Legal Update Archive

Model LPA Provisions for Subscription Credit Facilities

The first step in determining if a subscription credit facility, often called a capital call facility (a “Subscription Facility”), is a viable option for a private equity or similar investment fund (a “Fund”) is to diligence the limited partnership agreement or other organizational document of the Fund (the “LPA”). Subscription Facility lenders usually require that specific concepts and language be included in an LPA in order to provide a Subscription Facility without additional credit support, such as investor consent letters.

Kiel A. Bowen, Caitlin E. Woolford

Divisive Mergers and Impact on Fund Financings

Divisive Mergers and Impact on Fund Financings Ann Richardson Knox and Christopher A. Davis Introduction Private equity and...

Ann Richardson Knox

Investor Pre-Funding Rights in Subscription Credit Facilities

As the market for subscription-backed credit facilities, also known as “capital call” or “capital commitment” facilities (“Subscription Facilities”), continues to mature, we have seen co-mingled private investment funds (each, a “Fund”) seek higher advance rates and inclusion of a wider pool of investors in the borrowing base.

Vincent R. Zuffante, Christoper N. Ellis

Statutory Protections against the Unauthorized Release of Capital Commitments in a Subscription Credit Facility

The market for subscription-backed credit facilities, also known as “capital call” or “capital commitment” facilities (“Subscription Facilities”), was recently unsettled by reports that an international private equity fund had allegedly released its investors’ capital commitment obligations in violation of covenants under its Subscription Facility, potentially leaving the Subscription Facility lender exposed without sufficient collateral coverage with respect to the loan amounts outstanding.

Kiel A. Bowen

Enforcement of Forms of Credit Support in Fund Finance

Private investment funds (“Funds”) employ a variety of financing structures to improve liquidity and/or obtain leverage, and lenders similarly rely on a variety of collateral and credit support packages for repayment in connection therewith.

Mark C. Dempsey, Jonathon R. Rosaluk, Todd N. Bundrant

Most Favored Nations Clauses: Potential Impact on Subscription-Backed Credit Facilities

The terms of the business arrangement between a private equity fund (a “Fund”) and an investor (an “Investor”) are generally contained in the constituent documents of the Fund, often a limited partnership agreement (an “LPA”), which sets forth the rights and obligations of the general partner and each Investor.

Mark C. Dempsey, Frank Falbo, Christoper N. Ellis

Default Remedies under Subscription Credit Facilities: Guide to the Foreclosure Process

Although the growing market for subscription-backed credit facilities (each, a “Subscription Facility”) has witnessed very few defaults or similar events necessitating non-consensual enforcement actions (each, a “Default”), Subscription Facility lenders and other secured parties thereunder (the “Secured Parties”) nevertheless should understand and, if necessary be prepared to quickly enforce their rights in the collateral pledged under such Subscription Facility—a point consistently reinforced by both bank regulators and risk teams at many of our clients.

Kiel A. Bowen, Sean T. Scott

Unencumbered Asset Pool Credit Facilities: An Alternative to Subscription, NAV and Hybrid Products

Introduction As the fund finance market continues to expand, we have seen a growing interest among real estate...

Todd N. Bundrant, Vincent R. Zuffante

Structural Changes in Hedge Fund Financing Transactions

A fund of hedge funds (“FoHF”) is an investment vehicle that offers its investors exposure to a portfolio...

Lending to Series Limited Liability Companies: Subscription Credit Facility Considerations

As the private equity asset class continues to expand2 and private equity fund managers respond to demand by investors for ever-more bespoke products and tailored investments, there has been an increase in the use of alternative fund structures to accommodate such demand. In addition to the proliferation of separate accounts, funds-of-one and co-investment structures, the use of vehicles that employ series, cell or other asset and liability segregation technology has increased, bringing with it opportunities and potential challenges when leverage at the fund or individual series level is sought.

Haukur Gudmundsson, Vincent R. Zuffante

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Legal Update Archive