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NAV loans are getting constant coverage in the press now. For those of us that spent years trying to direct focus to the potential of NAV lending, this is a welcome development. Admittedly, not all of the coverage is positive. It seems that there is a new article out every week with a negative take on NAV. As a result, we’ve been receiving a lot of calls from clients asking questions about the status and trajectory of the NAV loan market. We welcome the attention, positive and negative. A discussion on the merits of NAV lending is warranted, and the positives will, over time, win out over perceived negatives. In the meantime, we continue to see robust NAV loan activity, and we remain unequivocally bullish on this segment of the fund finance market. Let’s recount some of the reasons why:
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We have recently seen a notable uptick in the usage of equity commitment letters (ECLs) in fund finance transactions and have been spending an increasing amount of time discussing their merits with our clients’ credit teams. So, even though Fund Finance Friday has done overviews of various types of credit support in the past, we thought it was time for a refresh on ECLs, how they are deployed in fund finance transactions and what lenders should look for when relying on them as credit support.
Last week saw almost 1,140 registrants attend the FFA’s annual symposium at the Queen Elizabeth II Conference Centre in London. As ever, the event brought together a wide range of market participants from across the industry, providing a unique opportunity to network and learn more about the many exciting developments taking place in fund finance.
The panels at this year’s event covered a diverse range of topics including (but not limited to) NAV, securitisation, ratings, CRTs, secondaries as well as the growth of credit funds in the market. The variety of speakers at this year’s event reflect how much the fund finance market has grown and matured in recent years. We heard from bankers, sponsors and lawyers but also ratings agencies, insurers, credit funds, administrators and advisors (including our very own Head of European GP Solutions, Mike Hubbard!)
The Cadwalader London team has set out below some of the key themes arising from the panel discussions . . .
It was an honor to represent our Fund Finance team and join my Cadwalader colleagues this week at the 2024 Gotham Ball on behalf of Food Bank For New York City!
Please join the US Diversity in Fund Finance Committee for the Boundary Breakers Speaker Series event!
In a recent article from Mourant parnters Danielle Roman and Simon Lawrenson they explore recent trends, evolving structures, preferred financing instruments, and the impact of economic conditions on LP financing in Asia.Danielle is head of the firm's Asia Banking and Finance team, and Simon is the global co-practice leader for the firm’s Corporate and Finance team.
Financial challenges from volatile equity markets, a real estate crisis in China and high US$ interest rates have prompted transformations in the landscape of limited partner (LP) financing in Asia. High net worth (HNW) individuals are increasingly exploring ways to leverage existing assets, primarily driven by the need for liquidity, higher margins and a desire to proactively manage and diversify their portfolios amid lacklustre performances in the public markets. Fund managers, meanwhile, increasingly look for financing options to exploit opportunities in the secondaries market or fund their own contributions into continuation funds.
Read the article here.
We had a great time attending the first Women in Fund Finance Ladies Poker Night at the Hearst Tower in New York City, cohosted by Fitch Ratings, Deloitte and WFF last week!
One of the most important aspects in arranging any fund finance transaction is structuring the security package. As anyone that has ever looked at a complete structure chart for a fund financing transaction knows, even a “simple” private fund structure typically involves a number of different entity types (limited partnerships, limited liability companies, etc.) organized in several jurisdictions (Delaware, the Cayman Islands, Luxembourg, etc.). Depending upon the type of facility (e.g., a subscription facility, a NAV facility or a hybrid facility), there may be collateral pledged to the lenders (or a security agent on their behalf) by one or more of these entities to secure the obligation to repay the facility.
For purposes of this article, we discuss the issues that arise in connection with perfecting a security interest by filing a UCC-1 financing statement (which is the most common method of perfecting security interests granted pursuant to NY law governed security agreements in fund finance transactions) with respect to an entity type that is somewhat less common in the fund finance space - trusts.
Save the date! We're thrilled to announce the 8th Annual Cadwalader Finance Forum will take place on Wednesday, October 23, in Charlotte.
Praxio Law & Tax recently published their Fund Finance Security Guide featuring Cadwalader partners Brian Foster and Patrick Calves.