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Financing and guaranteed loans in Sweden
After the 2008 global economic meltdown, the credit markets in Sweden have always been dominated mainly by local and pannordic banking institutions. Whilst Scandinavian credit institutions continue to represent by far the largest share of collateralised credit operations in Sweden, surplus cash on the markets and alternatives to financing offer more opportunities to the borrower than in the past.
Does secure credit granting constitute a regular business in your jurisdictions? Guaranteed credit is only subject to regulation in Sweden if it affects the consumer. If the lender also takes deposit from the general public, however, it is a regulatory funding operation that in Sweden needs a licence (either directly from the Swedish Financial Supervisory Authority (FSA) or through EU passport regulations).
If credit is deemed to be fairly frequent, it can be assumed that the company has a long-term business in Sweden, in which case the Commission must inform the Commission. Although the current regulation is not entirely clear, more occasional loans to Swedes are generally not notifiable.
Is there a particular set of regulatorial questions that a potential creditor should consider when agreeing or concluding a collateralised exposure? Is there a particular set of regulatorial questions that a potential creditor should consider when agreeing or concluding a collateralised exposure? Beyond retail banking, creditors should check whether the Swedish business is more durable and therefore the Financial Services Authority should be informed.
Which are the current suppliers of secure financing in your jurisdictions (e.g. global banking, domestic banking or non-banking)? Does your legal system use customary commercial credit facilities for collateralised credit operations? In Sweden, the Loan Marketing Association (LMA) recommends the use of widely used credit formats (with adaptations to Sweden's legal aspects) in credit insurance credit rating and Leverage credit rating systems.
A number of property deals are also recorded on the basis of the LMA's recommendation form, although locally standardised banking documents are more used. An abbreviated LMA form is usual for bi-lateral trades. Does your legal system typically have collateralized credit lines? As a rule, the LMA form mechanisms are followed by the appointment of a facility manager to perform management tasks (e.g. payment and communications between the borrowers and lenders).
In your jurisdictions, does the Act allow collateral and warranties to be fiduciarily retained by a collateral fiduciary for the account of the bank consortium? As a rule, the securities are kept by a collateral officer who acts as the collateral taker's proxy. In the case of collateralised financial operations for SEVs (Special purpose vessels, SPVs), is it customary to use the asset to be hedged?
As a rule, would collateral be provided for the SPV units or would creditors demand immediate collateral? Usually, equity collateral is acquired via the SPV and financial collateral is acquired via the SPV's financial collateral. In the case of the SEK, the Stockholm Interbank Offered Rates (STIBOR) is the benchmark price.
Benchmarks are used as usual when the interest is not available for any reasons. Outside borders are when the lending interest actually is exorbitant, which is prosecuted in Sweden. Insofar as not otherwise agreed in the credit contract, interest on arrears shall be paid at the legally applicable amount.
Do warranties apply in your jurisdictions? Yes, guaranteed loans are usual for collateralised (and unsecured) credit operations in Sweden. While there are no prerequisites, warranties are usually given in written form. Usually, the surety is included in the contract of credit and the surety is made a contracting partner.
It is customary to have seperate warranties - either unilaterally or recorded in an arrangement - even if for some purpose the surety will not be a party hereto. Does legislation influence or limit the provision or enforcement of warranties in your jurisdictions (e.g., up-stream warranties)? Yes, the limits on Sweden's support are quite stringent and cover warranties.
Generally speaking, an undertaking may not lend or give securities or sureties for any loan to: corporate bodies under the control of such a body. Even if such support is covered by this exemption if it is in the forms of securities or warranties, such securities or warranties must also conform to the provisions of the provisions of the Swedish law on the assignment of assets.
Therefore, if an entity provides collateral or a guaranty for the obligations of a third person, it must be assessed whether the entity derives a gain from the transactions. Furthermore, an entity may not give any form of monetary support, either in the form of an Advance, Credit or Collateral, or in the form of sureties for a credit facility provided to a borrower, to enable the borrower to purchase any interest in the entity or any interest in its ultimate controlling (direct or indirect) entity or any other entity placed in the group above or equal to the entity.
Consequently, a Norwegian affiliate cannot normally ensure liabilities taken out to finance the purchase of a Norwegian business by a mother entity. Therefore, a credit, guaranty or other post-purchase support is not forbidden if the resources are used to settle the purchased stock or to reimburse the finance resulting from that purchase.
There is no white washing process under Sweden's legislation. Outline the most commonly used ways to structure the priorities of debt and collateral. Contract and structure submission are customary means in Sweden to guarantee a certain hierarchy. In the case of more sophisticated Leveraged Financing deals, an Interim Loan Arrangement governs the seniority of debt and collateral, while in the case of less sophisticated deals, a Subordinated Summary Arrangement or a Subordinated Summary Arrangement may be used.
