Blog
PRIVATE FUNDS CFO: ALTERNATIVE FUND FINANCERS TO THE RESCUE, BUT IS IT ENOUGH?
Concentrated NAV lenders and preferred equity financers are seeing historic dealflow. But only a handful of alternative lenders exist, and banks active in concentrated NAV are scarce and rarely transact. With potentially thousands of funds looking for liquidity for their portfolio companies, will this rare source of fund liquidity be able to sate demand?By: Graham Bippart There are only a handful of players in the concentrated net asset value (NAV) lending and preferred equity financing markets, but since early and mid- March they’ve seen a tremendous boost in dealflow. At Crestline Investors, managing director and senior portfolio manager Dave Philipp…
Continue Reading PRIVATE FUNDS CFO: ALTERNATIVE FUND FINANCERS TO THE RESCUE, BUT IS IT ENOUGH?
PRIVATE DEBT INVESTOR: THREE KEY DEVELOPMENTS IN FUND FINANCE
Fund Finance Partners looks at the current priorities of a market that has experienced rapid growth through the good times, writes Andy Thomson The fund finance market has grown rapidly in recent years as alternative asset managers have found themselves able to access a useful source of liquidity at low cost. But how has COVID-19…
Continue Reading PRIVATE DEBT INVESTOR: THREE KEY DEVELOPMENTS IN FUND FINANCE
PRIVATE CREDIT FUND AND BDC LEVERAGE STRESS TESTING COMES TO LIFE: IT’S TIME TO ACT
Only a few weeks ago (although it now feels like another era), Fund Finance Partners (“FFP”) published an article on the numerous ways that direct lending funds and BDCs (collectively, “Debt Funds”) could finance their investment portfolios in order to increase liquidity, enhance returns and offer more competitive spreads to borrowers. (Article) Now, though, is the time…
Continue Reading PRIVATE CREDIT FUND AND BDC LEVERAGE STRESS TESTING COMES TO LIFE: IT’S TIME TO ACT
PRIVATE EQUITY INTERNATIONAL: GPS PONDER EARLY REPAYMENTS FOR CREDIT LINES AS CORONAVIRUS THREATENS LIQUIDITY
March 17, 2020 By: Alex Lynn Drawdowns could enable managers to pre-empt liquidity issues arising from the pandemic but may compound the problem for certain LPs. Some general partners are considering early repayments for subscription credit line drawdowns in anticipation of potential liquidity issues among LPs arising from coronavirus. Modern limited partnership agreements typically specify…
MITIGATING CONFLICTS OF INTEREST IN FUND FINANCE
March 11, 2020 – Since FFP’s inception in 2019, the vast majority of our fund sponsor clients’ mandates stem from our collective expertise in and around the fund finance markets. Between the number of fund finance transactions our principals have executed and our long-standing, deep relationships with virtually every bank and alternative lender in the space,…
Continue Reading MITIGATING CONFLICTS OF INTEREST IN FUND FINANCE
PRIVATE EQUITY INTERNATIONAL: UNCOMMITTED DEBT – HOW TO AVOID GETTING STUNG IN A DOWNTURN
February 4, 2020 By: Alex Lynn GPs can avoid potential liquidity issues by drawing down loans early and performing greater due diligence on their lenders Uncommitted capital call facilities have taken the private markets by storm, but fund managers should be cognisant of the potential for lenders to withhold financing during a liquidity crunch. The…
IMPROVED BDC LEVERAGE OPTIONS SET TO TAKE OFF IN 2020
January 15, 2020 – The emergence of Business Development Companies (“BDCs”) over the last decade is not a surprise. BDCs are well-established as an essential provider of debt capital to small and medium-sized U.S. businesses. Since the peak of the financial crisis, the number of publicly-listed BDCs has more than doubled, and the number of…
Continue Reading IMPROVED BDC LEVERAGE OPTIONS SET TO TAKE OFF IN 2020
“How Extremely Busy Executives Make Time To Be Great Parents”, With Zac Barnett of Fund Finance Partners
A child’s self-esteem is tied, in large part, to how they are treated, valued and cared for by their parents. If we spend too much time “giving time” to everything else in our lives ahead of our children, we are teaching them that they are less important to us — and therefore the greater world.…
Investors Hit the Pause Button on CRE Debt Strategies
Private equity real estate funds have stepped up to be a major source of financing for the commercial real estate industry—and a bigger allocation for investors. However, fund managers may face a tougher road ahead for fundraising in the near term as capital flows to the sector slow. Debt strategies have moved from the fringe to…
Continue Reading Investors Hit the Pause Button on CRE Debt Strategies
Fund Finance Partners: Why Governance Matters in an Asset Manager’s Leverage Strategy
How does governance come into play for institutional asset managers. One key area is how leverage is managed, according to Richard Wheelahan, III, and Zac Barnett, the Co-Founders of Fund Finance Partners. Over the past decade Richard has advised fund sponsors and lenders, both as an adviser and as a principal at a $3 billion…
Driving Efficiency in Fund Finance: The Future is Now
