Security in acquisition finance transactions

This Overview is a guide to the Banking & Finance content within the Taking security in acquisition finance transactions subtopic, with links to the appropriate materials.

Taking security on acquisition finance transactions

Leveraged acquisition finance transactions are considered relatively risky by lenders due to proportionately large amount of debt in the group. For this reason, lenders will normally expect the group to provide it with a comprehensive guarantee and security package.

Many acquisition finance transactions have similar features to each other including eg cross-border aspects, the purpose of the loans and use of SPVs. These features give rise to some typical characteristics and issues in terms of the security, including:

•
structure and nature of security package
•
guarantee coverage
•
legal issues with guaranteeing, repaying and servicing interest on the acquisition debt

In addition, the fact that transactions are often cross-border means that reviewing local law security documents is often a significant task in an acquisition finance transaction.

Security and guarantee structure

Typically on an acquisition finance transaction, the security package will comprise:

•
security granted by the special purpose vehicles (SPVs)

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