PORTUGAL Law and Practice Contributed by: Marta Pontes, Hélder Frias and José António Reymão Nogueira, Uría Menéndez
4.2 Bank/Bond Deals Intercreditor agreements are of major impor- tance when there are different types of creditors, particularly when the acquisition is simultane- ously financed by bank financing and bond issu- ance. As the latter usually has a longer maturity, the intercreditor agreement plays a crucial role in establishing the priorities for payments or cash distributions. 4.3 Role of Hedge Counterparties Typically, the hedging liabilities are treated as senior liabilities and benefit from the security package granted to secure the senior loan asso- ciated with the hedging. Moreover, the hedging agreement typically provides hedging termina- tion rights, which are, however, limited to major events of default (eg, insolvency). 5. Security 5.1 Types of Security Commonly Used There are different types of security, with differ- ent formal requirements and execution process- es depending on the assets to which they relate. Shares Under Portuguese company law, shareholdings can refer to both: • shareholdings in limited liability companies by quotas ( sociedades por quotas ); and • shareholdings in limited liability companies by shares ( sociedades anónimas ) that are nomi - native and can be represented by certificates or book entries. The shareholdings above can be encumbered and granted as security by means of a pledge. Shareholdings in limited liability companies by quotas may be subject to transfer restrictions.
Structural Subordination Structural subordination is not common in Por- tuguese acquisition transactions. Structural sub- ordination refers to a financing structure where senior creditors lend funds directly to the target company and junior creditors lend to a holding of the target company so that junior creditors only have access to the assets of the target after all the target′s direct creditors (including sen- ior creditors) have been paid and the remaining assets have been distributed to the company as the equity-holder. Payment of Principal Liabilities are typically categorised into sen- ior and junior liabilities. Junior or subordinated liabilities are subordinate to senior credits and must be paid after all senior credits have been paid. Within these categories, liabilities can rank pari passu without preference or according to priority rules agreed between the parties. Interest The rules are the same as for repayment of prin- cipal (see Payment of Principal above). Fees The rules are the same as for repayment of prin- cipal (see Payment of Principal above). Sharing Arrangements Sharing arrangements are not very common in Portugal, although some lenders require the inclusion of LMA-based sharing provisions in the finance documents (typically either in the facility or intercreditor agreements). Subordination of Equity/Quasi-equity Equity or quasi-equity financing is not typically subject to contractual subordination in Portugal.
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