FINLAND Law and Practice Contributed by: Timo Lehtimäki, Niklas Thibblin, Essi Hietaoja and Oona Honkamaa, Waselius
rules and their impact on the scope of secured obligations is slightly in flux. 3.7 Junior and Hybrid Capital Junior capital is generally provided in a similar manner to more traditional bank led financings with junior lenders. Typically, this involves an intercreditor agreement, and sometimes struc - tural subordination is used. Hybrid financing is less common and is usually structured as a con - vertible note when used. In junior capital deals, the security package is similar to that in sen - ior deals, but is of course subordinated either contractually or structurally. In hybrid deals, the security package tends to be more limited. Since major-sponsor holding companies (“Hold - Cos”) tend to be outside Finland, Finnish HoldCo deals are scarce to say the least. Nonetheless, HoldCo deals are typically secured, though the security package is generally more limited com - pared to operating company (“OpCo”) deals. For example, the security package may include a security over shares, intra-group loans and bank accounts held by the HoldCo. 3.8 Payment in Kind/Amortisation Payments in kind are a common feature in pri - vate credit. Private credit funds typically offer more flexible funding structures compared to traditional bank loans, with private debt often lacking amortisation requirements and having longer maturities. 3.9 Call Protection In recent years, the levels of call protection have gone down and make-whole provisions have become rarer. First permitted call dates usually fall around 12 months after utilisation, with the second-level call dates varying between 18 and 48 months from utilisation. During the first year, a make-whole requirement is still fairly common;
however, from then onwards there is typically only a prepayment fee, which varies between 1% and 3% depending on the timing – and there might well be no prepayment fee after the three- year mark, for example. Generally, the Finnish market can be expected to follow London market trends in this regard.
4. Tax Considerations 4.1 Withholding Tax
Based on domestic law, Finnish withholding tax is generally not levied on interest payments made on loans to non-Finnish resident lenders. The same applies to the repayment of loan prin - cipal. Due to Finnish-sourced interest payments being largely exempt from Finnish withholding tax, very little structuring is required in customary private credit/non-bank lending transactions in Finland. 4.2 Other Taxes, Duties, Charges or Tax Considerations As a rule, no other taxes, duties or charges are payable on the issuance or transfer of loans in Finland. Transfer Taxation If the loan is regarded as a collateral for Finnish transfer tax purposes, the transfer thereof would be subject to Finnish transfer tax at a rate of 1.5%. Loans can be considered as collateral for transfer tax purposes if: • the interest payable on the loan is depend - ent on the profits or dividends payable by the company; • the loan grants the holder of the note a right to the company’s annual profits or surplus; or
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