Legal Practice Notes

In most leveraged buy-outs, funding combines equity and debt. Deployment of proceeds varies by deal, but finance is typically directed to: buying the target business—usually by making a direct payment to the seller meeting transaction costs and expenses, including advisers’ fees, and refinancing outstanding debt A transaction may instead aim to refinance existing liabilities or return capital to the sponsor without a full exit—known as a ‘leveraged recapitalisation’—rather than acquire a target (see Practice Note: What is acquisition finance?). This Practice Note considers: how investors inject equity into the group and the forms that equity may take the range of debt options, including senior facilities, mezzanine facilities, second lien facilities, PIK or payment in kind facilities, unitranche facilities, senior secured notes and subordinated notes, and the factors that influence the choice of funding...

For any construction scheme that relies on external finance, the funder will usually instruct its own team of solicitors to prepare and/or settle the necessary legal paperwork. Among the many agreements to be finalised are the project development and building documents. The funder will also appoint a specialist construction solicitor to carefully scrutinise those construction documents and to negotiate with the borrower’s lawyer wherever it believes amendments are needed. That solicitor will expect the construction suite to safeguard the interests of both the borrower and the lender, in the immediate term (while the works are carried out) and over the longer term (once the works are complete). This Practice Note identifies the construction documents a lender’s lawyer will commonly examine and the issues that typically matter from the lender’s viewpoint. In this Practice Note, the expression borrower refers to the party that is taking funds from the...

Commercial lending transactions Commercial finance deals typically provide funding to sizeable corporate bodies, yet there are occasions when an individual is also part of the arrangement. For instance, a person may give a guarantee and/or offer security to support a business facility. This Practice Note explores the principal issues that may emerge when interacting with individuals within a commercial finance context. It reviews the kinds of steps an individual might take in such transactions and examines the individual’s capacity and authority when carrying them out. It also highlights other specific considerations when dealing with a private person in a commercial financing, including the usual representations and warranties the individual is expected to give in the finance documents, undue influence, and executing ‘legal’ assignments via powers of attorney. Please note, this Practice Note does not address scenarios where the individual concerned is the...

This Practice Note covers the main areas involved in taking security over a superyacht and highlights the issues which set it apart from mainstream ship finance. For wider guidance on taking security over commercial vessels generally, see Practice Note: Shipping finance—security. Lenders typically structure collateral into three strands: charges over the superyacht itself; security over rights linked to the yacht; security over the beneficial owner’s other property. In addition, third parties may obtain security over a superyacht, whether arising by agreement or imposed by law, in the form of liens over it. This final category matters greatly to a lender, as some liens, in certain legal systems, can outrank the lender’s collateral. The type and timing of the security package will also depend on whether the facility supports a new build or the purchase of a pre-owned...

This primer is aimed at lenders (and other creditors) and their legal advisers, setting out how to approach a potential debt restructuring. It highlights the merits of an informal, consensual solution versus formal proceedings; identifies key preparatory steps for lenders; and summarises the range of options across informal restructurings and formal processes. It also considers the enforcement of security, noting its relative disadvantages and the available procedures. As an introductory resource, it signposts more detailed materials on each topic. A Glossary of restructuring terms and jargon provides further explanations of commonly used and technical expressions in restructuring and insolvency. The guide addresses only processes involving domestic companies. Where a restructuring or enforcement features foreign companies or cross‑border elements, see: Cross border co‑operation in insolvency and restructuring—overview and the additional resources referenced there. Why a...

This Practice Note offers a high-level overview of privilege between clients and their legal advisers, viewed from the standpoint of an in-house lawyer. It is intended for banking and finance lawyers working within banks or other financial institutions. It signposts where questions of privilege may emerge for in-house banking and finance counsel and sets out practical steps to handle them. Privilege is a complex area and, accordingly, further reading is recommended. The following provide overviews of further reading materials: Privilege and without prejudice communications—overview Legal professional privilege— LPP—for in-house lawyers—overview What is privilege? The principal purpose of privilege is to protect the confidentiality of communications between clients and their lawyers, or, in some instances, third parties. Privilege allows a party (or its successor in title) to resist disclosure of documents to a third party, the court or tribunal. The...

This Practice Note forms part of the Share purchase transaction collection. The reporting process Every adviser appointed to carry out due diligence ought to promptly notify their principal conclusions as they first emerge—particularly notable risks and concerns—and subsequently compile a comprehensive due diligence report drawing focused attention to any material matters identified during their detailed review. The advisers’ engagement letters should specify the agreed timetable, format and substance of the due diligence report. Preliminary or interim papers can be produced and shared at intervals during the exercise, enabling significant points to be addressed when they surface. Frequently, by the stage the definitive report is delivered to......

