SLOVENIA Law and Practice Contributed by: Markus Bruckmüller, Klemen Radosavljević and Matej Kraner, Wolf Theiss Attorneys-at-law
PIK Debt Subject to certain conditions, PIK debt enables the borrower to pay upcoming interest payments in kind, ie, by increasing the total outstanding principal amount of the relevant instrument. In this way, the borrower pays interest as additional debt rather than in cash. PIK debt is typically used in loans where there is insufficient liquidity to cover the full interest rate in cash. In Slovenia, this is a less common form of financing. 3.3 Bridge Loans In the context of acquisition financing, short- term financial instruments serve to bridge the gap between the announcement of an acquisi- tion and the finalisation of permanent financing. Lenders generally require bridge loans to be secured by real estate or other assets to mitigate risk. Given their short-term nature and higher associated risk, bridge loans often carry higher interest rates compared to conventional loans and may be structured with provisions for inter- est rate escalations, encouraging the borrower to refinance at the earliest opportunity. 3.4 Bonds/High-Yield Bonds The issuance of corporate bonds by private or public companies is a common way to raise medium- to long-term finance. However, they are less common in M&A transactions. They can be arranged as secured or unsecured, convertible, subordinated, floating-rate or fixed-rate bonds. 3.5 Private Placements/Loan Notes Private issuance involves placing securities, particularly shares and bonds, with a limited number of pre-selected investors or institutions rather than offering them to the public. Although subject to fewer regulatory requirements, private issuance is still governed by certain aspects of EU law/Slovenian law, including anti-money laundering and market abuse regulations. Since
the securities are sold to a limited number of professional investors who are expected to have the necessary knowledge to evaluate the invest- ment, private placement generally involves less detailed disclosure. Loan notes ( zadolžnica ) do not constitute a separate financing structure in Slovenia. Under Slovenian law, a loan note does not create an obligation, but is merely a means to prove the existence of a previously or simultaneously incurred obligation (eg, from a loan). 3.6 Asset-Based Financing A typical asset-based financing arrangement involves a term loan facility secured by various security interests, with the business’ assets serv- ing as collateral for the loan. The specific form of security granted depends heavily on the nature and value of the business’ assets, as well as its future business strategy and financial outlook. In asset-based financing, common types of security interest include real estate mortgages, which are typically used when the business owns substantial property, as well as pledges over movable assets such as machinery, equip- ment, or inventory, and pledges over business shares. Intellectual property rights, such as pat- ents, trade marks and copyrights, may also be used as security. Another common form of col- lateral is the pledge or fiduciary assignment of receivables and accounts receivable.
4. Intercreditor Agreements 4.1 Typical Elements
Intercreditor agreements are essential to ensure a clear and structured allocation of rights and priorities among creditors in transactions involv- ing multiple layers of debt. As a general principle
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