Collateral hierarchy is usually addressed in the corresponding collateral documentation (i.e. the collateral giver provides first and second tier collateral to certain holders either in the same collateral documentation or in discrete collateral documentation) and is supported by the intermediary or seniority covenant. Restructuring (i.e. when a creditor lends to different units in the enterprise structure) is usual in the case of meszanine operations, although there has been a strong rebound from meszanine providers to structuring.
Interim credit arrangements have not yet been fully trialled by Sweden's judiciary, so there is a degree of doubt as to whether some of the terms of the normal interim credit arrangements will be respected (in particular, cancellation rules for junior debt). In addition, in the case of procedural insolvency procedures in which a company in Sweden is involved, the receiver may choose whether the administration of the inheritance is linked to the intermediate loan or not.
Is there any payment of duties, taxes, stamp duties or other charges in connection with the provision or enforceability of a credit, surety or interest? There is no stamping or document levy to be paid for the grant of a credit, the borrowing of credit documents or the provision of warranties. Issuing a new mortgage bond for property entails a 2% stamping fee on the amount guaranteed (i.e. the nominal value of the mortgage bond).
Issuing a commercial mortgage certification entails a 1% postage tax on the amount hedged. Tax on stamps is to be paid for the safety of certain property such as aeroplanes and vessels. It is more usual for it to be governed by domestic laws that regulate the conditions of the plant record, or is the laws of another jurisdication often chosen by the contracting party (e.g. British or New York law)?
It is customary to use Sweden's legislation as the applicable legislation for business conducted with a borrowing company in Sweden and a group of borrowers mainly consisting of companies in Sweden. Is there any restriction on lending by or the provision of collateral or guaranties to overseas creditors? Is there any control on currency that restricts payment to a non-resident creditor under a securities instrument, bond or credit contract?
It is possible to establish a lien over all of a company's financial instruments? Assuming so, would a lump-sum collateral arrangement be sufficient or is a lump-sum collateral arrangement necessary for each kind of financial instrument? Sweden does not recognize comprehensive collateral, and collateral is provided on an asset-by-asset base. How do you formalise the release of collateral for the most popular types of investment?
According to Sweden there are no official safety clearance conditions. Usually the counterparties arrange for a clearance or repayment note and the protection buyer or protection agents return the pawned securities to the pawner as soon as the collateralised obligations have been met. Since certain types of guarantees in Sweden are made perfect by the conveyance of ownership, it is important for the debtor that the encumbered ownership is given back to the pledger.
Is it possible to provide collateral for property? And if so, what are the most commonly used securities for property and what is the process? Collateral for property is provided by a mortgage and formal land registry office registry. At the request of the legally and legally incorporated proprietor, the registry office shall issue Pfandbriefe which, upon delivery to the collateralised lender, constitute a lien with a certain value and a certain precedence.
The dematerialized Pfandbrief is deemed to have been surrendered to the holder if it has been surrendered to the holder's bank account in the mortgage registry (or to the bank account of a third person acting on behalf of the holder) of the land registry authority. Dematerialized mortgages are only available to resident bankers.
Once all guaranteed liabilities have been met, the guaranteed lender must surrender the allowance or, if appropriate, deregister as the owner. Specific asset items (e.g. machinery) may be considered as attachments or devices and would then be mortgaged. Essentially, the collateral right gives a collateral taker the right to pay from the revenue from the disposal of the immovable up to an amount of 115% of the amount of the mortgage credits granted in that ownership and pledged as collateral by that collateral taker.
Is it possible to guarantee safety for machines and plants? And if so, what are the most commonly used types of collateral for this type of ownership and what is the process? In so far as the machines and equipments are not regarded as commercial attachments or facilities and are therefore secured by a mortgage, the only practicable way of providing collateral for machines and equipments is to provide a company mortgage.
This is because the securing of moveable goods necessitates a transfer of ownership and the pledger must be barred both in law and in practice from handling the mortgaged sums. Consequently, it is hard to obtain mature collateral for machines and plants not covered by a corporate mortgage. Commercial mortgages cover the pledgee's entire moveable asset (excluding liquid funds and credit balances at banks, equities and other negotiable finance instrument and securities) used for the pledgee's business.
The collateral is made perfect by handing over the commercial mortgage certificates to the pledge holder and is recorded with the Commercial Register Authority. Mortgage does not preclude the pledger from selling his property in such a way as to reduce the value of the mortgage. Mortgage loans are subordinated to other completed mortgages, even if these are established after the mortgage loan.
Therefore, a borrower can pawn claims that are part of an already existent commercial mortgage, and the pawning of the claims then comes before the commercial mortgage. Is it possible to provide collateral for claims? And if so, what are the most commonly used types of collateral for this type of ownership and what is the process?
