JAPAN Law and Practice Contributed by: Jiro Mikami, Ryo Okubo, Hiromi Hattori and Tomohiro Koyasu, Nagashima Ohno & Tsunematsu
1. Market 1.1 Major Lender-Side Players
of Yokohama, Ltd. Corporate loans are also widely arranged by local banks and corporate banks as well as by the mega banks. Local banks tend to participate in small to mid- sized deals, whether corporate loans or acquisi- tion finance.
Japanese commercial banks, trust banks and government-related banks are major players as senior lenders. In particular, a substantial volume of Japanese acquisition finance is provided by Japan’s three mega banks: • MUFG Bank, Ltd.; • Sumitomo Mitsui Banking Corporation; and • Mizuho Bank, Ltd. In addition to mega banks, local banks are becoming more active in acquisition finance. In the early days of Japanese acquisition finance, US and European banks played a larger role, but fewer non-Japanese banks are currently active in the Japanese acquisition finance market. Certain Japanese mezzanine funds, bank sub- sidiaries, local banks and lease companies have become major participants in the mezzanine finance markets. The mezzanine funds include: • funds established by certain Japanese banks; • funds established by certain securities com- panies; and • independent funds. The three mega banks have notably expanded their activities to include mezzanine financing for large-cap deals. 1.2 Corporates and LBOs The mandated lead arrangers of senior loan facilities for acquisition finance in Japan are pre- dominantly the three Japanese mega banks and several other corporate banks and local banks, such as Sumitomo Mitsui Trust Bank, Ltd., SBI Shinsei Bank, Ltd., Resona Bank, Ltd., Aozora Bank, Ltd., Kiraboshi Bank, Ltd., and The Bank
2. Documentation 2.1 Governing Law
Purely domestic transactions are always gov- erned by Japanese law. However, where the lenders are foreign financial institutions, the loan facility agreements may be governed by English or New York law. If the secured assets relate to a jurisdiction other than Japan, the governing law of the security agreements may be the law of that jurisdiction, depending on the applicable conflict of laws rules. There is no difference between corporate loans and acquisition finance. 2.2 Use of Loan Market Association (LMA) Agreements or Other Standard Loans In purely domestic transactions, there is no official form for definitive agreements for sen- ior acquisition finance facilities. However, in practice, many lenders in the market use a form based on the model syndicated loan agreement form published by the Japan Syndication and Loan Trading Association (the “JSLA” ), which is predominantly used for corporate loans. In cross-border transactions in which the lend- ers are Japanese mega banks, the globally used Loan Market Association (the “LMA” ) forms are becoming more common. When the buyer is a US or European private equity fund, the LMA form is especially sometimes used (although the governing law is Japanese law) and they some-
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