Legal structuring of direct lending deals: Spain

As in other jurisdictions, direct lending in Spain is characterised by the creation of flexible and creative financing solutions adapted to each particular transaction.

However, there are certain structural features common to most loans driven by Spanish law particularities - above all, in terms of the enforcement of both financing agreements and security interests. These issues are always important to resolve when granting financing but are especially key when lending in distressed scenarios. Likewise, up until late September 2022, the lack of solutions under the Spanish insolvency regime to cram down shareholders and the inability to grant super seniority to shareholder loans due to strict equity subordination regulations set forth in the former Insolvency Act also disincentivised certain deals. As to the latter, we expect these issues to be resolved sooner rather than later - especially since the new Insolvency Act (enacted through Law 16/2022, which transposed EU Directive 2019/1023 on preventive restructuring frameworks) came into force on 26 September 2022.