DOMINICAN REPUBLIC Law and Practice Contributed by: Marielle Garrigó, Urania Paulino, Eduardo Pellerano and Ricardo Pellerano Nadal, Pellerano Nadal Law & Consulting
rial documents or information they receive regarding material changes of the borrower, financial condition, status of liens/collateral and occurrence of an event of default, among other matters. • Priority – the senior lender(s) will have prior- ity over the subordinated lenders and a first ranking lien on all of the collateral covered by the loan security. • Application of funds – this determines the arrangement for sharing the funds received from the borrower. In the event of a sale or disposition of any collateral the net proceeds shall be applied first to the senior lender(s), second to the subordinated lender(s), and third to the borrower. • Liens – lenders may also consent to the crea- tion of the liens granted by the security agree- ments in their favour to secure the loan. • Cross-default/acceleration – they may agree that the loan documents will be subject to customary cross-default/cross-acceleration provisions. • Enforcement action/notice – no lender may take any enforcement action (other than acceleration of a loan upon an event of default) unless they have given the other lend- ers an enforcement notice and a determined period time, during which each lender shall consult with the other upon request about the reasons for taking such enforcement action. Usually, in the case of subordination, the senior lenders are entitled to exercise rights and remedies following an event of default under the loan documentation and to lead any enforcement actions that may be under- taken from time to time. The subordinated lenders may also provide notice that they wish to carry out an enforcement action if the senior lenders are not already undertaking an enforcement action but are usually only enti- tled to do so after a determined period (the
“standstill period” ) and subject to customary consent rights for the senior lenders. • Expenses – expenses are shared, or some- times each lender shall bear all expenses they may incur as a result of any effort to enforce their rights under the loan documents. • Local collateral agent – the process for appointing and replacing a local collateral agent to protect the local collateral, acting on behalf of the lenders. Hedge counterparties may be used by lend- ers for the purpose of hedging interest rates or currency liabilities. This is not frequently used in local transactions but is sometimes used by international banks when participating in cross- border acquisition finance operations for acqui- sitions in the Dominican Republic. 5. Security 5.1 Types of Security Commonly Used The types of securities are often based on the type of transaction and other factors, such as the financing amount, number of lenders, com- plexity and industry. 4.2 Bank/Bond Deals See 4.1 Typical Elements . 4.3 Role of Hedge Counterparties However, acquisition finance should include: • the pledge of the shares of the target or par- ent company; • the pledge of material contracts; • the pledge over machinery, inventory and assets (including securities); • the pledge over the assets of a trust; • the pledge over intellectual property;
162 CHAMBERS.COM
Powered by FlippingBook