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This article looks at the distinguishing features of infrastructure funds from a credit perspective, their typical funding requirements, and the potential lessons for NAV facilities to private equity funds. While there remains some debate on the precise limits on infrastructure as an asset class, for the purpose of this article we will use infrastructure funds to refer to any fund established for the purpose of investing in a portfolio of assets comprising investments in PPP, energy (including renewables) and/or infrastructure projects that are characterised by their long-term revenues.
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We have recently been fielding a number of questions from our lender clients on the application of certain investor side letter provisions on the collateral package that secures the repayment of a subscription credit facility. A typical collateral package for subscription credit facilities consists of the fund’s limited partners’ unfunded capital commitments, capital contribution proceeds, and the general partner’s right to call capital from the limited partners. It is common for investors to enter into side letters, which are separate written agreements with the fund which amend, supplement, and alter the terms of the investors’ rights and obligations under its limited partnership agreement with the fund. These changes agreed to by the fund in a side letter may have material implications on a lender’s subscription credit facility. Here we take a look at certain side letter provisions that impact a subscription credit facility, how these provisions operate, and how lenders look to mitigate the risks associated with the consequences of the side letter provisions.
The Fund Finance Association European Symposium was held this week in London, bringing the industry together in Europe for the first time since 2019. The event was a tremendous success, with a packed agenda spanning three days from the opening reception on Monday through to the conclusion of the symposium with the Women in Fund Finance Networking Brunch on Wednesday morning.
Cadwalader’s financial services team will host the third part of its four-part series focused on capital relief trades on July 13. Part 3, titled “U.S. Legal and Regulatory Considerations” and led by partners Jed Miller, Daniel Meade and Ivan Loncar, will look at: Securities Law (Disclosure); Risk Retention; Tax; Swap Regulation; Commodity Pool; Insurance Regulation; Volcker Rule; Regulation W; and the Banking Holding Company Act.
You may register here for the July 13 (1-2 p.m.) webinar.
You may also view replays of Parts 1 (“CRT Overview and Regulatory Capital Basics”) and 2 (“Unpacking Regulation Q”) of the webinar series.
Private Funds CFO provides initial highlights from the packed Fund Finance Association European Symposium. Non-bank NAV lenders expect to benefit from higher rates, insurance company inflows, NAV/preferred equity hybrids and more, reports PFCFO. Full news here.
Maples Group recently released its June 2022 edition of FUNDed: An Industry Newsletter for the Global Fund Finance Market, which features a series of global market reviews, including specific reviews of the fund finance markets in the United States, Europe and Asia. One of the global market trends highlighted is the steady growth of ESG transactions over recent years and why to expect that growth to continue throughout 2022. The newsletter also featured other articles, including a thoughtful overview of Irish Collective Asset-Management Vehicles (i.e., ICAVs) and another that provides practical takeaways on the Jersey Limited Partnership − 2022 Amendments from a lender’s perspective. Find access to the full newsletter here.
As we near the close of the second quarter, eagerly look forward to next week’s 6th Annual FFA European Fund Finance Symposium in London and keep a watchful eye on the macroeconomic environment, we thought it would be helpful to provide an update on 2022 market activity based on our observations.
The LIBOR transition process continues to roll along. New transactions are (mostly) being closed without using LIBOR any more, and many legacy transactions are naturally transitioning when refinanced or renewed this year. However, a significant portion of the legacy loan market remains that will require active transition at or before LIBOR cessation on June 30, 2023. In order to help members think through the process, the LSTA has produced and distributed a series of amendment forms that may be used by market participants as part of the LIBOR transition.
This week, Women in Fund Finance hosted a panel discussion, "Infrastructure Fund Life Cycle Considerations: A Bank and Funds’ Perspective." The esteemed panel included Adina Schwartz from Morgan Stanley, Micaela Mastrogiannis from KKR, Vicky Du from Standard Chartered, and Sarah Elliot from NAB. The panel was moderated by Carolyn Baker from Commonwealth Bank of Australia. This robust discussion focused on the unique challenges of using fund level credit facilities, including subscription, NAV, or hybrid, and providing liquidity management solutions throughout the lifecycle of an infrastructure fund.
Cadwalader’s financial services team hosted the first part of a four-part webinar series on capital relief trades and opened registration for the second installment.
Moody’s Investors Service this week published a brief overview on capital call lending. Rather than ratings metrics, the write-up focuses on the role of capital call lending in the banking sector. Available behind a paywall here.