continue to demand borrower-friendly terms. How - ever, distressed borrowers needing a private credit solution tend to be term-takers, with private credit providers being able to obtain more lender-friendly terms. 3.3 Restrictions on Foreign Direct Lenders See 2.1 Licensing and Regulatory Approval . Foreign lenders are not generally restricted from providing private credit, taking security or enforcing security. However, see 6.4 A Foreign Private Credit Lender’s Ability to Enforce Its Rights . 3.4 Use of Proceeds and Acquisition Financings There are no regulatory restrictions on the use of pro - ceeds from private credit transactions. Private credit continues to be a key source of funding for both cor - porate and sponsor-backed acquisitions. Take-private activity has been limited in recent times, but there are no legal or practical reasons why a take- private could not be funded by private credit. 3.5 Debt Buyback Unitranche and other larger-cap transactions typi - cally permit debt purchase transactions, subject to certain conditions. Documentation on this point tends to follow the suggested wording in the APLMA form of facilities agreements. 3.6 Recent Legal and Commercial Developments Not applicable. 3.7 Junior and Hybrid Capital See 3.1 Common Structures for common junior capi - tal structures. Junior creditors may lend to the same vehicle as the senior lenders. Real estate deals aside, security is
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