NORWAY Law and Practice Contributed by: Ida Marie Windrup, Kristine Hjertenæs, Markus Nilssen and Daniel Jovanovic, BAHR
of acquisition financing in Norway. It may be included as part of a revolving facility under a combined financing package, however.
have a claim on its assets before the creditors of the holding company, meaning that the holding company’s debt is structurally subordinated to the operating company’s debt. Payment of Principal In both contractually and structurally subor- dinated structures, there is generally an inter- creditor agreement between the lenders on the various levels of debt, regarding the priority for payment of principal, so that the subordinated loan will have limited or no payment of principal during the tenor of the senior ranking loan. Ven- dor notes will typically be a bullet loan maturing after the senior loan. Interest The intercreditor agreement will typically also outline how interest payments are prioritised across different layers of debt, ensuring that interest is paid on both higher-priority (senior) and lower-priority (junior) loans for the life of the loans. However, in the case of an event of default, the senior ranking loan will usually take priority. Further, parts of the subordinated debt may be on PIK interest terms, and standard conditions will typically be included for vendor notes. Sharing Security Sharing of security and contractual subordina- tion of payment through a payment waterfall pro- vision is a common structure in Norway. Enforcement The intercreditor agreement will typically set out the procedure and terms for accelerating the loans and the terms for enforcing any guarantee or security granted thereunder. The intercreditor agreement will typically state that the enforce- ment instructions of one of the creditor groups shall prevail in the case of the agent receiving conflicting instructions, subject to certain condi-
4. Intercreditor Agreements 4.1 Typical Elements General
The rights and arrangements amongst different classes of creditors will typically be regulated by way of an intercreditor agreement. Typical ele- ments include, amongst others, the ranking and priority of payment, subordination, sharing of security and the rights to accelerate and instruct enforcement thereof. Contractual Subordination Both contractual and structural subordination are recognised concepts under Norwegian law. Contractual subordination of debt is common in Norway, both in relation to the amounts payable and the procedures to enforce security. Con- tractual subordination, thus creating a hierarchy, can be achieved by a declaration from the junior security lender that it will not collect its debt until the senior debt is paid in full, either through a separate declaration of subordination, but most commonly directly through the intercreditor agreement itself. Structural Subordination Structural subordination is also common in Nor- way, and is achieved by debt being issued at different levels within the same group of the cor- porate structure, that is, further away from the source of income, such as by a parent company or a subsidiary. For instance, while the senior debt might be held at the operating company level, junior debt could be issued by the hold- ing company, and in the event of bankruptcy or liquidation, creditors of the operating company
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