NETHERLANDS Law and Practice Contributed by: Folko de Vries, Ilse van Gasteren, Robert Smits and Stern Flik, Clifford Chance
1. Private Credit Overview 1.1 Private Credit Market
1.3 Acquisition Finance Private credit has been the preferred form of acquisition financing in the Netherlands for some time, including the last 12 months. Depending on market conditions, however, sponsors will look to the syndicated loan market for larger transactions. 1.4 Challenges In the Netherlands, private credit was initially considered to be expensive debt, as pricing was higher than pricing for bank debt. In recent years, the pricing difference between private credit and bank debt narrowed and sponsors have been opportunistic in having higher lev - erage and financing add-ons with all debt or mostly debt and the perception of private credit On some transactions in the Netherlands pri - vate credit providers will either co-invest in the equity or provide PIK (payment-in-kind) financ - ing, which may or may not have an equity- linked component in the pricing or fee structure. Please also refer to 4. Tax Considerations in this respect. PIK financing will often be structurally subordinated and will benefit from limited secu - rity with no overlap with the security package for the senior financing. The security will often be limited to shares in an entity above the sin- gle point of enforcement for the senior financing and claims on such entity. There will typically not be intercreditor arrangements between the PIK financing and the senior financing. 1.6 Sponsored/Non-Sponsored Debt as expensive debt largely faded. 1.5 Junior and Hybrid Capital Private credit providers are mostly focused on sponsor-led transactions, but there are a num - ber of private credit funds which regularly trans - act with founder-owned companies, either from specific strategies or from general leveraged
Generally, the market was considered slow in the past 12 months, and this resulted in many sponsors focusing on their existing portfolio and activity being weighted towards incremen - tal debt processes, re-pricings and the occa - sional covenant re-set or waiver. This seems more related to global political and economic conditions than local conditions. Private credit is generally considered to have kicked off in the Netherlands from 2014. Whilst the Dutch market initially took a number of years to really discover the private credit market, from about 2016, it has grown significantly and proven resilient. Even in the relatively slow last 12 months, the private credit market in the Netherlands has seen new providers coming into the market, with estab - lished players also exploring new asset class - es. Software, healthcare and accounting were among popular sectors. 1.2 Interaction With Public Markets In the past few months, the authors have not seen many broadly syndicated loans or high- yield transactions in the Netherlands, although some well-known Dutch issuers were active in the market. Generally, given the size of trans - actions in the Netherlands, the market is more weighted towards private credit and/or bank club transactions, with only the larger transactions being considered in scope for the syndicated loan or high-yield market. Syndicated transac - tions have also been seen in which one or more private credit providers commit to provide a sig - nificant part of the debt prior to the launch of syndication, and the collaboration between the syndicated market and the private credit market is increasingly common.
220 CHAMBERS.COM
Powered by FlippingBook