Are there any regulatory restrictions on the interest rate that can be applied on bank loans? Competition in the syndicated loan market has so far hampered the development of a viable Australian corporate bond market. However, law firms and financial institutions often use their own form of credit documentation, which includes their own nuances and opinions of the house. Are taxes, stamp duties or other charges incurred when granting a loan, guarantee or security or when they are applied? The spread depends mainly on the borrower`s credit risk as well as the size and duration of the loan. The spread can be set for the duration of the loan or related to changes in the leverage or profitability of the borrower. Recently, spreads have narrowed due to an increased supply of credit from banks. Another trend is that more and more non-banks are participating in syndicated loans, such as Australian bond funds such as Challenger, IFM and VicSuper (which have their own credit teams) and international investors such as Intermediate Capital Group. Guarantees and compensations can be created in a stand-alone document or included as a clause in another document (for example. B a credit agreement or security document). Financial support Shareholder approval may be required if the provision of a guarantee is considered financial support (e.g. .B. in the usual scenario where the guarantee is granted to support a loan used to finance the acquisition by a purchaser of shares of the company providing the guarantee). The role of the securities trustee is to hold the security in trust for the benefit of the banking consortium in accordance with a securities trustee certificate.
However, security provided by debtors under a syndicated facility agreement is not held in trust by the securities trustee. Rather, the guarantee is a direct contractual obligation of the debtors in favour of the members of the banking consortium. The standard market documentation issued by the Asia-Pacific Loan Market Association (APLMA), which is similar to the standard form documentation prepared by the UK Loan Market Association, is regularly used as the basis for secured loan operations. That is, there is no standard APLMA secured loan agreement, so the unsecured APLMA loan agreement must be converted into a secured document. Syndicated loans are generally valued as an interest rate spread greater than a variable reference rate – most often the bank change swap rate for loans denominated in Australian dollars and LIBOR for loans not denominated in Australian dollars. Gibson, Dunn & Crutcher LLP is pleased to announce that the Asia Pacific Loan Market Association (APLMA) has published a model contract in English for offshore lending in Indonesia, which is available in the APLMA documentation library. In transactions involving senior and mezzanine debt, it is common for the classification of debts and guarantees to be achieved by structural subordination. In this approach, a holding company is inserted into the structure of the business between the previous holding company and the borrower. Senior lenders provide the borrower with financing and provide collateral through each Group company from the holding company down. Mezzanine lenders provide funds to the previous holding company and only provide guarantees to the previous holding company (including its 100% stake in the holding company).
Since this structure includes different levels of credit and there is no common collateral, there is no prima facie need for an agreement between senior lenders and mezzanine lenders or any other direct contractual relationship between those parties. The APLMA Indonesia Bill not only contains specific Indonesian provisions that are usually found in credit documents for Indonesian cross-border transactions, e.B. with regard to reporting obligations to Bank Indonesia and Law No. 24 of 2009 regarding the use of Bahasa Indonesia, but also detailed advice that helps model users to focus on these important issues related to Indonesia. A Bahasa Indonesia version of the APLMA Indonesia model will be released soon. Are syndicated secured credit facilities typical of your jurisdiction? Syndicated secured loans are a common form of credit facility in Australia. Australia`s major banks each have syndicated credit meters that issue, structure and distribute syndicated loans. There is a mix of guaranteed funding providers, although Australia`s four major banks (Australia and New Zealand Banking Group, Commonwealth Bank, National Australia Bank and Westpac) continue to dominate as leading arrangers for syndicated banking facilities, controlling more than 50% of the institutional lending market. Australia does not have a particularly active secondary market where loans can be resold and traded as liquid assets. Indeed, most syndicated lenders prefer a « buy and hold » approach. Who are the active providers of secured financing in your jurisdiction (for example.
B international banks, local banks or non-bank financial institutions)? Does the law in your jurisdiction allow guarantees and guarantees to be held in trust by a securities trustee for the benefit of the banking consortium? Limitation and applicability issues may arise in the general scenario where a subsidiary provides collateral to a lender to secure the obligations of its parent or affiliate (as a condition of obtaining financing from the parent or affiliate). Loans to trust trustees are common, especially real estate investment trusts. In this case, lenders must ensure that the trustee is authorized under the trust deed to take out loans and provide guarantees, as well as an effective right to compensation for the trust`s assets. Directors must ensure, among other things, that the provision of security by an entity is consistent with their obligations to act in the best interests of the corporation. While it may bring little economic benefit to a wholly-owned subsidiary to provide collateral over the obligations of its parent company (despite the fact that the granting of the guarantee ensures that the financing is provided to support the group as a whole), the directors of a wholly-owned subsidiary may take into account the best interests of the holding company if this is done in accordance with the Constitution. is authorized and if the company is solvent at any relevant time. Australia levies a withholding tax (IWT) on interest payments from an Australian borrower to an offshore lender. The rate for inland navigation is 10 % of the gross amount of interest paid. An exemption from inland navigation may be available if: Some states and territories also have formalities, e.B.
that a guarantee must be made in writing and signed by the guarantor. Unionized facilities are generally structured with the following people: How are unionized facilities usually structured? Does the law in your jurisdiction allow for the appointment of a settlement agent to act on behalf of other members of the banking consortium? In a typical business (about A$500 million), two to five lenders are usually involved in organizing and financing the business. The order of precedence of claims of two or more creditors with respect to separate security rights in the assets of a debtor is dealt with in a senior deed. This document deals with the ability of a security holder to take enforcement action and the agreed priority of distributing the proceeds of the realization of the secured asset. If two or more classes of secured creditors share the same security right, the overriding arrangements between those creditors are generally covered by the security deed (which in these circumstances may be referred to as a securities trust and inter-creditor deed). The National Credit Code also provides for certain formalities for natural persons who provide guarantees under certain credit agreements. The usual contractual principles apply to the justification of guarantees and indemnities. Depending on the jurisdiction, different registration fees are payable when registering mortgages on real estate. A nominal registration fee is also payable for each interest on securities registered in the Personal Property Securities Register. APLMA`s Indonesian Documentation Steering Committee was founded and chaired by Jamie Thomas, Partner of Gibson Dunn, Chair of the Committee.
If a secured party wants to assert its security right, the legal costs must also be paid. Publicity for lawyers: The attached documents are provided for general information purposes only and are not intended to serve as legal advice. Jamie Thomas – Singapore (+65 6507.3609, jthomas@gibsondunn.com) Consumers are protected against excessive interest rates applied by the Australian Securities and Investments Commission. However, this protection does not extend to debtor companies. Is interest most often calculated by reference to a bank base rate or a variable market reference rate (e.B LIBOR, EURIBOR or HIBOR)? In the latter case, what is the most commonly used benchmark interest rate in your jurisdiction? Certain consumer protection rules apply to guarantees given by consumers and small businesses. In secured financing operations for special purpose entities (SPVs), is it customary to hold the assets to be financed? Would SPV shares generally be secured or would lenders require a direct guarantee of the assets? The Australian Financial Markets Association (AFMA) also publishes industry-standard documents, including for debt capital market transactions and letters of arrangement for international debt offerings (excluding the United States). .