Previous FFF articles have discussed an increase in demand for GP and co-invest facilities over recent years. In light of current circumstances, some market participants are already predicting an increase in the popularity of these products, with GPs, managers and co-invest participants wanting to ensure they have an available source of liquidity to meet their obligations to provide capital to their funds. Anecdotally, and in line with these predictions, we have seen a healthy uptick in work around existing GPPS facilities (increases, additional borrower accessions) over recent months.
Cadwalader’s Mike Mascia connects with Richard Wheelahan, founding principal of fund finance debt advisory firm Fund Finance Partners, in this week’s podcast edition of Fund Finance Friday: Industry Conversations. In the podcast, Rich covers what his fund sponsor clients are seeing in the market, where the current demand for fund finance is the highest and what it is like being a principal in a start-up during challenging times.
The filing of a UCC-1 financing statement is necessary to perfect the lender’s security interest in the collateral supporting a credit facility. In normal times, the lender’s counsel will file the appropriate UCC-1s on the closing date of the transaction after confirming the form and content of each UCC-1 with the borrower and checking the information against the certified constituent documents of the filing debtor. These are not normal times, and Cadwalader has been monitoring our clients’ ability to file UCC-1s on a timely basis and without surprises.
Global corporate, capital markets, private equity and private wealth advisory firm Intertrust this week hosted a fund finance webinar titled “Accessing capital and liquidity from a fund finance perspective during the COVID-crisis.” The panel was moderated by Cliff Pearce, Intertrust’s Global Head of Capital Markets, and included James Rock-Perring, Intertrust’s Head of Fund Finance Advisory, Stephen Quinn, Managing Director at 17Capital, and Cadwalader’s Samantha Hutchinson and Mike Mascia.
This week the Institutional Limited Partners Association (ILPA) circulated a draft proposal around subscription facilities. Graham Bippart of Private Funds CFO published an extensive article on it yesterday titled “ILPA to recommend boosting disclosure of capital call credit line usage.”
The purpose of this article is to envisage whether the current COVID-19 pandemic can be considered as a force majeure in Luxembourg and the potential impact on Luxembourg fund finance transactions.
The Cayman Islands Private Funds Law, 2020 (the “PF Law”) has been an increasingly prevalent topic in fund finance transactions since its introduction in February of this year. As transactions have arisen (new subscription lines or amendments to existing facilities), most lenders have sought to directly address the implications of the PF Law. This has primarily occurred via the addition of affirmative covenants or other contractual provisions to the loan documents in respect of the requirement for private funds to register with the Cayman Islands Monetary Authority (“CIMA”), which is of material significance to lenders to such funds. As a result of the negotiation of these provisions (primarily in respect of registration timing, evidence of registration and ongoing compliance requirements) we are seeing a number of similar queries related to these points. The below is a summary of the questions we are most frequently receiving from lenders and their legal counsel and our responses to them.
Private Funds CFO published and distributed multiple articles this week about the response of preferred equity and concentrated net asset value (NAV) lending markets in the midst of COVID-19’s continued presence in the economy.
While most of the market noise in fund financing continues to be centered around subscription credit facilities, as liquidity becomes an increasing priority, GPs are looking to lenders for NAV and preferred equity structures. In this Unquote podcast, Matt Hansford of Investec unpacks the rationale for such facilities, including efficiency, flexibility of payment and reduced interference with portfolio management.
In many subscription credit facilities, lenders establish a multi-faceted timeframe for the borrowers to, among other things, make mandatory prepayments, pay certain tax reimbursements and post cash collateral in the event of a defaulting lender.