DENMARK Law and Practice Contributed by: Morten Krogsgaard and Lennart Meyer Østenfjeld, Moalem Weitemeyer
3. Structures 3.1 Senior Loans
Market Practice for Legal Opinions Full opinion by lender’s counsel
Counsel for the lender or agent (as applicable) typically provides the full legal opinion. This opinion covers power, capacity and the author- ity of the Danish obligors to enter into the finance documents and perform their obligations under them, as well as the legality, validity and enforce- ability of the finance documentation and provi- sions of the finance documents, such as govern- ing law and jurisdiction. Split opinions In some cases, split opinions are issued. Here, counsel for the lender will issue an opinion on the legality, validity and enforceability of the finance documentation and counsel to the bor- rower will issue an opinion regarding the power, capacity and authority of the Danish obligors to enter into the finance documents and perform their obligations under them. Borrower’s counsel providing full opinion It is rare for the borrower’s counsel to provide the full opinion. This is usually limited to instances involving a Danish obligor and non-Danish law governed finance documents. In these cases, the “enforceability” opinion is limited to matters such as governing law and jurisdiction. Multi-Jurisdictional Transactions In multi-jurisdictional transactions, counsel from each jurisdiction where an obligor is incorporat- ed and/or security is granted will be expected to issue an opinion to ensure that all legal aspects across different jurisdictions are adequately cov- ered.
In an acquisition finance scenario, the standard structure typically involves a term loan to finance the acquisition and refinance existing indebt- edness. When Danish banks are involved, this often includes an amortising term loan and a bul- let term loan. Alternatively, when private credit providers are involved, a unitranche loan may be used. In each case, a revolving credit facility is provided for working capital purposes and may be utilised as an ancillary facility. Additionally, the target may assume a term loan to refinance a portion of the acquisition finance facility via a dividend distribution to the acquiring entity (debt pushdown) subject to compliance with corporate law. Uncommitted accordion facilities are sometimes incorporated from the outset for add-ons and other potential future financing needs, mostly to ensure that they are included as part of the security package without the need to amend the security package. Private credit providers sometimes offer delayed draw term loans in the form of committed CAPEX or acquisition facilities, which may be drawn subject to certain conditions. Second lien facilities are rare in the Danish mar- ket. Danish M&A and acquisition finance transac- tions are typically structured to include a string of holding companies to ensure an effective capitalisation or exit structure. To avoid struc- tural subordination, the acquisition debt is often obtained at the level of the acquiring company. Layered financing at various levels in the acqui-
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