FRANCE Law and Practice Contributed by: Arnaud Fromion, Frédéric Guilloux and Pierre-Benoît Pabot du Châtelard, Clifford Chance
of the bonds by granting security over its assets (shares in its subsidiaries, bank accounts and intragroup receivables). Under the French banking monopoly, private credit providers are not authorised to provide revolving facilities and delayed draw facilities in France. Usually, RCFs are structured under the terms of a super senior RCF made available by licensed lending institutions. The making available of super senior RCF by licensed lending institutions makes it neces - sary to structure the relationships between the private debt bondholders and credit institutions under the terms of a specific intercreditor agree - ment which, in particular, deals with the enforce - ment of security and allocation of enforcement proceeds between the two ranges of creditors. 3.2 Key Documentation One particular feature of the French market is that, due to the “banking monopoly” restrictions, private debt providers cannot make or commit to make loans available to borrowers incorpo - rated in France) unless they have obtained the necessary licence, which a few of them have). Consequently, mezzanine debt, unitranche debt and, more generally, any debt to be underwrit - ten or made available by such private credit providers must take the form of a bond instru - ment rather than that of a loan. French obliga - tions are governed by a set of mandatory provi - sions enshrined in the French commercial code, which, in a number of respects, substantially dif - fer from what a lender would expect to find in a loan facility agreement. Historically, these obstacles were addressed by structuring the bond issuance as an international issuance where available, or by resorting to the use of English law notes documentation in lieu
of the traditional French law bonds documen - tation, which allowed, to some extent, to build some of the features that could not find their way into French law bonds terms and conditions. In October 2017, France also simplified certain fea - tures of the existing bonds regime and adopted a new derogatory regime for bonds issuances subscribed by professional investors (know as the “retail” regime) which allows issuers and investors to cherry pick between elements of the traditional regime and more contractual free - dom, in essence bringing loan documentation and bond documentation closer than ever. Such bond documentation has historically taken the form of subscription agreements, terms and conditions for bonds and usual intercreditor and security documents. It has now become fairly common to merge subscription agreements and terms and conditions into a bonds facilities agreement, making it even closer to loan docu - mentation. These agreements generally follow the format of the latest English law LMA format for leverage transactions adapted to the French specificities in terms of bonds regulation, except for smaller transactions where specific French law and French language precedents are used. Despite this, the product is still described as uni - tranche/unirate; the US style AAL model has not developed in France. Instead, senior and junior private credit financing would still enter into a traditional intercreditor agreement. Since 2018, there have been a handful of first loss/second loss transactions, but this is no longer a trend that is noticed in France given the requirement for efficiency in private credit transactions, with the exception of a few recent examples in small-cap transactions. There have been a few attempts of partnerships between
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