SPAIN Law and Practice Contributed by: Antonio Paredes, Carlos Saldaña, Manuel Martínez and Román Mejías, ZADAL
3.2 Key Documentation Key Documents in Spanish Private Credit Deals Most Spanish private credit transactions use a familiar European package, adapted to local security formali - ties. The core documents typically include: • facility/credit agreement (often based on LMA-style concepts, heavily tailored); • intercreditor agreement (where there is more than one debt layer, hedging, or super senior working capital); • security documents (Spanish-law pledges, mort - gages, guarantees) plus notarial deeds and regis - trations where required; and • fee letters, mandate/engagement letters, and, where relevant, hedging documentation and account bank arrangements. Lender Arrangements and First Out–Last Out Mechanics Agreements among lenders are commonly negotiated on a transaction-by-transaction basis, especially in club deals, unitranche structures, or where banks pro - vide super senior lines alongside private credit term debt. First-out–last-out economics are used in Spain where the deal size or lender mix calls for a split of risk and return, and they are most often implemented through an agreement among lenders and/or an inter - creditor agreement that sets out priority, voting, trans - fers and payment waterfalls, with the credit agreement aligning with that framework. In practice, parties pre - fer documenting these mechanics outside the main credit agreement to keep the borrower-facing docu - ment cleaner while preserving lender-only economics and protections. External Factors Driving Drafting Changes Drafting has been shaped by three main trends: (i) competition (banks and public markets pushing for more borrower-friendly flex in stronger credits); (ii) risk and workout readiness (more focus on reporting, cash leakage controls, transfer restrictions, disenfran - chisement, and clearer “sacred rights” and amend - ment mechanics); and (iii) compliance expectations (expanded AML/sanctions representations, beneficial ownership transparency, and increased attention to ESG/sustainability disclosure alignment where inves - tors require it). The result is documentation that is
often more bespoke, with greater emphasis on preci - sion in definitions and baskets and on intercreditor enforceability in a downside scenario. 3.3 Restrictions on Foreign Direct Lenders General Rule Foreign lenders are not generally restricted from pro - viding private credit into Spain. Lending to corporates is not, by itself, a reserved activity, so nationality is usually not the determining factor. Restrictions arise mainly if the lender is conducting regulated banking activity in Spain (in particular, deposit-taking) rather than simple lending. Taking Security Foreign lenders can take and enforce security over Spanish assets, subject to local formalities (Spanish- law security documents, and, where relevant, notarial execution and registration, especially for real estate). In practice, the key constraints are structuring and execution issues – most commonly withholding tax analysis for Spanish-source interest and robust AML/ sanctions compliance – rather than prohibitions on foreign lenders. 3.4 Use of Proceeds and Acquisition Financings Restrictions on the Borrower’s Use of Proceeds Spanish law does not impose private credit-specific use-of-proceeds restrictions beyond illegality. In prac - tice, limits are mainly contractual (permitted purposes, restricted payments, intra-group flows) and driven by corporate/insolvency principles (corporate benefit, capital maintenance, directors’ duties and avoidance risk). In acquisition financings, financial assistance is the key constraint, often limiting target guarantees or security supporting the purchase of its own shares (or those of its parent). Practical Challenges for Take-Privates and Acquisition Financings Challenges are mostly structural and execution- related, not licensing-related. Financial assistance can prevent “full target security” at closing, so lend - ers rely on alternative or staged collateral and post- closing steps. Security perfection can also add time and cost due to notarial and registration requirements, especially for real estate and certain movable secu -
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