It has been a common refrain in the fund finance industry that “hybrid” loan facilities (i.e., loans underwritten on the basis of both a fund’s investor capital commitments and its investment portfolio) are constantly talked about, but are (at least in the PE buy-out space) seldom seen. An internet search returns a bounty of articles citing such facilities as a “cradle to grave” financing solution. Marketing teams crank out glossy presentations touting capabilities to execute such facilities. And conference agendas schedule panels to discuss the nuances of hybrid collateral structures. But the market consensus year after year has been that the number of hybrid deals actually executed has been . . . underwhelming.
Old habits die hard. For the decade leading up to Covid, inflation averaged a very comfortable 1.5%-2.0%. Stable, low inflation meant no one could be blamed for letting “real,” inflation-adjusted thinking fall by the wayside. In 2023, however, clear differentiations between real and nominal trends probably need to stage a comeback.
Funds make use of series partnerships across jurisdictions to allow for segregation of partnership interests, assets, distributions and operations into separate series or classes. A particular quirk of Cayman series partnerships, however, is that they are not statutory entities and instead exist solely as a matter of contract. It is therefore important for lenders to understand how this structure differs from statutory series vehicles and how this might impact a financing.
See you next week!
The 2023 Cadwalader Finance Forum is just one week away – on Thursday, October 19 at the Ritz-Carlton in Charlotte. We are looking forward to this engaging event, which will give you up-close interactions with industry thought leaders via intimate fireside chats and panel discussions exploring the latest market trends.
On March 12, 2023, the New York State Department of Financial Services appointed the FDIC as receiver for Signature Bank. The FDIC created a bridge bank, Signature Bridge Bank, and transferred all deposits and substantially all of Signature Bank’s assets to the Bridge Bank. No consents or other restrictions on transferring rights and obligations of Signature Bank are applicable for the transfer to the Bridge Bank. The receivership is governed by the Federal Deposit Insurance Act. Under the FDIA, the FDIC succeeds to the rights and powers of Signature Bank. The Bridge Bank is authorized to sell the assets of Signature Bank to another person.
On September 28, the Federal Reserve Board posted three new FAQs to its website regarding Regulation Q (Capital Adequacy of Bank Holding Companies, Savings and Loan Holding Companies, and State Member Banks). The FAQ guidance provides additional clarity on the use of credit-linked notes to transfer credit risk and offer capital relief to U.S. banks. While in some respects the FAQs merely confirm positions that the FRB has already taken in regard to individual CLN transactions, these FAQs are nevertheless important inasmuch as they publicly memorialize the FRB’s view of these products as valid capital management tools.
Meet us on Thursday, October 19, at The Ritz-Carlton in Charlotte for the 2023 Cadwalader Finance Forum! Hear from thought leaders and top executives including our keynote speaker, Michael Dryden.
Please join us for our inaugural European Finance Forum on October 12, focusing on bringing together fund managers, financial institutions and alternative lenders across the European finance industry to discuss some of the most topical issues across our industry today.
Cadwalader has been recognized across a broad range of practice areas in the 2023 edition of The Legal 500 United Kingdom.
Congratulations to our UK team for being ranked in Tier 1 of Fund Finance. Samantha Hutchinson, Nathan Parker, James Hoggett, Mathan Navaratnan and George Pelling are all ranked in Fund Finance as a Leading Individual, Next Generation Partner and Recommended Lawyers, respectively.
You can see the full rankings here.
Following the disruption in the market in March of this year, with the FDIC seizing three major middle-market lenders one of the questions on many people’s minds was – where were our bankers, colleagues, clients and friends going to land?