We hope that everyone is keeping safe and healthy in these unprecedented times. As the world adjusts to the “new normal” of working from home and staying in place, the Mayer Brown Fund Finance team has addressed various questions pertaining to fund finance in the era of COVID-19. As we want to keep you current with what we are seeing in the market, some of our collective thoughts and observations are set forth below.

Fund Finance Market

• There has been increased activity in the fund finance market over the last month as a result of COVID-19 and the related governmental actions. Many deals already in the pipeline were put on accelerated timetables for closing. We have fielded numerous requests for upsizes, maturity extensions and joinders of portfolio companies as qualified borrowers. The latter was a popular method for funds to bolster the liquidity of their portfolio companies. While the bulk of the activity was seen in the context of subscription credit facilities (“SCFs”), we also understand there are increased requests from sponsors and general partners (“GPs”) for liquidity through use of management fee, GP and partner loan programs.
• Funds seeking to upsize SCFs may find lenders scrutinizing their historical usage of subscription facilities, including whether prior upsizes have been fully utilized, the current usage of the facility, whether the GP has made recent capital calls and if the limited partners (“LPs”) funded as required. We are not aware of any institutional LP defaults under SCFs, and we are not hearing anything contrary from our recent conversations with GPs and lenders.
• In general, we understand that lenders under uncommitted facilities have continued to fund such lines and honor requests for borrowings.
• There has been some discussion regarding pricing for SCFs in particular but also with respect to other fund finance products:
  • With respect to existing fund finance deals, it would appear that lenders are not yet looking to “increased costs” provisions in loan documents as a basis for raising pricing for existing facilities. With respect to deals closing as of last week, we understand that pricing was mostly held at or close to pre-COVID-19-negotiated levels.