The Fund Finance market has been on an incredible run. We at FFP, like many of you reading this, want to see that success continue. We believe that the only way the market can maintain its staggering growth rate is to evolve, innovate and modernize its transaction processes. As many of you know, the core…
Continue Reading Driving Efficiency in Fund Finance: The Future is Now
Separate Accounts vs. Commingled Funds: Similarities And Differences In The Context Of Credit Facilities
The use of managed accounts as an investment vehicle has been widely publicized of late with institutional investors such as the California State Teachers’ Retirement System and the New York State Common Retirement Fund (referring to such vehicles as “separate accounts”), and the Teacher Retirement System of Texas and the New Jersey Division of Investment…
Buyout Firms’ Profit-Goosing Scheme Spurs Backlash From Clients
Pension funds are taking aim at private equity firms for exploiting a financial sleight of hand that can make even mediocre investments look brilliant. Read full story here
Continue Reading Buyout Firms’ Profit-Goosing Scheme Spurs Backlash From Clients
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 and other private equity funds (each, a “Fund”) in unleashing the value of their assets to optimize investment returns. In order to meet the financing needs of these Funds, a growing number of banks and other credit…
Forms of Credit Support in Fund Finance
In the fund finance market, there are a wide array of financing structures that are utilized by private investment funds (“Funds”) to improve liquidity and/or obtain leverage and a variety of collateral and credit support packages that lenders rely upon for repayment.1 While the fund finance market has unique characteristics when compared to other types…
Spring 2018 Market Review Market Review
Our outlook for the fund finance market for 2018 is positive, as we expect the market to build upon the successes experienced over the last calendar year. In 2017 strong credit performance, record-breaking fundraising and product expansion fueled significant market growth. In addition to a significant uptick in the number of traditional subscription credit facility…
Powers of Attorney in Fund Financing Transactions
Introduction A power of attorney (“POA”) is a written agreement wherein an individual or organizational person (the “principal”) provides advance authority to another party (the “agent”) to make certain decisions, to execute certain documents or to act on the principal’s behalf, generally or in certain circumstances. POAs can take the form of stand-alone documents or…
Continue Reading Powers of Attorney in Fund Financing Transactions
Hybrid Credit Facilities
Introduction Real estate, buyout, debt, secondary and other closedend funds (“Funds”) have often used subscription-backed credit facilities—also known as “capital call” or “capital commitment” facilities (each a “Subscription Facility”)—to access cash quickly or as a bridge to capital calls or other permanent asset-level financing. Under these facilities, Lenders look to a Fund’s uncalled capital commitments…
Benefits of Fund-Level Debt in Acquisition Finance
Introduction Private equity and other investment funds have traditionally utilized portfolio company-level financing to finance acquisitions. These types of financings have focused on the portfolio company for both the debt underwriting and collateral package. The categories of these loans include asset-based loans (“ABL”), cash flow financings and real property mortgages, among other traditional lending products.…
Continue Reading Benefits of Fund-Level Debt in Acquisition Finance
Fall 2017 Market Review Market Review
The strong credit performance and significant growth of subscription credit facilities (each, a “Subscription Facility”) and the broader Fund Finance market continued into the first half of 2017. In fact, Mayer Brown remains unaware of any Subscription Facility lender (each, a “Lender”) experiencing a loss in connection with any Subscription Facility. Likewise, while we are…
The Advantages of Subscription Credit Facilities
The market for subscription-backed credit facilities, also known as “capital call” or “capital commitment” facilities (“Subscription Facilities”), continues to grow rapidly, expanding into a broader range of Funds,1 with constantly evolving features and mechanics. As the Subscription Facility market continues to grow, the functionality of Subscription Facilities has also grown beyond its roots of bridging…
Continue Reading The Advantages of Subscription Credit Facilities
Partner and Employee Co-Investment Loan Programs for Private Investment Funds
I. Introduction As the fund finance market continues to mature, fund-related product offerings are expanding both in number and in customization, attracting a broader array of private equity and real estate funds (“Funds”) and credit providers, and increasing the range of the financing products available to Funds and their Sponsors (“Sponsors”) beyond the traditional subscription…
Continue Reading Partner and Employee Co-Investment Loan Programs for Private Investment Funds
Basel III Regulations and the Move Toward Uncommitted Lines of Credit
