SPAIN Law and Practice Contributed by: Ángel Pérez López, Luis Jiménez and Rodrigo del Saz, Uría Menéndez
ity of lenders to enforce personal guarantees, especially if such guarantees are being granted by subsidiaries of the borrower rather than by its shareholders. This new development leaves the individual lender an exclusive recourse vis- à-vis the borrower and its assets. It is important to note that the termination rights can also be subject to stricter rules established in the inter- creditor agreements. This individual right to terminate and accelerate is traditionally applied in respect of all events of default; however, of late it has been limited to major events of default, such as payment default, breach of financial covenants and insolvency- related events (although the acceleration of the loan based solely on insolvency is not permitted under the Spanish Insolvency Law and enforcing any guarantee due to insolvency reasons can prove to be difficult). In addition, specific Spanish lenders have recent- ly come to consider that including this individual termination right in the loan may backfire, espe- cially in syndicates with a significant number of lenders and of varying natures. Thus, the same lenders that traditionally defended that right are now pushing to remove it in pursuit of the cor- responding LMA standard and they are winning the battle (particularly in financings applying international standards). Intercreditor agreements in Spain are similar to those in other jurisdictions, although certain fea- tures established in the Spanish Insolvency Law must be taken into account (eg, depending on the deal structure, debtors may not be party to them to avoid any risk of claw-back in the event of insolvency of the debtor). Spanish-law intercreditor agreements require tighter co-operation between creditors to accel-
erate and enforce security and personal guaran- tees since parallel debt is not recognised under Spanish law and the agent is rarely empowered by the creditors to enforce on their behalf (which, in the end, requires a co-ordinated enforcement strategy from all or a majority of creditors), as explained in 5.7 General Principles of Enforce- men t. 4.2 Bank/Bond Deals The importance and complexity of intercreditor agreements increase when creditors of diverse natures are party to them. As such, when the acquisition is financed through a combination of bank financing and bonds (which usually have longer maturity periods), the negotiation of intercreditor issues becomes more involved. Ultimately, it is a matter of the ranking that has been commercially agreed – pari passu or any of such classes being senior to the other –, the potential veto rights granted to bondholders and whether the majorities combine both types of creditors or are calculated separately. 4.3 Role of Hedge Counterparties In the Spanish market, hedging liabilities are usually pari passu to all senior liabilities and, therefore, treated as senior liabilities for all pur- poses. It is nevertheless common to find that hedging termination rights are limited to major events of default (non-payment, insolvency, etc) or to prior acceleration of the senior facility. Due to volatility around interest rates, new or innova - tive hedging strategies have been put in place (such as CAPs, collars, shorter terms hedging, and a combination of IRS-CAP products). Hedging facilities are usually documented under separate master agreements, attaching sched- ules that include specific provisions to ensure that the master agreement corresponds to the main terms of the financing agreement (eg, rep-
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