SOUTH KOREA Law and Practice Contributed by: Ie Hwan Yoo, Hang Jin Chang and Da Eun Jung, Kim & Chang
actively seek financing from domestic banks and domestic securities companies.
valid and binding upon the borrower pursuant to the terms of such documents. In addition, lenders would typically want their counsel to opine on the following: • whether the financing documents contravene the borrower’s constitutional documents or any applicable laws or regulations of Korea; • whether the financing documents need to be filed, registered or recorded in any public office to ensure the validity or enforceability of the obligations of the borrower under the financing documents; • whether any required consents, authorisa- tions, approvals, filings (including foreign exchange report filings) have been made or are not necessary for the borrower’s perfor- mance under the financing documents; and • whether there are any stamp, registration, documentary or similar taxes, duties, assess- ments or governmental charges payable in respect of the financing documents. A typical debt financing structure involves extending senior loans to a newly formed com- pany that acts as the acquiring vehicle. In larger deals, mezzanine financing in the form of mez- zanine loans or redeemable shares is often used. At syndication, most investors participating in the senior loan also participate in the mezza- nine loan. A secondary market for subordinated bond/high-yield debt is not active in Korea. The senior loan amount is usually around 50% of the total acquisition cost, which may be adjusted based on the target’s earnings before interest, taxes, depreciation and amortisation (EBITDA). 3. Structures 3.1 Senior Loans
2. Documentation 2.1 Governing Law The governing law of the loan documents is almost always Korean law. 2.2 Use of Loan Market Association (LMA) Agreements or Other Standard Loans Typically, the loan documentation is drafted by the lender’s legal counsel. No particular stand- ardised forms are used (eg, the Loan Syndica- tions and Trading Association standard provi- sions or Loan Market Association templates are not typically used). The law firm acting as counsel to the lenders uses its own templates for producing the loan documents. However, the contents of the loan documents used in the Korean acquisition finance market do not differ materially from those governed by the laws of England and Wales or the State of New York. 2.3 Language Loan documents are usually written and negoti- ated in Korean, though they can be prepared in English in cases where the sponsor is a non- Similar to other financing transactions, a legal opinion in an acquisition finance transaction will cover: • whether the borrower is validly existing under the laws in which it has been incorporated; and • whether the financing documents have been duly authorised and executed, and are legal, Korean entity. 2.4 Opinions
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