LUXEMBOURG Law and Practice Contributed by: Stefanie Ferring, Oliver Zwick and Geoffrey Scardoni, Clifford Chance
3.3 Restrictions on Foreign Direct Lenders There are no specific restrictions on foreign lend - ers in respect of providing private credit or taking security in addition to those already set out in 2. Regulatory Environment and 4. Tax Considera- tions . 3.4 Use of Proceeds and Acquisition Financings There are no specific Luxembourg law restric - tions on the use of proceeds from private credit transactions by a borrower. Financial assis - tance rules must be complied with in acquisi - tion financings. 3.5 Debt Buyback Whether debt buybacks by the borrower or sponsor are permitted will depend on the requirements of the private credit provider and sponsor precedent. A number of private credit providers require that the documentation does not permit debt buybacks. In any event, if debt buybacks are permitted, the documentation would cater for appropriate disenfranchisement. 3.6 Recent Legal and Commercial Developments There are no recent legal or commercial devel - opments that have required major changes to legal documentation for private credit transac - tions and this is not Luxembourg specific in any event. 3.7 Junior and Hybrid Capital Please see 1.5 Junior and Hybrid Capital . 3.8 Payment in Kind/Amortisation Payment in Kind Junior or mezzanine financings usually provide for a PIK, allowing the borrower to capitalise interest or part of the interest for a period of time
super senior revolving facility or a combination of senior term debt and super senior term and
revolving facilities. Revolving facilities
Revolving facilities are typically only provided by private credit providers for a certain bridge period. Delayed draw facilities Delayed draw facilities are common in Luxem - bourg and feature on the majority of deals. In first-out last-out (FOLO) structures the super senior lender or super senior lenders will often be allocated part of the delayed draw facility (which then is converted into a super senior delayed draw facility) alongside their participation in the drawn term debt (which is then converted into super senior drawn term debt). 3.2 Key Documentation Key documents are the term sheet, facilities agreement, intercreditor agreement and the collateral documents. Agreements are usually negotiated for individual transactions but often precedent documentation is used as a starting point. FOLO FOLO transactions are not uncommon in Lux - embourg. External Factors Documentary terms for private credit transac - tions are not typically Luxembourg-specific and the drafting of private credit documentation in Luxembourg therefore changes with the inter - national market.
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