SWEDEN Law and Practice Contributed by: Magnus Wennerhorn and Victor Bengtson, Linklaters
but can also be used to finance recapitalisa- tions, where the PE fund retracts equity with- out selling the asset and thus increasing IRR. 3.3 Bridge Loans Bridge loans are short-term facilities designed to provide interim funding until longer-term financ- ing is arranged, primarily for corporates. • Structure: bridge loans are often unsecured but rely on borrower guarantees and under- takings. • Use in Sweden: common in acquisition finance, particularly in auctions, where immediate liquidity is required to close a deal before the permanent capital structure (eg, bonds, term loans or rights issues) is final- ised. • Repayment: typically repaid through the issuance of bonds, proceeds from long-term loans, or other refinancing mechanisms. 3.4 Bonds/High-Yield Bonds High-yield bonds are increasingly popular in the Swedish market, often used by PE sponsors, either in connection with the acquisition or in a refinancing. While bridge to bond facilities may be provided in larger transactions, the arrange- ment of underwritten high yield bonds is pos- sible under Swedish law. • Structure: (a) usually unsecured for corporates while high-yield bonds will usually be secured (although lightly secured compared to senior loans) unless security is granted only for the super senior revolving facility; and (b) rank below super senior debt in the re- payment waterfall but above equity.
• Issuers: high-yield bonds are typically issued through SPVs to streamline regulatory and tax considerations. • Typical users: frequently used for larger cor- porates or LBOs requiring significant funds beyond what traditional banking syndicates can provide. • Governing law: many high yield bonds in the small and mid-size segment are governed by Swedish law. In larger international transac- tions English and New York law is dominant. 3.5 Private Placements/Loan Notes Private placements and loan notes provide an alternative to public bonds for smaller or more bespoke transactions. • Structure: loan notes are typically unsecured and documented via simplified agreements. • Use in Sweden: primarily utilised by smaller corporates or investors for funding require- ments that do not suit bank loans or public instruments like bonds. Private placements offer flexibility and customised terms but lack the liquidity of public debt instruments. 3.6 Asset-Based Financing Asset-based financing (ABF) is less prevalent in Sweden than in the USA or the UK but is occasionally used for borrowers with significant physical assets. Typical Structure • Facilities are secured against specific assets, such as inventory, accounts receivable or equipment. • Loan values are directly linked to asset valu- ations (eg, through borrowing base calcula- tions).
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