NEW ZEALAND Law and Practice Contributed by: David Weavers, Alex MacDuff, Matt Consedine and Verniel Virtucio, Russell McVeagh
5. Guarantees and Security 5.1 Assets and Forms of Security Private credit transactions will almost always be secured. A typical security package will involve a cross- guarantee and all-asset security being granted by each entity in the borrowing group, together with registered mortgages over any real proper - ty. This is often subject to a guarantor coverage test, such that members of the borrowing group owning/contributing between 80% and 95% of the group’s assets/EBITDA must grant all-asset security and become guarantors. For acquisition finance transactions, New Zea - land target entities will usually accede to the security package within a week post-closing. Real Property Security over interests in land (real estate) is gen - erally taken by a registered mortgage. Although an all-asset security agreement will create a security interest over both personal property and real property, registered mortgages will also be taken where land is a material part of the credit package. Registration is not mandatory, but an unregistered mortgage will generally rank behind registered mortgages and other instru - ments registered on the title. Registration is a straightforward and largely online process facili - tated through LINZ (a government department). Registration costs approx. NZD90–NZD180. Personal Property The Personal Property Securities Act 1999 (PPSA) governs security over personal property (being, in general terms, all property other than real property). Security over personal property can be taken by either an all-asset security deed or a specific security deed over certain personal
A payer may elect to reduce the rate of NRWT to 0% and instead register for and pay an approved issuer levy (AIL) at a rate of 2% of the gross amount of interest. The AIL regime is not available where interest is derived jointly by a resident and a non-resident or paid between associated persons (unless the approved issuer is a member of a New Zealand banking group), or in instances of “related-party debt”. Most offshore-based private credit funds require New Zealand borrowers to register for, and pay, AIL with no ability for the borrower to deduct the cost of the AIL from interest payments – but this is a deal-by-deal negotiation point. 4.2 Other Taxes, Duties, Charges or Tax Considerations New Zealand has a goods and services tax (GST), but GST is not charged on the supply of “financial services” (including provision of credit). There are no stamp taxes or other similar duties, charges or tax considerations that apply in New Zealand. 4.3 Tax Concerns for Foreign Lenders See 4.1 Witholding Tax . 4.4 Tax Incentives New Zealand does not have any specific tax incentives that may be accessed by foreign pri - vate credit lenders lending into the country. 4.5 Non-Bank Status There are no additional tax considerations nec - essary for non-bank lenders.
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