Structuring a lending transaction
Who are the active providers of secured finance in your jurisdiction (eg, international banks, local banks or non-bank financial institutions)?
The main lenders in the Norwegian market are Scandinavian banks; Norway’s largest bank, DNB Bank ASA, is the largest player on the market and Swedish bank Nordea Bank AB (publ) is the second largest. Swedish banks SEB, Swedbank and Handelsbanken, mainly lending from their Norwegian branches, are also significant players; the same can be said for Danske Bank A/S, which also has a large branch in Norway. Specialising in the shipping and offshore sectors, banks such as ABN AMRO and DVB Bank have also been active on the Norwegian market. Other international banks are also commonly players in larger transactions, often as syndicate participants alongside Scandinavian banks. Non-bank financial institutions are active on the bond market, where no licence is required for lending.
Is well-established market-standard facility documentation used in your jurisdiction for secured lending transactions?
Yes, Norwegian financing transactions of any considerable size are most often documented using Loan Market Association-based facility agreements. Bond transactions are based on the Nordic Bond Terms template published by Nordic Trustee ASA, which acts as bond trustee for most of the bond issuances made under Norwegian law.
Are syndicated secured loan facilities typical in your jurisdiction?
Yes, club lending and syndications are common in Norway.
How are syndicated facilities normally structured? Does the law in your jurisdiction allow a facility agent to be appointed to act on behalf of other banking syndicate members?
Yes, the Norwegian market works similarly to under English law. The deal is structured and negotiated by one or more mandated lead arrangers, one of which is also appointed to act as facility agent on behalf of all finance parties. The transaction can be syndicated with or without previous underwriting.
Does the law in your jurisdiction allow security and guarantees to be held on trust by a security trustee for the benefit of the banking syndicate?
Norwegian law does not recognise the concept of ‘trust’ as known in English law, but it is possible for one entity to hold security on behalf of itself as well as others. As such, the transaction security is held by a security agent appointed to act on behalf of all of the finance parties. The security agent can be one of the banks party to the transaction or an independent entity (eg, Nordic Trustee ASA, which is commonly appointed as security agent in combined bank and bond structures).
Special purpose vehicle financing
Is it common in secured finance transactions for special purpose vehicles (SPVs) to be used to hold the assets being financed? Would security generally be given over the shares in the SPV or would lenders require direct asset security?
SPVs are widely used in Norway to finance real estate, shipping and oil service units in order to ring-fence the asset being financed. For real estate, the use of SPVs has also developed for tax reasons. Lenders customarily ask for security over both the shares in the SPV and the asset owned by the SPV.
Is interest most commonly calculated by reference to a bank base rate or a market standard variable reference rate (eg, LIBOR, EURIBOR or HIBOR)? If the latter, which is the most commonly used reference rate in your jurisdiction?
Yes, bank loans in Norway are usually provided with floating interest rates and expressed with the relevant interbank offered rate plus a margin. For loans provided in Norwegian kroner, the Norwegian Interbank Offered Rate is the reference. Norwegian banks are also large lenders in euros and US dollars, as many of Norway’s largest businesses have export income in currencies other than kroner.
Are there any regulatory restrictions on the rate of interest that can be charged on bank loans?
There are no such regulatory restrictions at present. It has been suggested that maximum interest rates be applied to retail banking, especially for lending to low-income households and with respect to credit card debt. However, as of April 2017 no such limits have been implemented and it is unlikely that maximum interest rates will be imposed on business lending.
Use and creation of guarantees
Are guarantees used in your jurisdiction?
Yes, guarantees are possible and common in Norwegian financing transactions.
What is the procedure for their creation?
A guarantee obligation is at the outset a legally binding agreement under Norwegian law, often stated as a one-sided promise to pay a named beneficiary. No formalities need be observed in order to create the guarantee, other than that it must be made in writing. However, guarantees may be subject to strict information undertakings both before inception and during the term of the guarantee in order to be valid on the guarantor. Most of these information requirements can be waived by written confirmation from the guarantor, although some are statutory and should be evidenced in writing when entering into the guarantee.
Do any laws affect or restrict the granting or enforceability of guarantees in your jurisdiction (eg, upstream guarantees)?
In addition to the information undertakings mentioned above, Norwegian companies subject to acquisition – with certain exceptions for real estate companies – are not allowed to grant any financial assistance in connection with the acquisition of their shares. This means that debt push-downs and upstream guarantees and security from acquisition targets are not possible in Norway under the current rules. A proposal has been made to soften the strict Norwegian financial assistance rules in connection with acquisitions, although there is no clear timing yet as to when the rules may be changed.
Subordination and priority
Describe the most common methods of structuring the priority of debts and security.
Norwegian bank financing is commonly structured around first-priority security, while subordinated lending is often seen, but on an unsecured basis (eg, vendor loans granted in connection with acquisition financing). In bank and bond combined financing, a traditional structure is senior banks secured on first priority in an asset and bonds secured on second priority in the same asset.
Documentary taxes and stamp duty
Are any taxes, stamp duty or other fees payable on the granting of a loan, guarantee or security interest, or on its enforcement?
Only nominal fees are payable for registering security in Norway.
Click here to view the full article.