SWEDEN Law and Practice Contributed by: Magnus Wennerhorn and Victor Bengtson, Linklaters
4.2 Bank/Bond Deals In bond deals the structuring may be dependent on whether there is a bond ranking pari passu with the RCF and whether it is English- or New York-governed documentation. In Swedish high yield bond transactions, the most common structure includes a senior bond with a super senior RCF and super-senior ranking hedging. • Structural subordination: high-yield bonds may include a structurally subordinated bond if issued through a holding company above the operating company’s level. In such cases, bondholders may rely more on their position in the capital structure than specific inter- creditor rights. • Pari passu in payment but subordinated at enforcement: some structures may place bonds pari passu with senior loans or permit payments, but restrict bondholders’ ability to trigger enforcement. Once enforcement is triggered, the bondholders may control enforcement under certain conditions. High-yield documentation for larger transactions often adheres to New York or English law stand- ards. 4.3 Role of Hedge Counterparties Hedge counterparties, often participating in the form of interest rate or currency hedging, play a peripheral but protected role in intercreditor agreements. • Priority positioning: hedge liabilities under documented ISDA Master Agreements gener- ally rank alongside senior lenders (or super- senior RCFs in bond and unitranche struc- tures) in the payment waterfall. This protects hedge counterparties’ positions, particularly in an enforcement scenario.
Common Uses • ABF is more common in sectors like manu- facturing and logistics, where movable assets (eg, trucks or warehouses) or receivables can act as collateral.
4. Intercreditor Agreements 4.1 Typical Elements
Intercreditor agreements govern the relationship between different lenders in a financing structure and are particularly crucial in LBOs and acquisi- tion finance. In Sweden, they often follow LMA standards. Typical elements include the follow- ing. • Ranking and priority: clearly define the order of payment between senior, mezzanine and any subordinated lenders or unitranches and super senior RCFs. Lenders typically share first-ranking security and the payment water- fall provides for ranking between the credi- tors. • Standstill provisions: prevent junior lenders from enforcing security or suing the borrower during agreed standstill periods, usually to allow senior lenders to recover their debts first. • Payment waterfall: dictates how proceeds (from enforcement or other sources) are dis- tributed among creditors. Senior debt is paid first, followed by mezzanine and junior debt. For unitranche transactions, the super senior debt will be paid first. • Turnover provisions: require junior creditors to turn over any recoveries received in breach of the agreement to senior lenders. • Release of security: gives senior lenders control over security releases in enforcement scenarios to prevent conflicts among credi- tors.
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