DOMINICAN REPUBLIC Law and Practice Contributed by: Marielle Garrigó, Urania Paulino, Eduardo Pellerano and Ricardo Pellerano Nadal, Pellerano Nadal Law & Consulting
ty that is being represented and if the transaction is local or cross-border. The general aspects covered are: • capacity and due authorisations of the par- ties; • no conflicts with the parties with local law or their corporate documents; • reference to the collateral/security granted by the debtor and their capacity to do so which may also include, when necessary, if the security is duly registered, its ranking and if it may be duly enforced in the case of default; and • validation that the transaction documents are considered legal, valid and binding on the parties. In the case of cross-border transactions, they also include: • the enforceability of foreign law in the Domini- can Republic; and • that none of the lenders will be deemed resi - dent, domiciled or carrying on business and therefore subject to taxation in the Dominican Republic solely by reason of the execution, delivery, performance or enforcement of the transaction documents.
the debtor to disburse additional amounts within a specific timeframe, although this may not be common in acquisition finance. Regarding syndicated loan operations, the sen- ior lenders will rank pari passu and, in the case of senior secured loans, will have first degree rank- ing security over the collateral. In these types of transactions, it is also common to see inter- creditor agreements to regulate the relationship between the lenders as well as the designation of an administrative agent to act on behalf of all of the lenders, vis-a-vis the debtor. Some terms and conditions may include pre- payment penalties, restrictions on selling cer- tain assets, paying dividends, entering into new lines of business, or converting debt into equity, among others. Depending on the amount, industry and the type of lenders and/or debtors, senior secured loans may be used where the typical collateral would be granted as security, such as in: • mortgage over real estate properties; • pledge over shares, movable assets and inventory, bank accounts; and • assignment of rights over permits, licences, financial instruments, etc. 3.2 Mezzanine/Payment-in-Kind (PIK) Loans In the Dominican Republic’s acquisition finance market, mezzanine lenders are less common but still present. Typically, they are either multilateral banks or debt funds that focus on subordinated loans. Ifsubordinated debt is part of the transac- tion, mezzanine lenders may secure a secondary ranking lien over real estate collateral, as mort- gage law in the Dominican Republic allows this. However, for other types of collateral, such as
3. Structures 3.1 Senior Loans
Senior loans are structured according to the number of lenders in the transaction and wheth- er they are local or foreign. In view of this, some senior loans are led by a single bank while others are structured in a syndicated manner. In some cases, the financing documents may have “facil- ity increase” or “accordion” provisions, allowing
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