ARCHIVED: This Practice Note is archived and not maintained This note contrasts the conventions applied in the loan and swap markets for sterling, US dollar, euro and Swiss franc interest rate benchmarks that reference risk-free rates ( RFRs), and is designed to help hedging lawyers pinpoint potential mismatches and sources of basis risk. Loan and swap RFR conventions for legacy transactions—comparison table Pounds sterling ( GBP): SONIA Sources and guidance from the Working Group on Sterling Risk- Free Rates ( RFRWG): Working Group on Sterling Risk- Free Rates Detailed Loans Conventions (updated March 2021) Best Practice Guide for GBP Loans (updated March 2021) Fallback Rate ( SONIA) Fact Sheet IBOR Fallbacks IBOR Fallback Rate Adjustments Rule Book RFR Conventions and IBOR Fallbacks— Product Table Interest methodology Compound in arrears. The market generally favours compounding the rate rather than the balance; however, multiple...

This Practice Note outlines the principal distinctions between standard bonds and sukuk, or trust certificates as they are otherwise known, (the Sukuk). It also provides an overview of the principal Sukuk structures and offers commentary on recent trends observed across the Sukuk market. This Practice Note should be read alongside Practice Note: Sukuk documentation and transaction mechanics. What are Sukuk? Sukuk are Shari’ah-compliant certificates, defined by the Accounting and Auditing Organisation for Islamic Financial Institutions ( AAOIFI) as evidencing undivided interests in ownership of tangible assets, usufruct and services, or in the assets of specified projects or particular investment activities. The word ‘ Sukuk’ is Arabic and broadly translates as ‘instruments’ or ‘certificates’. Sukuk are frequently described as Islamic bonds and, in general terms, operate as the fixed-income counterpart of a conventional bond or note instrument. Sukuk follow...

Timing This phase follows the Signing and completion phase in loan transactions. It is intended to be brief, with post-completion tasks finalised promptly, though it can frequently run on longer than anticipated. What happens during this phase? A range of actions may be needed after completion of a loan transaction, some are legal in character and others administrative. Secured transactions After executing the security documents, additional measures are often required to ‘perfect’ the security. Perfection is the process that makes the security enforceable against specified third parties (though not invariably every third party) (see Practice Note: Perfecting security— Why is it necessary to perfect security?). Perfection may be obtained by several methods, and the appropriate approach for a given security interest will depend on: the type of entity......

What is a credit derivative? A credit derivative is a two-party contract whose value is tied to the credit risk of a third party, called the 'reference entity'. That reference entity issues 'reference obligations', being its particular underlying liabilities, both direct and indirect (for example, those without guarantees). The key objective of a credit derivative is to ring-fence the reference entity’s credit risk from its other exposures. The reference entity may be a company, a sovereign, a municipality or a comparable organisation, and it need neither participate in, nor even know about, the deal. This preserves confidentiality for the counterparties to the credit derivative, as the reference entity could be a client of one of them, and that party may prefer the client not to be aware of the credit derivative. In its most basic guise, a credit derivative is traded over the...

STOP PRESS: The UK’s prospectus regime stems from the EU Prospectus Regulation, which was preserved in domestic law after Brexit as the UK Prospectus Regulation. The UK has been reassessing this regime as part of wider capital markets reforms designed to strengthen the UK’s appeal as a listing venue. Consequently, the UK Prospectus Regulation will be superseded by the Public Offers and Admission to Trading Regulations 2024 (the POATRs), with the granular admission to trading requirements to be set out in Financial Conduct Authority ( FCA) admission rules. The FCA issued its final rules ( PS25/9) on 15 July 2025. The new regime is expected to commence on 19 January 2026. For more detail on the principal elements of the POATRs framework relevant to debt capital markets, see Practice Note: The UK Prospectus...

LMA REF Term Sheets The Loan Market Association ( LMA) has issued two English law term sheet templates for real estate finance ( REF) transactions. They are: the LMA term sheet for a single currency term facility agreement for multi-property investment transactions (the LMA REF Investment Term Sheet), and the LMA term sheet for a single currency term facility agreement for single property development transactions (the LMA REF Development Term Sheet) This Practice Note considers the risk-free rate versions of the LMA REF Investment Term Sheet and the LMA REF Development Term Sheet, collectively referred to as the ‘ LMA REF Term Sheets’. The LMA REF Term Sheets contain the standard provisions you would anticipate in a loan term sheet. This Practice Note highlights the principal features of the LMA REF Term Sheets that are particular to real estate finance...

What are investment-grade, high yield and crossover bonds? Investment grade ( IG) bonds are debt instruments that hold an IG credit rating: BBB and above on the S& P and Fitch scales, and Baa3 and above on the Moody’s scale (for further detail on credit ratings, see Practice Note: Credit ratings). IG issuers are usually sizeable blue‑chip corporates—well‑known, well‑established and well‑capitalised—and are often companies with shares listed on a major stock exchange. Aside from sovereign bonds of developed markets, IG securities are widely regarded as among the safest income‑generating investments. As a consequence of this perceived safety, IG bonds tend to offer lower yields than high yield ( HY) bonds. Many institutional investors and pension schemes operate policies and mandates that constrain their bond holdings to assets with, on average, lower default risk, such as IG instruments or government...

