AUSTRALIA Law and Practice Contributed by: John Schembri and Erin Cartledge, Gilbert + Tobin
ings of Australian companies documented via an offshore law-governed facility document, wheth- er a US-style TLB or an English law-governed “unitranche” -style facility. Local liability management transactions are less common in Australia and, while the rel- evant “technology” (including J.Crew, Chewy/ PetSmart, Revlon, Envision, Serta and simi- lar clauses) developed to address leakage concerns arising from these transactions has started to make its way into Australian facility documentation, these provisions are less rel- evant in Australian facility documentation given that any potential risk of leakages addressed by these provisions is already addressed in some way by APLMA standard facility documentation and other market standard provisions. Austral- ian financiers are nevertheless aware of these transactions and focused to address any poten- tial leakage risks, particularly in light of recent decisions of the US bankruptcy courts, which have shown inconsistent views on how they interpret these provisions. Each firm also has its own precedent security documentation, though all asset security will be taken under “general security” agreement/deed (equivalent to a UK debenture) and security over a specific asset or class of asset (typically shares or other equity interests) will be taken under “specific security” agreement/deed. 2.3 Language From a domestic perspective, debt documen- tation (including the finance documents and security documents governed by Australian law) is almost exclusively drafted in English. Occa- sionally, debt might be arranged in an offshore jurisdiction such as China, where the facility documentation will be in the national language of that offshore jurisdiction, with an English transla-
tion required by the financiers. In that case, any security documents affecting Australian assets will be drafted in English (and governed by Aus- tralian law), with security over offshore obligors governed by the local customs applicable to the relevant jurisdiction. 2.4 Opinions As is typical, lenders will ordinarily require the provision of a legal opinion as a condition precedent to the initial drawdown of the facili- ties (and any subsequent accessions). Legal opinions typically cover the capacity, authority and corporate power of the obligors incorpo- rated in Australia to enter into the finance docu- ments and the enforceability of the Australian law-governed finance documents against the obligors. In a secured transaction, the relevant legal opinion will also cover the creation of valid security interests, though will not typically opine on the priority of security interests over assets other than real property due to the complexities of the federal law that applies to the priority of such security interests. These opinions are often expanded to cover additional matters such as the payment of stamp duty, withholding tax, immunity from suit and whether the transaction requires the financiers to be licensed or registered in Australia (which is often requested by international banks). The general rule remains that counsel to the financiers will issue the legal opinion, even where the borrower’s counsel has drafted the finance documents (noting that there is no hard and fast rule in Australia as to whether the borrower’s or financier′s legal counsel drafts the documents, though increasingly strong sponsors’ legal coun- sel will hold the pen on all key documents). How- ever, due to increased cross-border acquisition activity, borrowers’ counsel have become more
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