Acquisition Finance 2025

AUSTRALIA Law and Practice Contributed by: John Schembri and Erin Cartledge, Gilbert + Tobin

2. Documentation 2.1 Governing Law

2.2 Use of Loan Market Association (LMA) Agreements or Other Standard Loans The Loan Market Association (LMA) equivalent in Australia is the Asia Pacific Loan Market Asso- ciation (APLMA), which has produced a suite of documents, including bilateral facility docu- mentation, commitment letters, confidentiality letters, mandate letters, and both investment grade and standard secured syndicated facility agreements, but is yet to produce an equivalent to the LMA’s leveraged acquisition documenta- tion (unlike the LMA suite, these documents are not specifically tailored to acquisition finance transactions). The APLMA standard secured syndicated facility largely mirrors the structure of the LMA version, with notable differences in Australia’s interest withholding tax regime, local laws (eg, financial assistance legislation) and market practice. The APLMA documentation has largely followed the approach of the LMA precedents to the use of risk-free rates as replacements for IBOR rates, again with some differences (eg, taking into account that Australian dollar denominated loans typically use a forward-looking term rate rather than a backwards-looking risk-free rate – a position that appears unlikely to change in the short term). Each firm tends to have its own precedent acqui- sition facility documentation, which is, to a great- er or lesser extent, based on the APLMA stand - ard facility documentation. As US and European private equity funds have become more active in the Australian market, facility documentation has become more aligned to offshore norms, often incorporating documentation “technol- ogy” seen in more developed capital markets. Similarly, as the market dynamic has changed, there have been a number of acquisition financ-

For domestic transactions, debt documentation (including commitment letters, term sheets and full-form facility and intercreditor agreements) is governed by the law of an Australian state or territory – generally New South Wales or Victoria. There are no material differences between the laws of each state or territory from a governing law perspective, with all Australian companies regulated by Commonwealth law irrespective of the governing law of the documentation. If the acquisition debt is arranged offshore, the gov- erning law of that offshore jurisdiction may be used (typically, English law or the laws of a state of the USA). Security documents affecting Australian assets are similarly governed by the law of a state or territory, and only one jurisdiction is chosen for the governing law even if the assets are located in multiple states. Again, the choice of law is usually determined by where the grantor oper- ates, where its assets are located and/or where the Australian lenders have lending offices. If assets are located outside Australia, financiers will usually require the relevant obligor to provide security governed by the law of the jurisdiction where the assets are located. Where a foreign company is granting security over assets locat- ed in Australia, financiers will require separate security documents to be executed over those assets, with one security document governed by the law where the foreign company is incorpo- rated and one governed by the jurisdiction where the assets are located.

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