Background/Key Issues Basel III, a regulatory capital framework for financial institutions, was developed by the Basel Committee on Banking Supervision (the “Basel Committee”) in response to the financial crisis that began in 2008. During the crisis, banks were unable to dig themselves out of financial trouble due to their relative inability to convert assets into…
Continue Reading Basel III Regulations and the Move Toward Uncommitted Lines of Credit
Fundraising and Subscription Facility Growth
Fund financings experienced positive growth and strong credit performance as an asset class through the end of 2016. Capital call subscription credit facilities (each, a “Subscription Facility”) sustained their steady growth as the product continues to diversify into various fund industries and follows the performance of capital raising in 2016. Investor capital call (each, a…
Continue Reading Fundraising and Subscription Facility Growth
Mayer Brown Fund Finance Abilities Strengthened In New York
The New York office of Mayer Brown added a global Banking & Finance and Fund Finance partner to their team. Experienced in-house and hedge fund financing attorney Bryan Barreras joined Mayer Brown’s global Banking & Finance and Fund Finance practices in New York as a partner. He has most recently served as the executive vice…
Continue Reading Mayer Brown Fund Finance Abilities Strengthened In New York
Bryan Barreras Joins Mayer Brown As Partner
Mayer Brown announced today that Bryan Barreras has joined the firm’s New York office as a partner in the global Banking & Finance and Fund Finance practices. Read full story here
Continue Reading Bryan Barreras Joins Mayer Brown As Partner
Lending to Single Investor Funds: Issues in Connection with Subscription Credit Facilities
As the subscription credit facility market continues to experience steady growth, lenders seek to expand their lending capabilities beyond traditional subscription credit facilities to commingled private equity investment vehicles (“Funds”). One way lenders have accomplished this is by lending to Funds that have a single dedicated investor in the Fund (each, a “Fund of One”).…
Management Fee Subordination: Potential Issues with Subscription Credit Facilities and Management Fee Lines of Credit
A management fee credit facility (a “Management Fee Facility”) is a loan made by a bank or other financial institution (a “Lender”) to the management company or investment advisor (collectively, a “Management Company”) that is typically the sponsor (or affiliated therewith) (a “Sponsor”) of a private equity fund (a “Fund”). The Lender under a Management…
Fund of Funds Financing: Secondary Facilities for PE Funds and Hedge Funds
Real estate, buyout, infrastructure, debt, secondary, energy and other closed-end funds (each, a “Fund”) frequently seek to obtain the benefits of a subscription credit facility (a “Subscription Facility”). However, to the extent that uncalled capital commitments may not be available to support a Subscription Facility (for example, following expiration of the applicable investment or commitment…
Continue Reading Fund of Funds Financing: Secondary Facilities for PE Funds and Hedge Funds
Fall 2016 Market Review
Fund Financings continued positive growth and strong credit performance as an asset class through Q2 2016. Capital call subscription credit facilities (each, a “Facility”) continued their steady growth and followed the uptick of closed funds and capital raised through Q2 2016. Investor capital call (each, a “Capital Call”) funding performance continued its near-zero delinquency status,…
Operational Challenges for Private Fund Managers Considering Subscription Credit and Other Financing Facilities
As subscription credit facilities and other financing facilities become more prevalent in the industry, hedge fund and other private fund managers seeking to use them on their funds’ behalf must be mindful of the operational complexities that attend those structures. Read full story here
Financing Facilities Offer Hedge Funds and Managers Greater Flexibility
Along with subscription credit facilities, other forms of fund financing are becoming more prevalent in the asset management industry. In the hedge fund space, fund-of-funds managers are employing financing structures, and portfolio acquisition facilities and general partner support facilities are growing in use. Read full story here
Continue Reading Financing Facilities Offer Hedge Funds and Managers Greater Flexibility
Enforceability of (Debt) Capital Commitments
A subscription credit facility (a “Facility”) is an extension of credit by a bank, financing company, or other credit institution (each, a “Lender”) to a closed end real estate or private equity fund (the “Fund”). The defining characteristic of such a Facility is the collateral package securing the Fund’s repayment of the Lender’s extension of…
Continue Reading Enforceability of (Debt) Capital Commitments
Beginner’s Glossary to Fund Finance
