DENMARK Law and Practice Contributed by: Morten Krogsgaard and Lennart Meyer Østenfjeld, Moalem Weitemeyer
entire principal amount is repaid at the end of the loan term; and • secured or unsecured: bridge loans can be either secured or unsecured, depending on the borrower’s creditworthiness and the nature of the long-term financing that will replace the bridge loan. Common Bridge Loan Structures in Acquisition Finance Interim facilities agreement This is used to document certain funds and pro- vide a temporary financing solution until long- This structure involves using the bridge loan to finance an acquisition until the borrower can issue bonds, other debt instruments and/or a public offering or private placement in the capital markets. 3.4 Bonds/High-Yield Bonds The Nordic high-yield corporate bond market has occasionally been utilised as an acquisi- tion finance tool but Denmark continues to be a small market. When used, issuances are typi- cally under Norwegian or Swedish ISINs. The Nordic high-yield bond documentation and mar- ket provides flexibility for a bond to be issued to fund the acquisition upfront, even without a bridge loan. Non-Nordic high-yield bonds may also be used to finance acquisitions. These bonds are usually employed in combination with an initial bridge loan, which will subsequently be refinanced out of the proceeds of the bond issue on or after the completion of the acquisition. These high- yield bonds are not often used and are typi- cally reserved for large transactions and com- plex capital structures. However, private equity term financing is arranged. Bridge-to-capital markets
players, especially in “buy-and-build” portfolio companies, are successfully refinancing into the bond market. Danish corporates may also utilise the invest- ment grade debt capital markets, including via the Euro Medium Term Note (EMTN) pro- grammes. A bridge facility will frequently be used as additional funding support for a bor- rower if required, even though it is not drawn down in most instances. 3.5 Private Placements/Loan Notes Private Placements Notes Private placement notes can be used by issuers to fund acquisitions partially or fully. However, they are not frequently used in the Danish market for Danish acquisitions. Danish corporates may look to private placements for foreign acquisi- tions, either to access certain currencies or to secure longer maturities. As with bonds, these products are commonly used in conjunction with a bridge facility. Vendor Loans See 3.2 Mezzanine/Payment-in-Kind (PIK) Loans . 3.6 Asset-Based Financing Asset-Based Financing Asset-based financing is not a common part of acquisition financing but may be used to refi- nance existing debt in the target or in connection with a debt pushdown. Asset-based financing is structured to provide companies with flexible funding solutions by leveraging their assets as collateral. The typical structures include the following.
133 CHAMBERS.COM
Powered by FlippingBook