Spain: Law and Practice. Structured Finance & Derivatives 2019 Global Practice Guide.

1. Structured Finance
1.1 Market Overview

In October 2018, the International Monetary Fund (IMF) forecast that Spain’s GDP would grow by 2.7% in 2018 and by 2.2% in 2019, well above the European average of 2% for 2018 and 1.9% for 2019.

The improvement of the economic situation during the last decade, together with long-standing low interest rates in Europe and the expansive monetary policy implemented by the European Central Bank, has led to a substantial increase in bank financing, debt capital market deals, direct lending and structured finance transactions (where project finance has proliferated – especially in the energy and infrastructure markets – along with leveraged and asset finance transactions). The increase in liquidity and competition amongst lenders (primarily banks and debt funds) has led to borrower-friendly structures, especially in sponsor-driven transactions.

2. Acquisition Finance/Leveraged Finance
2.1 Transaction Structure, Players and Legal Regime
Transaction structures

Financial assistance, corporate restructuring and accounting rules play a key role in the Spanish acquisition/leverage finance market and the way in which transactions are structured in Spain. This ultimately requires a case-by-case analysis, inter alia, in order to determine how the existing indebtedness of the target, the financing needs of the target or the equity structure of both the target and/or the buyer can impact the acquisition/leverage financing structure and, along with that, the purpose of the loan or loans (as multi-tranche structures are commonly used in these kind of transactions), the way the indebtedness is scheduled to be repaid and/or the security package that the acquisition/leverage financing deal can benefit from.

Typical acquisition/leveraged finance transactions customarily entail multi-tranche structures, simultaneous corporate transactions (such as mergers, reverse mergers and/or global assignment transactions) and/or debt push-downs.

Although bank facilities still predominate in leverage transactions, there has been a significant increase in both direct lending and capital markets acquisition/leverage financing transactions in Spain in recent years. In general, Loan Market Association (LMA)-based documentation (previously amended to comply with Spanish general market standards and specific rules) is commonly used in Spanish transactions involving international financial sponsors. In sponsorless mid-market transactions, documentation tends to be that of standardised Spanish language agreements.