NORWAY Law and Practice Contributed by: Ida Marie Windrup, Daniel Jovanovic, Markus Nilssen and Steffen Rogstad, BAHR
Common methods to mitigate priming lien risks include: • Cash flow monitoring – regular monitoring of pay - roll, tax and social security obligations to prevent arrears. • Blocked accounts – requiring funds to flow through controlled accounts, with sweeps to reduce opera - tional cash exposure. • Representations and covenants – requiring borrow - ers to confirm compliance with employment and tax obligations. • Insurance – maintaining appropriate insurance coverage for certain priority claims. • Over-collateralisation – providing a security cush - ion to absorb potential priority claims. Common intercreditor provisions for second lien arrangements include: • Payment subordination – second lien lenders receive payments only after senior debt is repaid in full. • Standstill periods – second lien lenders agree not to enforce for specified periods (typically 90–180 days) after senior lender enforcement begins. • Silent second liens – second lien lenders have no voting rights on amendments affecting shared col - lateral. • Proceeds waterfall – enforcement proceeds flow first to senior lenders, then to junior lenders. • Turnover provisions – any payments received by junior lenders in violation of priority are turned over to senior lenders. • Permitted refinancing – terms allowing junior debt refinancing without senior lender consent are sub - ject to conditions. Norwegian intercreditor arrangements typically follow. 5.9 Cash Pooling and Hedging/Cash Management Obligations Cash pooling is commonly used in Norway, particular - ly by corporate groups with multiple subsidiaries. Nor - wegian companies frequently participate in domestic and cross-border cash pooling arrangements.
The relationship between private credit lenders and cash pooling banks requires careful structuring as cash pooling creates fluctuating intercompany bal - ances and potential set-off rights for the cash pool - ing bank that can conflict with private credit lenders’ security interests. Loan documentation often provides caps on cash pooling exposures. Secured hedging and cash management obligations are typically addressed as follows: • Secured hedging – interest rate and currency hedging providers often receive: (a) shared security on a pari passu basis with senior lenders; (b) priority for a capped amount of hedging obli - gations; and (c) inclusion in intercreditor arrangements with agreed priority for hedging claims. • Cash management banks – banks providing cash management services (accounts, payment ser - vices) typically receive: (a) limited security or super-priority for cash man - agement exposures up to a specified cap; and (b) set-off rights over accounts they maintain, subject to intercreditor limitations. • Caps and limitations – private credit lenders typi - cally impose caps on secured hedging and cash management exposure to preserve collateral value. Norwegian market practice generally follows interna - tional standards, with private credit lenders requiring robust intercreditor protections to manage conflicts between their security and cash pooling/cash man - agement banks’ rights. 5.10 Appointment of Collateral Agent Norwegian law permits a security agent (collateral agent) to hold security on behalf of a syndicate of lenders. This is the standard market practice for syn - dicated and private credit transactions. Security does not need to be re-granted or re-reg - istered when loans are transferred between lenders.
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