NETHERLANDS Law and Practice Contributed by: Gianluca Kreuze, Ruben den Hollander, Anne van Geen and Sanne van Esterik, Loyens & Loeff
to the format (also for syndication purposes), while private credit funds given more tailored solutions. In some medium and small financings, alterna- tive lenders have been willing to work off short(er) form documentation which is often a stripped- down version of the LMA format. Dutch com- mercial banks also offer short form documenta- tion for smaller transactions where, at the offset, syndication of the product is not considered part of the bank’s strategy nor commercially likely. Eventually, the level of negotiations strongly depends on the size of the deal, type of lend- ers, type and size of borrower/sponsor and the borrower’s/sponsor’s strategy and financial per- formance. 2.3 Language There are no requirements relating to the lan- guage used in finance documentation (save for a deed of mortgage (in relation to registered prop- erty) which must be executed in the Dutch lan- guage or, if in another language, come together with a certified translation. However, in most cases, the finance documentation will be drafted in English. 2.4 Opinions Legal opinions play an important role in acqui- sition finance transactions in the Netherlands by providing assurances to lenders regarding capacity of the obligors and the legal validity and enforceability of the finance documents. The legal opinion will often be a condition precedent to funding and will typically cover: • the capacity of the Dutch entities entering into the finance documentation; and • the enforceability in the Netherlands of the finance documentation.
It is market practice in the Netherlands that lend- er’s counsel issues a full legal opinion, covering both capacity of the obligors and enforceability aspects of the transaction.
3. Structures 3.1 Senior Loans
Acquisition finance transactions in the Nether- lands can take various forms and the structure highly depends on the specific needs of the bor- rower, type of debt provider and prevailing mar- ket conditions. That said, forms of senior loan facilities we often see in the Netherlands are term loans to (re)finance the acquisition and the existing debt of the target, combined with revolv- ing credit facilities to finance working capital as needed. In leveraged financings, sponsors often negotiate that the term loans are non-amortising (term loan B) and require inclusion of accordi- on features, which allows them to increase the size of the facility or attract additional financing under certain conditions. This feature provides the flexibility to adapt the financing arrange- ments to changing needs or increased funding requirements without the need for renegotiating the entire agreement. Commercial banks usually want to see that part of the term loan is amortis- ing (term loan A). As a result of the increase of direct lenders, medium and large–sized private equity transac- tions are often structured as unitranche products (meaning a blended senior and mezzanine risk structured as a non-amortising secured term loan). In larger, internationally arranged financ- ings, we usually see senior financing being com- bined with mezzanine or second lien financing or high–yield bond issuances.
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