NETHERLANDS Law and Practice Contributed by: Gianluca Kreuze, Ruben den Hollander, Anne van Geen and Sanne van Esterik, Loyens & Loeff
and borrowers prioritising strong cashflow and lower leverage ratios. As long as interest rates remain relatively high (compared to the years preceding 2022), the expectation is that lenders will remain focused on free cash flow instead of growth (EBITDA). 1.2 Corporates and LBOs Cautious Buyers and Decreasing Interest Rates Higher pricing of debt products has caused borrowers to drop (part of) their planned debt financing and explore alternative forms of financ- ing, such as vendor loans and subordinated financings. These include back-leverage such as Holdco financing or, in the private equity space, financings at fund level. Certain borrowers financed acquisitions without third-party debt, hoping to obtain a debt financing in the future whenever markets, pricing and terms improve. The economic environment has resulted in some borrowers being unable to fulfil obligations under their financing documentation. In these cases, this was with regard to payment obligations and financial ratios. In return for waiving certain defaults, lenders often impose additional condi- tions on borrowers that can lead to amending the financing documentation, such as agreeing to new financial ratios, limiting flexibility for bor- rowers on general covenants, or imposing more extensive information undertakings and charging amendment fees. That said, the European Central Bank’s monetary policies led to a decline in interest rates during 2024, which is expected to make debt servic- ing more manageable for borrowers. In addition, there is an increasing willingness among lend- ers, particularly in the unitranche and direct lend- ing market, to accept lower margins in order to secure deals. Looking ahead, the Dutch acquisi-
tion finance market is expected to benefit from the improving economic environment and easing financial conditions (eg, lower interest rates and subdued inflation), although challenges such as geopolitical conflict, trade restrictions and inflationary pressures are likely to continue to influence market dynamics. Lenders and bor- rowers alike will need to adapt to these evolving conditions to navigate the acquisition finance landscape effectively. Save for investment grade corporates, there is not much difference between corporate loans, acquisition finance or leveraged buyout loans. The larger deals are often documented under US or English law especially where syndication is relevant. For mid-market and smaller deals, Dutch law is often used, especially if EU com- mercial banks or debt funds are involved. Given that Dutch law is rather creditor friendly (the position of the lender under Dutch, English or US law does not materially differ) and for smaller and/or mid-market deals, most often assets are located in the Netherlands or the EU, in which case Dutch law facilitates enforcement. The level of “borrower friendliness” of the documentation often depends on the strength of the corporate or sponsor. 2. Documentation 2.1 Governing Law 2.2 Use of Loan Market Association (LMA) Agreements or Other Standard Loans The basis for the finance documentation in an acquisition finance transaction is, in most cases, the documentation as published by the Loan Market Association (the LMA), but especially large deals often deviate heavily from the format. In addition, commercial banks often stay closer
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