SWEDEN Law and Practice Contributed by: Magnus Wennerhorn and Victor Bengtson, Linklaters
• Pricing stability: derivatives help manage interest rate or currency risk for the borrower, stabilising cash flows and improving the transaction’s overall risk profile. • Voting rights: hedge counterparties typically have limited (or no) voting rights in lender decisions outside payment and securities enforcement issues. 5. Security 5.1 Types of Security Commonly Used Swedish acquisition finance transactions typi- cally involve a wide range of security to protect lenders. Common types of security include the following. Shares Security over shares in the target or Swedish subsidiaries is common. Shares represent a critical asset to control the borrower group in enforcement scenarios, where the lenders focus on the single point of enforce- ment, where the whole borrower group may be taken control over or be sold. Inventory Inventory is sometimes used as collateral, pri- marily in asset-based financings. Security is nor- mally granted in the form of a floating charge (business mortgage) (which may incur stamp duties). Bank Accounts Security over bank accounts located in Swe- den is usually not granted in more local LBO structures. The main reason is that such secu- rity requires that the pledgor is restricted from making withdrawals, so it normally remains unperfected until a later trigger (such as an
event of default). The delayed perfection may trigger a three-month hardening period and is of less value for lenders, hence local PE sponsors have often succeeded in avoiding bank account security using the cost/benefit argument. Bank account security will be more frequent in larger English law deals with foreign credit funds. Asset finance, including real estate finance, will usually include bank account security. Receivables Borrower entities may grant security over intra- group loans and, in some more specific situa- tions, trade receivables. Notification and pay- ments to the pledgee are typically required. Trade receivables may therefore be more com- monly covered by a floating charge (business mortgage). Intellectual Property Rights (IPR) Patents, trade marks and copyrights are occa- sionally pledged. IPR security is less common unless the borrower operates in IP-reliant indus- tries. Real Property Mortgages are used to provide security over land or buildings owned by Swedish companies. Mortgages may incur stamp duties. Movable Assets (Trucks, Trains, Etc) Specific movable assets, such as vehicles or equipment, can be secured via pledges, but due to the perfection requirements security is typically granted under a floating charge (busi- ness mortgage). There is also a security transfer option, which may be used for larger scale secu- rity arrangements in order to avoid stamp duty and where there is no need for flexibility, such as project finance structures.
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