This Practice Note explores jurisdiction agreements (choice of court agreements): what they achieve, why they are adopted, and comparable arrangements pursuing the same objective. It outlines the main categories of jurisdiction agreement together with remedies available if one is breached. For assistance distinguishing the different types, see: Determining court jurisdiction—overview. It is likewise essential to grasp the operation of any formal jurisdictional regime. For insight into which regimes may apply, see Practice Note: Jurisdiction rules. A principal regime is the Hague Convention on Choice of Court Agreements. That convention applies between the UK and other contracting states in proceedings where the parties have entered into an exclusive jurisdiction agreement... What is a jurisdiction agreement? A jurisdiction agreement is the parties’ undertaking specifying which court(s) will have authority to determine disputes that could arise between them. For clarity on the concept of...

Loan market and developments This section offers a succinct outline of the current state of the loan markets in this jurisdiction together with any material recent developments. Lending by Jersey-domiciled banks tends to be restricted, in practice, to arrangements concerning domestic real estate or locally based businesses, and, in the private banking sphere, to global high net worth individuals across a range of transactions. In parallel, we observe significant volumes of financing provided by UK and European banks to Jersey structures that primarily hold assets situated outside Jersey, including, in particular, UK real estate. It also summarises forthcoming legal changes and other matters that may influence the loan markets or the answers to the questions below. The Security Interests ( Jersey) Law 2012, which took effect on 2 January 2014 (the SIJL), implemented comprehensive, far-reaching reforms to how security is created over...

Loan market and developments The loan landscape has shifted in response to the economic and financial downturn. That crisis exposed weaknesses in a corporate funding paradigm built predominantly on bank lending, underscoring the requirement for alternative financing channels. According to the Bank of Italy, lending contracted during the crisis, most notably for SMEs, confirming the Italian market’s negative trajectory despite greater liquidity across the system. With fewer loans available, transactions were predominantly arranged as club deals or as bilateral facilities, while only a small number of financings were arranged on a syndicated basis. These patterns emerged notwithstanding the notable increase in liquidity within the system. Syndicated transactions were the exception rather than the rule, appearing only in limited circumstances. The Italian market nevertheless experienced some activity in the issuance of bonds by large corporates outside the banking sector, providing a partial and...

In debt capital markets ( DCM), ‘due diligence’ describes the exercise of gathering, organising, collating and verifying details about the issuer, its operations, the market it trades in, and the legal and regulatory framework that applies to it in a structured way. The findings are presented to prospective investors as part of the offering process for their review and assessment. STOP PRESS: On 17 June 2025, the European Commission issued its long-awaited review of the EU Securitisation Framework, together with a detailed legislative proposal to amend the EU Securitisation Regulation ( Regulation ( EU) 2017/2402). The proposed changes touch on due diligence, among other matters. The package is moving through the legislative process, but the final rules have not yet been adopted. Reasons for conducting due diligence In international investment-grade public DCM transactions, the lead manager typically oversees the due diligence process for all...

Islamic real estate finance Islamic real estate finance is gaining increasing traction and has become firmly embedded in the UK and global property arenas. Worldwide Islamic finance assets are assessed at over US$4.5tn, with the sector forecast to keep expanding to US$6.7trn by 2027. This growth has been, and is expected to remain, driven by worldwide economic developments, evolving demographic trends, higher income levels and rising investment from the Gulf Co-operation Council, itself spurred by strong returns across the Halal, infrastructure and Sukuk segments. Consequently, the UK is well positioned to continue capturing the advantages of this consistently expanding market. At the same time, conventional financial institutions are increasingly turning to Islamic finance to complement traditional equity and debt solutions. The purpose of this Practice Note is to consider in detail the principal Islamic real estate finance structures set out...

This Practice Note reviews a range of Islamic or Shari’ah‑compliant structures commonly used in project financings and the documentation associated with them. It proceeds on the basis that readers have a working grasp of the key principles of Islamic finance; for detail, see Practice Notes: Key principles of Islamic finance and Sources of Shari’ah. It likewise assumes familiarity with standard conventional project finance frameworks and participants; for these, see Practice Notes: Introduction to project finance, Project finance—key project parties, Project finance—key finance parties, Types of projects and Project finance—meaning of completion and its effect. The structures outlined are typically more intricate, involve additional moving parts and require parties to enter into a greater number of documents than their conventional counterparts. Even so, they are established financing forms, well recognised by most financial institutions and law firms in the...