INTRODUCTION - Over the past 50 years, the retirement landscape has steadily shifted from defined benefit (DB) pension plans to defined contribution (DC) plans. In fact, as of the fourth quarter of 2024, private sector DC...more
Cascading pledges are frequently used in subscription finance to avoid legal impediments, avoid tax implications and mitigate prohibited transaction risk under the Employee Retirement Income Security Act of 1974, as amended...more
In the past few years we have seen a resurgence of the use of portable alpha strategies tied to hedge fund investments (and the financing arrangements that accompany them), a trend that this old-timer last encountered more...more
As Net Asset Value (“NAV”) credit facilities continue to grow in popularity, we have seen a steady increase in non-traditional borrowers utilizing NAV loans, including family office borrowers. The term “family office” is used...more
Subscription credit facilities, commonly referred to as “sub-lines” or “capital call facilities,” are a cornerstone of private equity finance. These facilities are secured by a bespoke collateral package that protects lenders...more
In the evolving fund finance market, lenders are constantly assessing ways to mitigate risk and enhance credit support in order to provide for the smooth operation of subscription-based credit facilities. One such credit...more
EXECUTIVE SUMMARY - Subscription credit facilities rely on the obligations of investors to a private investment fund (“Fund”) to contribute their capital commitments to the Fund when called. From a subscription credit...more
The recent closing by Goldman Sachs of its highly innovative and market leading US$475 million “capital call” securitisation of subscription credit lines has generated a lot of interest in both fund finance and structured...more
The credit agreement for a subscription credit facility will list several conditions precedent that are required prior to the credit agreement becoming effective and/or the first extension of credit occurring thereunder....more
Executive Summary - Net Asset Value (“NAV”) credit facilities are a tool that borrowers may use to access financing based on the value of their underlying investment portfolio. The users of these facilities are generally...more
We have said it before – the “credit cornerstone” of a subscription credit facility is the limited partnership agreement (the “LPA”) – it is the primary contract, together with any side letters, governing the relationship...more
Section 23A and Super 23A can create additional complications for lenders in the fund finance market. Intended to protect the stability of financial institutions by restricting transactions with affiliates, Section 23A and...more
EXECUTIVE SUMMARY - In the evolving landscape of the subscription credit facility market, the introduction of fraud allegations by an investor against a fund as a new exclusion event marks a pivotal shift....more
Fund-level subscription-secured revolving lines of credit are a well-established instrument in the toolkits of a variety of private equity fund sponsors and managers, including for venture capital funds, hedge funds, debt...more
Recallable capital has become an increasingly common concept in subscription credit facilities. In this Legal Update, we explain the concept of recallable capital and its role in subscription credit facilities, as well as...more
The primary purpose of a capital call facility is to provide bridge financing to a fund borrower that may be drawn upon, in lieu of calling capital, to make investments in accordance with the fund’s business purpose. In...more
The year 2023 presented the fund finance industry with many challenges that it rose to face with an inventiveness and rigour that showed just how mature and multi-faceted the market has become. At Cadwalader in London we saw...more
In this article we look at the lender's right to challenge a sponsor’s valuation of their investments in the context of a NAV-backed financing. This right to challenge is a relatively recent development in these transactions,...more
Guaranties are a common feature in fund finance transactions. Particularly in NAV loans, upstream and affiliate (or “sideways”) guaranties are used. Below we discuss some of the context for the use of these types of...more
In years past defaulting lender mechanics in a subscription credit facility may have been viewed as boiler plate language and, in most cases, the relevant provisions have not received much attention. In light of recent events...more
As leveraged loan markets have been impacted by a challenging macroeconomic environment, private equity sponsors are sharpening their focus on flexibility in their portfolio companies’ loan documents Given the sharp...more
For our eighth installment in the FFF Sovereign Immunity Series, we consider the doctrine of sovereign immunity in England & Wales. We begin with our usual disclaimer that sovereign immunity is a complex legal and tax...more
The 2023 edition of the Fund Finance Association’s annual conference was again filled with interesting insights from a wide range of industry participants and leaders. The panel titled “Market Evolution & Industry...more
Following on Mike Mascia’s Closing Remarks delivered to young Fund Finance professionals at last month’s FFA University 1.0, I wanted to take things back to the basics for those who are just starting their careers in fund...more
When we think about parties to a subscription credit facility (the “Facility”), all eyes are generally on the fund and the general partner (the “GP”), but the investment manager (the “Manager”) is also a party to watch. For...more