The following glossary is intended to serve as a reference tool for those that are new to the private equity fund finance space by demystifying some of the more commonly utilized terms in the fund finance industry. Please note that these definitions/ explanations are accurate as of the date of publication, but that these terms…
Former Treasury secretary gets JPMorgan credit line to invest with Warburg Pincus
Former U.S. Treasury Secretary Timothy Geithner is preparing to borrow from JPMorgan Chase to help fund his new career in private equity. Read full store here
Continue Reading Former Treasury secretary gets JPMorgan credit line to invest with Warburg Pincus
Infrastructure Funds Update
Among private investors, the term “infrastructure” denotes a wide range of physical assets that facilitate a society’s principal economic activities — transportation, energy and utility, communications and “social” infrastructure, for example. Historically, funding for these projects has been the domain of governments, multilateral institutions, official lenders, and large commercial banks providing debt alongside such other…
Most Favored Nations Clauses: Potential Impact on Subscription-Backed Credit Facilities
Introduction 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. An LPA typically will address,…
Limitations on Lender Assignments To Competitors In Subscription Credit Facilities and Other Fund Financings
In a typical syndicated credit facility, the lenders are generally prohibited from assigning their rights and obligations under the credit agreement without the borrower’s consent (typically not to be unreasonably withheld) unless the borrower is in default of its obligations under the credit agreement or the assignment is made to an existing lender, an affiliate…
Developing Side Letter Issues
Introduction A subscription credit facility (a “Facility”) is an extension of credit by a bank, financing company, or other credit institution (each, a “Lender”) to a private equity fund (the “Fund”). The defining characteristic of such a Facility is the collateral package securing the Fund’s repayment of the Lender’s extension of credit, which is composed…
Winter 2015 Market Review
Capital call subscription credit facilities (each, a “Facility”) continued their post-crisis growth and positive credit performance in 2014, again achieving an excellent year as an asset class. Anecdotal reports from many of the key Facility lenders (each, a “Lender”) indicate substantial portfolio growth last year, and the Mayer Brown Facility practice closed more than 100…
Morning Briefing: World’s top law brands named
The annual ranking of global law brands has been released by industry analysts Acritas. Read full story here
Continue Reading Morning Briefing: World’s top law brands named
Feeder Funds
A feeder fund (“Feeder”) is an investment vehicle, often a limited partnership, that pools capital commitments of investors and invests or “feeds” such capital into an umbrella fund, often called a master fund (“Master”), which directs and oversees all investments held in the Master portfolio. A Master/Feeder structure is commonly used by private equity funds…
Spring 2016 Market Review
The past year was an active year for Fund Financings, with positive growth and strong credit performance through 2015 as an asset class. Capital call subscription credit facilities (each, a “Facility”) continued steady growth and followed the uptick of closed funds and capital raised through Q3 and Q4 2015. Additionally, anecdotal reports from many of…
Structuring Credit Facilities for Defined Contribution Plan Funds
Over the last ten years, there has been a steady trend transition from defined benefit plans to defined contribution plans. As further evidence of this trend, as recently as the end of the fourth quarter of 2013, defined contribution plan (“DC”) assets amounted to $5.9 trillion, compared to just $3.0 trillion in assets for private-sector…
Continue Reading Structuring Credit Facilities for Defined Contribution Plan Funds
Governmental Plan Investors and the Borrowing Base
A subscription credit facility, also frequently referred to as a capital call facility (a “Subscription Facility”), is a loan made by a bank or other credit institution (a “Lender”) to a private equity fund (a “Fund”).1 What distinguishes a Subscription Facility from other secured lending arrangements is the collateral package, which is comprised not of…
Continue Reading Governmental Plan Investors and the Borrowing Base
Subscription Credit Facilities and the Volcker Rule
On December 10, 2013, the federal financial agencies (the “Agencies”) approved joint final regulations (the “Final Regulation”) implementing section 619 of the Dodd-Frank Act, commonly referred to as the Volcker Rule. Section 619 added a new section 13 to the Bank Holding Company Act of 1956 (the “BHCA”), which generally prohibits any banking entity from…
Continue Reading Subscription Credit Facilities and the Volcker Rule
Summer 2014 Market Review
On July 22nd and 23rd, we held our annual Fund Finance Mid-Year Market Update Panels, this year in Los Angeles and San Francisco (the “Market Updates”).1 Based on our experiences and the views expressed by the panelists at the Market Updates, capital call subscription credit facilities (each, a “Facility”) have continued their positive credit performance…