Collateral for claims and contractually agreed entitlements is provided by way of pledging. The pledging is carried out by notifying the claim holder or the contracting party, if any. In the case of claims relating to a holder's debenture bond (or similar), the lien shall be discharged by transferring the ownership of the debenture bond in question to the lien holder.
Securing receivables can be unwieldy for the pledger, as he may not have any right of disposition over them. Lien presupposes that the collateral taker has full sovereignty over the settlement of the claims, which means that all borrowers must be informed of the lien and ordered to make payments into an unchecked bank escrow system.
Claims may also be secured by a commercial mortgage. Is it possible to provide collateral for financing documents? And if so, what are the most commonly used types of collateral for this type of ownership and what is the process? Collateral for equities and other financing tools is provided by way of pawn.
The pledging of securities is completed by transferring the ownership of the respective stock certificate (in the case of securitized stock and stock certificate issued) to the pledger or, if no stock certificate has been granted, by notifying the Management of the lien to the Management Committee of the Corporation.
In order to perfect the ownership structure, other non-dematerialized financing tools need to be transferred. Is it possible to provide collateral in the shape of liquid assets? And if so, what are the most commonly used types of collateral for this type of ownership and what is the process? Yes, the guarantee for liquid funds in banking account is provided by a pledging.
The pledging is carried out by notifying the Kontobank of the pledging. A pledgee may not be permitted to draw money credited to the pawn accounts without the explicit agreement of the collateral taker. In practice, it may be unwanted to freeze the giro transfer agreement and the contracting partners may arrange for a pledging of the giro transfer agreement to be executed only upon the appearance of an incident of delay (or similar initiating event).
An unperfected instrument is, however, subjected to a three-month tightening phase from the date of completion and could be withdrawn in the event of subsequent insolvency. Is it possible to provide certainty about IP? And if so, what are the most commonly used types of collateral for this type of ownership and what is the process?
Collateral for inventions and trade marks can be provided by entering a lien at the office of protection and protection. There is no similar copyright registrability, and unless there is a counterparty or an officially registered register to which a pledging can be reported, this type of collateral may not be provided through copyright or good will.
Collateral for a patent or trademark can also be provided by a commercial mortgage. Copyright and company values can also be protected by a commercial mortgage. Which are the joint trigger mechanisms for enforcing credits, warranties and collateralisation? Swedish commercial practices state that a creditor is authorised to demand securities and claims under a guarantee if he defaults after a failure or the like in the loan file.
As a rule, but not always, the collateral becomes recoverable only when the lender (or agency on the lender's behalf) has expedited the credit by making it immediately due and payable. However, the lender may not be able to recover the collateral until the lender (or agency on the lender's behalf) has expedited the credit by making it immediately due and payable. 2. However, in some cases, the respective safety documentation provides for a withdrawal deadline before execution measures can be taken. According to Sweden there are no special conditions that a violation that constitutes an instance of late performance must be of a certain type in order for a secure lender to be able to expedite pending credit and assert collateral, such as the condition (in certain EU jurisdictions) that a late performance must be overdue.
Which are the most commonly used means of enforcing? Assertiveness will depend on the nature of the collateral to be enforce. Land charges and corporate mortgage loans can only be enforceable by certain government agencies and essentially involve an executory title or the opening of bankruptcy procedure. Alternative forms of collateral can usually be obtained through either government or commercial sales.
For example, the customary execution clause in a statutory stock lien arrangement in Sweden usually gives the liene creditor the right to dispose of the collateral values (e.g. pawned shares) by way of personal or collective selling, auctioning or otherwise and on such conditions and conditions as the lien creditor, in its absolute judgment, considers appropriate (including the lien creditor's right to acquire the property itself).
According to Sweden legislation, a secure lender or pawnbroker is deemed to have a due diligence obligation in respect of the securities and therefore may not assert or liquidate the collateral or dispose of the securities in such a way as to unreasonably prevent the pawner from doing so. Therefore, as a trustee obligation, the protected lender must take into account and safeguard the interests of the pawner concerned in the context of execution, as well as achieving a sale pricing at arm's length for the portfolio investments.
If the selling prices exceed the debt for which the securities were issued, the excess must be allocated to the pledgee after the asset has been sold. Those rules take precedence over any Treaty provision in legal certainty documentation in Sweden. To sum up, the precedence between debts in a case of insolvency in Sweden depends on the nature of the debt.
Receivables have three major types: receivables with particular priorities (for example, receivables guaranteed, receivables guaranteed by mortgages, and receivables guaranteed by garnishment); receivables without priorities. If, after satisfaction of the particularly prioritised entitlements, there remains property, general prioritised entitlements are satisfied from the other entitlements.
Receivables within the group of particularly senior receivables are eligible for payment from the revenue of the asset underlying the collateral.