PORTUGAL Law and Practice Contributed by: Marta Pontes, Hélder Frias and José António Reymão Nogueira, Uría Menéndez
Other types of security or funding structures may be used, depending on the specific character- istics of the target and its business sector and, naturally, the acquirer. A particularly relevant sector to take note of is tourism and the financ- ing of hotels and other accommodation facilities, where either a traditional loan agreement format with a comprehensive security package or a bond issuance format also backed by a com- prehensive security package, combined with the appointment of trustee-like representative inves- tors or lenders, is used. Acquisition financing agreements are usually governed by Portuguese law, although Eng- lish law may be used in certain transactions in the market (especially where the purchaser is a foreign investor). Security packages tend to be governed by Portuguese law, due to specific legal provisions on security and registration and formalisation requirements. Additionally, acquisi- tion finance transactions governed by a foreign law require significant input from Portuguese lawyers in many critical areas, such as corporate law and insolvency regulation. 2. Documentation 2.1 Governing Law 2.2 Use of Loan Market Association (LMA) Agreements or Other Standard Loans There is no general rule in the Portuguese market for financing agreements to follow an industry- standard format, such as the LMA documenta- tion used in the UK market. However, LMAs are increasingly used in the Portuguese market and many of the customary features of Portuguese acquisition financing documentation replicate LMA standards but are adapted to Portuguese
legal standards and requirements, especially in syndicated loan transactions. 2.3 Language The majority of acquisition financing agreements are drafted in English, reflecting the international dimension of the transactions currently taking place in Portugal. This does not generally cause an issue, except for (i) notarial documents, which must be in Portuguese, and (ii) documentation that must be submitted to the land or commer- cial registry offices, in which case it is often nec- essary to provide translations into Portuguese. 2.4 Opinions The issuance of legal opinions in acquisi- tion finance transactions is carried out by the lender′s legal counsel on the legality, validity and enforceability of the finance documents, whilst the borrower′s legal counsel is required to issue a legal opinion on the capacity and authority of the borrower. 3. Structures 3.1 Senior Loans Senior loans typically comprise: • a term facility used to fund the acquisition; and • a working capital facility in the form of a revolving credit facility. 3.2 Mezzanine/Payment-in-Kind (PIK) Loans Mezzanine financing is also commonly used in Portugal as subordinated debt. However, this type of loan is typically secured. Payment-in-kind (PIK) loans are relatively uncom- mon in Portugal due to the legal restrictions on
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