NORWAY Law and Practice Contributed by: Ida Marie Windrup, Kristine Hjertenæs, Markus Nilssen and Daniel Jovanovic, BAHR
In addition to traditional bank lending and direct lending/private credit, borrowers continue to seek to cover shortfalls through Norway’s very active high-yield bond market. As further described in 3.3 Bridge Loans and 3.4 Bonds/ High-Yield Bonds , the lack of certainty of funds will typically be a reasonable cause for con- cern when it comes to bond issuances, making bonds less suitable for acquisition financings. That said, this concern is often solved by way of a bridge-to-bond solution, whereby a short- term financing is provided, either through private credit or bank lending, in anticipation of a fully committed bond issue to refinance such bridge loan. 1.2 Corporates and LBOs Acquisition financing in Norway is primarily driv- en by leveraged lending, as opposed to capital injections or alternative non-debt instruments. Private equity entities specialising in leveraged buyouts have played a significant role in the market. Post-acquisition, it is common for both active stakeholders and existing management of the target company to be provided with the opportunity to reinvest or participate in manage- ment incentive programmes through investment plans. Direct lending has grown to become an impor- tant source of funding for leveraged buyouts, often being an avenue to higher leverage on a fixed interest rate basis, and a longer maturity.
of the transactions, as well as preferences of the lenders and borrowers. Lenders’ appetite will often determine governing law of acquisition financings (often Norwegian law, or English law as an alternative “mutual ground” ), with local law for security documents as needed. Norwegian law will typically govern the loan documents for acquisitions between Norwegian parties, especially if arranged by Nor- wegian banks. If the transaction is syndicated through a different market, it may be a condition for that market’s law to govern the documenta- tion as well. Corporate loans will typically be governed by the laws of the jurisdiction where the company oper- ates or where the lenders are located. As a general rule, a Norwegian entity may enter into contracts governed by foreign law and sub- ject itself to the jurisdictions of non-Norwegian courts. Nonetheless, it is important to note that by selecting foreign law to govern a contract, the Norwegian entity will usually not be able to circumvent statutory provisions under Norwe- gian law. 2.2 Use of Loan Market Association (LMA) Agreements or Other Standard Loans Most transactions are documented on LMA- based, or certainly LMA-inspired, leveraged loan agreements in English, adjusted slightly to reflect Norwegian law features such as agency concept rather than a trust holding security, and Norwe- gian requirements on financial agreements. The leading law firms in Norway will often have their own in-house standards, developed to reflect LMA format and optionality to reflect require- ments of key clients.
2. Documentation 2.1 Governing Law
The governing law of the financial instruments may vary depending on a variety of factors, including the jurisdiction of the parties involved, the location of the assets, the structure and size
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