As real estate, buyout, infrastructure, debt, secondary, energy and other closed-end funds mature beyond their investment or commitment periods (the “Investment Period”), they have often called and deployed the majority of their uncalled capital commitments on the acquisition of their investment portfolio (each, an “Investment”).

As a result, they often have greatly diminished borrowing availability under the borrowing base (“Borrowing Base”) of a traditional subscription credit facility (a “Subscription Facility”, often referred to as an “Aftercare Facility” when provided post-Investment Period). However, these post-Investment Period Funds still have significant ongoing liquidity needs, including funding follow-on Investments, letters of credit, ongoing fund expenses and the costs of maintenance and liquidation of their Investments. To address these needs, certain banks (each, a “Lender”) have been working to structure financing solutions for Funds, recognizing that a fully invested Fund has inherent equity value in its Investment portfolio. Of course, lending against a Fund’s equity value is a far different credit underwrite than a traditional Subscription Facility, so Lenders have historically been cautious in their approach. One solution we have seen has been to leave the Subscription Facility largely intact, but extend the Borrowing Base significantly to add borrowing availability. Under this approach, the Lender may set the advance rate for included investors (“Included Investors”) to 100% with no concentration limits or even set the Borrowing Base itself equal to 100% of the Unfunded Commitments of all investors (“Investors”) (i.e., not just Included Investors), but couple the increase with a covenant that the Fund must at all times maintain a certain minimum net asset value (“NAV”). The NAV covenant is typically steep from the Fund’s perspective, and is designed to essentially mitigate the additional risk incurred by the Lender in connection with the more generous Borrowing Base. This Aftercare Facility approach is merely a...