NEW ZEALAND Law and Practice Contributed by: David Weavers, Alex MacDuff, Matt Consedine and Verniel Virtucio, Russell McVeagh
Unitranche deals in this market tend to follow the European – rather than US – style. First out-last out transactions are not common in the New Zealand market, largely due to the lack of depth of creditors and the smaller average deal size by global standards. In general terms, strong sponsor-backed bor - rowers continue to demand borrower-friendly terms. However, distressed borrowers needing a private credit solution tend to be term-takers, with private credit providers being able to obtain more lender-friendly terms. 3.3 Restrictions on Foreign Direct Lenders See 2.1 Licensing and Regulatory Approval Foreign lenders are not generally restricted from providing private credit, taking security or enforcing security. However, see 6.4 A Foreign Private Credit Lender’s Ability to Enforce Its Rights . 3.4 Use of Proceeds and Acquisition Financings There are no regulatory restrictions on the use of proceeds from private credit transactions. Private credit continues to be a key source of funding for both corporate and sponsor-backed acquisitions. Take-private activity has been limited in recent times, but there are no legal or practical reasons why a take-private could not be funded by pri - vate credit. 3.5 Debt Buyback Unitranche and other larger-cap transactions typically permit debt purchase transactions, subject to certain conditions. Documentation on
this point tends to follow the suggested wording in the APLMA form of facilities agreements. For smaller transactions (typically bilateral trans - actions), documentation is generally silent on debt buybacks. 3.6 Recent Legal and Commercial Developments Not applicable. 3.7 Junior and Hybrid Capital See 3.1 Common Structures for common junior capital structures. Junior creditors may lend to the same vehicle as the senior lenders. Real estate deals aside, security is granted in favour of a security trustee for the benefit of all creditors, with an intercredi - tor agreement entered into between the credi - tors. The intercreditor agreement will set out: • the ranking and order of priority of all credi - tors; • permitted payments to each class of creditor; • turnover trust provisions; and • the circumstances when the junior creditors can step in to control enforcement. For real estate transactions, the junior creditor will usually take second lien security (rather than share in a common security pool) with a custom - ary deed of subordination and priority entered into between the creditors. This deed will cover matters similar to those set out in an intercredi - tor agreement. Alternatively, a junior creditor could lend at a holdco level. Here, the junior creditors will usual - ly receive first ranking security over all the assets
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