The primary purpose of a capital call facility is to provide bridge financing to a fund borrower that may be drawn upon, in lieu of calling capital, to make investments in accordance with the fund’s business purpose. In addition to providing a fund borrower with a readily available source of credit to quickly fund investments, a capital call facility also provides a fund borrower with the ability to leverage the fees and expenses of the partnership. In particular, many fund borrowers will look to the credit facility to finance the payment of management fees by the limited partners to the investment manager. It is therefore important for lender’s counsel to confirm that the fund borrower’s limited partnership agreement (a) authorizes the fund borrower to incur indebtedness for the payment of management fees and (b) doesn’t contain management fee overcall limitations. Lender’s counsel should also confirm with the lender that the credit facility use of proceeds contemplates the financing of management fees and the credit agreement appropriately reflects and permits the credit extensions to be used to finance management fees of the partnership.
A lawsuit that has worked its way through New York federal courts since 2017, including up to the Second Circuit Court of Appeals, has met its final stop at the United States Supreme Court. This week, the Supreme Court denied a petition for a writ of certiorari in the Kirchner case. This case raised the question of whether broadly syndicated term loans are “securities” and therefore should be subject to state and federal securities regulations.
We look forward to seeing you next week at The 13th Annual Global Fund Finance Symposium on February 26-29, 2024 in Miami Beach.
The most recent episode of the Fund Finance Expert Talk by Michael Mbayi is live. In this episode, the Head of Banking & Finance of the Luxembourg law firm Praxio Law & Tax, speaks with Mike Mascia, Co-Head Fund Finance at Everbank and Board Member of the Fund Finance Association.
Registration is open for the 2024 FFA U: Asia-Pacific! We look forward to welcoming you to the virtual half-day sessions on March 20th & March 21st, followed by in-person networking receptions held in Hong Kong, Singapore, and Sydney by the FFA NextGen Committee.
Women in Fund Finance EMEA and Maples Group are pleased to invite you to the first WFF Industry Gathering in Ireland. The evening will include networking drinks and canapes, and keynote address from Joan Kehoe, CEO and Founder of alchelyst.
About a year ago, we published “Term Loan Solutions in Fund Finance,” which ended up being a popular article on Fund Finance Friday. Since then we have seen lenders, sponsors, law firms and rating agencies become more interested in understanding a possible term loan component for certain fund finance facilities. Fund finance credit facilities that are secured by uncalled capital commitments of investors (“Sublines”) have historically consisted of revolving loan facilities that were often broadly syndicated. In contrast, fund finance credit facilities secured by portfolio-level assets (“NAV”) have historically consisted of term loan facilities, sometimes with a small revolving loan component, but were often bilateral or club deals (that is, not broadly syndicated). Interestingly, as the NAV market matures and syndication becomes more common in NAV, the Subline market matures and term loans become more common in Sublines. This has led to a coincidence where both the Subline market and the NAV market are negotiating issues regarding term tranche lenders and revolving tranche lenders, but for inverted reasons: The Subline market because term loans are relatively new and the NAV market because syndication is relatively new.
Cadwalader is lucky to have market-leading Subline and NAV practices for bank and non-bank lenders. We have worked on several amendments adding term loans to existing Subline facilities since the publication of the first article and we are regularly working on NAV facilities where syndication is increasingly common. So we thought a market update on term loan features in fund finance could be of interest. Here is what we have learned.
Luxembourg and the Cayman Islands are two of the world’s leading fund formation jurisdictions, and account for a large portion of the private equity funds domicile market. Most private equity fund structures are comprised of entities from a multitude of different jurisdictions, often including both Luxembourg and Cayman Islands funds. The efficient and commercial success of such multi-jurisdictional transactions invariably rests on the competence and experience of the legal counsel teams engaged to negotiate and advise the parties in respect of each relevant jurisdiction.
This article examines some of the principal similarities and differences between Luxembourg and the Cayman Islands when providing legal advice in connection with various types of fund financing transactions.
Following the end of a long-running process, the Cayman Islands has now officially been removed by the EU Commission from its list of ‘high-risk’ countries for AML/CFT purposes.
The most recent episode of the Fund Finance Expert Talk by Michael Mbayi, Head of Banking & Finance at the Luxembourg law firm, Praxio Law & Tax, is now live.