Subscription Credit Facility and Fund Finance Symposium
Subscription Credit Facility and Fund Finance Symposium Read full story here
Continue Reading Subscription Credit Facility and Fund Finance Symposium
Infrastructure Funds Primer
Infrastructure funds are private equity vehicles that invest in a wide range of assets—including assets that could be described as transportation, energy and utility, communications, and “social” infrastructure, and investments that may be specific to a particular asset or in a company that develops such assets or is otherwise involved in their operation. Like other…
Foreign Investor Capital: Collateral Enforceability and Minimization of Risk
Due to previous challenges in the United States fundraising market for sponsors of real estate, private equity and other investment funds (each a “Fund”), many Fund sponsors have sought to expand their sources of capital to include investors domiciled outside of the United States (“Foreign Investors”). As such, Fund sponsors are increasingly requesting that the…
Continue Reading Foreign Investor Capital: Collateral Enforceability and Minimization of Risk
Management Fee Credit Facilities
As the subscription credit facility market matures,1 lenders seeking a competitive advantage are expanding their product offerings to private equity funds (a “Fund”) from traditional capital call facilities made to closed-end Funds to other financing products, including lines of credit to open-ended Funds, separate-account vehicles and net asset value facilities.2 Another emerging product gaining traction…
Winter 2013 Market Review
Capital call subscription credit facilities (each, a “Facility”) continued their positive momentum in 2013 and had an excellent year as an asset class. As in the recent past, investor (“Investor”) funding performance remained as pristine as ever, and the only exclusion events we are aware of involved funding delinquencies by noninstitutional Investors (in many cases…
Summer 2013 Market Review
Despite continued challenges in the fundraising market for sponsors of real estate, private equity and other investment funds (each, a “Fund”), the positive momentum capital call subscription credit facilities (each, a “Facility”) experienced in 2012 has continued and perhaps accelerated in early 2013. And for good reason: on all the panels at the Subscription Credit…
Subscription Credit Facilities: Certain ERISA Considerations
A subscription credit facility (a “Facility”), also frequently referred to as a capital call facility, is a loan made by a bank or other credit institution (the “Lender”) to a private equity fund (the “Fund”). The defining characteristic of such Facilities is the collateral package, which is composed not of the underlying investment assets of…
Continue Reading Subscription Credit Facilities: Certain ERISA Considerations
Separate Accounts vs. Commingled Funds: Similarities and Differences in the Context of Credit Facilities
The use of managed accounts as an investment vehicle has been widely publicized of late with institutional investors such as the California State Teachers’ Retirement System and the New York State Common Retirement Fund (referring to such vehicles as “separate accounts”), and the Teacher Retirement System of Texas and the New Jersey Division of Investment…
Structuring a Subscription Credit Facility for Open-End Funds
A subscription credit facility (a “Facility”), also frequently referred to as a capital call facility, is a loan made by a bank or other credit institution (the “Lender”) to a private equity fund (the “Fund”). The defining characteristic of such Facilities is the collateral package, which is composed not of the underlying investment assets of…
Continue Reading Structuring a Subscription Credit Facility for Open-End Funds
Subscription credit facilities on the rise in 2013
Subscription credit facilities are set to become more common in the private equity and investment funds space this year. Read full store here.
Continue Reading Subscription credit facilities on the rise in 2013
Sovereign Immunity Analysis in Subscription Credit Facilities
Subscription credit facilities have become a popular form of financing for private equity and real estate funds. Governmental pension plans, state endowment funds, sovereign wealth funds and other instrumentalities of foreign and domestic governments are frequent Investors that may possess certain sovereign immunity rights against enforcement proceedings rooted in the common law concept that “the…
Continue Reading Sovereign Immunity Analysis in Subscription Credit Facilities
Enforceability of Capital Commitments in a Subscription Credit Facility
A subscription credit facility (a “Facility”), also frequently referred to as a capital call facility, is a loan made by a bank or other credit institution to a closed end real estate or private equity fund secured by the capital commitments of the fund’s investors. As the number of new funds in formation appears to…
Continue Reading Enforceability of Capital Commitments in a Subscription Credit Facility