We are very pleased to announce that associates Spencer Davies and Justin Larson have joined our Fund Finance team.
The fund finance market has experienced serious growth over the last few years. Fund borrowers are seeking more liquidity than ever in terms of the number of funds taking advantage of credit facilities as well as the sheer size of the facilities themselves. We have seen rapid growth in subscription line financings as well as a great deal of interest in other types of financings that allow funds to access liquidity − in particular, NAV loans (i.e., loans that are underwritten by lenders based on the fund borrower’s investment portfolio). NAV is hot and getting hotter.
Private credit funds are making their presence felt in the leveraged loan market. Recent transactions illustrate the scale direct lenders have achieved, enabling these managers to compete head-to-head with banks. Earlier in the month, a private lender group provided a $2.5 billion unitranche facility that facilitated Vista Equity Partners’ acquisition of Avalara Inc., the latest in a string of large-cap loan transactions that have been done away from banks.
The LSTA published an Excel version of its ESG borrower due diligence questionnaire, the latest step in an asset manager ESG diligence initiative that started in June 2021 as a joint project of the Loan Market Association (LMA), the Loan Syndications and Trading Association (LSTA) and the European Leveraged Finance Association (ELFA). The questionnaire is intended to streamline the due diligence process and to generate readily comparable data. The questionnaire and further information can be found here.
The Fund Finance Association is thrilled to announce the expansion of FFA University, which now includes two fund finance courses. FFA University 1.0 will be the traditional program, designed for those relatively new to fund finance or seeking a refresher, and will be held virtually on September 21. FFA University 2.0 is a more advanced, in-person program for those seeking greater depth and networking opportunities. Class 2.0 will take place on October 6 in New York City in Cadwalader's New York office, with a reception to follow. To register and learn more about both opportunities, please click here.
Working with Cayman, Guernsey, Ireland, Jersey or Luxembourg funds? WFF brings you “Back to School: Offshore Structures and Fund Financing ‘101’”, a panel discussion scheduled for Wednesday, September 21.
Jeff Diehl, Managing Partner of Adams Street, penned a special report in Financier Worldwide, providing a timely perspective on the link between public and private market valuations.
This article continues our prior discussion of the risk of “bad acts” by a borrower in certain NAV loan structures. For our purposes, NAV loans are loans to alternative investment entities (e.g., private equity funds, secondaries funds, hedge funds, funds of hedge funds, pension funds and family office vehicles) that are underwritten, either on a secured or unsecured basis, by the value of the entity’s investments. Even in secured NAV loan facilities, rather than a direct pledge of the underwritten assets for the financing (i.e., the fund’s portfolio of investments), lenders typically will only receive a pledge of the management and economic interests in one or more controlled subsidiary holding vehicles (“HoldCo”) that hold the investments (i.e., an “indirect pledge” of the investments). As a result, the borrowers typically maintain complete control over the assets that the lenders are underwriting.
The fundraising outlook has become more complicated in recent months. No question, year-to-date data looks good. PitchBook, for example, reports that 191 U.S. PE funds raised $176 billion in the first half, annualizing ahead of last year’s full-year fund value raised of approximately $340 billion. More broadly, global private capital raised in the first half totaled $645 billion, according to Preqin data, which, while lower than in 2021, sets the industry up for another trillion-dollar-plus year. Those numbers, however, are in the rearview mirror at this point, and a host of factors are clouding the forward outlook.
Private Funds CFO interviewed industry leaders Anastasia Kaup of Fund Finance Partners, Vicky Du of Standard Chartered, and Katie Cotterell of Bridgepoint Credit on the rise of ESG-linked fund financing. You can access the article here.