Lending & Secured Finance Guide 2016: Cayman Islands
By Tina Meigh, Nick Herrod From Maples
In this guide, Tina Meigh and Nick Herrod provide an overview of lending and secured finance law in the Cayman Islands. Their contribution formed part of the 4th edition of the Lending & Secured Finance guide, published in April 2016 and covering law in 42 jurisdictions.
This article first appeared in The International Comparative Legal Guide: Lending & Secured Finance 2016 published by Global Legal Group in April 2016.
1 Overview
1.1 What are the main trends/significant developments in the lending markets in your jurisdiction?
There have been no changes to the Companies Law (2013 Revision) of the Cayman Islands in the last 12 months that impact the Cayman Islands’ reputation as an influential, innovative and creditor-friendly jurisdiction. Financial institutions and corporate borrowers alike continue to rely on the current regime that recognises bilateral and multilateral set-off and netting upon the insolvency of a Cayman Islands company and statutory provisions allowing secured creditors to enforce their security without the leave of the court or a liquidator. These legislative provisions continue to support the view that the Cayman Islands is the leading, preferred offshore jurisdiction of choice for any lending and security structure. We have continued to see an increased focus on securities and netting principles in the last 12 months, specifically following the introduction of the Basel III Capital Adequacy requirements applicable to lenders in the market. This increased focus has continued to lead to increased opinion requirements and extended analysis on security issues, in particular, in relation to perfection and priority of security interests.
1.2 What are some significant lending transactions that have taken place in your jurisdiction in recent years?
The most significant lending transactions continue to occur in the investment funds space, especially to Cayman Islands domiciled private equity funds. These transactions tend to be governed by New York and English law finance documents with security taken over Cayman Islands assets being governed by both Cayman Islands law and non-Cayman Islands law. Although the courts in the Cayman Islands generally recognise foreign law documents, lenders often prefer, for commercial purposes, to have dual Cayman Islands security.
The main types of security are, in the case of funds established in the form of exempted limited partnerships, security over capital calls and more generally security over Cayman Islands equity interests either in the form of registered shares or limited partnership interests. This is particularly common where there is a “master-feeder” structure or underlying blocker entities are used to hold assets.
In both private equity and hedge funds, borrowing is required for both leverage and liquidity purposes using a variety of different instruments including subscription facilities, variable funding notes and total return swaps.
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SOURCE: http://www.maplesandcalder.com/news/article/lending-secured-finance-guide-2016-cayman-islands-1281/
