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We continue our focus this week on NAV loans, discussing common issues that arise in evaluating the security structures for such loans. For our purposes, NAV loans refer to loans to private equity funds where the value of the portfolio companies comprising the investment assets of the fund support the private equity fund borrower’s loan obligations. In other words, lenders are underwriting the value of the private equity fund borrower’s investments in its portfolio companies, as opposed to another asset of the fund (e.g., capital call rights).
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In a previous FFF article, we discussed the due diligence scope and content for GP facilities where security is taken over the GP profit share. As mentioned in that article, we are increasingly seeing facilities being made available to management and executives of a fund for the purpose of the executives funding their commitment as LPs of co-invest vehicles. This raises very different considerations to subscription facilities and also a different set of considerations to facilities relying on the GP profit share.
In this week’s FFF: Industry Conversations, Mike Mascia and Wes Misson of Cadwalader walk through Cadwalader’s 2020 U.S. portfolio data, including comparing Q2 medium spreads to Q1, looking at how tenors compressed in Q2, and presenting slides covering a host of other data metrics depicting how COVID-19 has (and has not) impacted the market.
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Last week Wildgen's Michael Mbayi hosted an insightful panel discussion that gave listeners the opportunity to compare and contrast fund finance transactions and trends in the European, U.S. and Asian markets.
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Sarah Lobbardi has launched Avardi Partners, an independent debt advisory boutique focusing on the fund finance market. Sarah has worked in private debt markets and corporate finance for over 14 years.
Sanna Yamin has been promoted to Vice President from Assistant Vice President at Bridge Bank, a division of Western Alliance Bank.
Sanna joined Bridge Bank’s Equity Fund Resources group in 2018 and has assisted in expanding the bank’s footprint in shared national credits, in addition to subscription facilities for private equity and venture capital funds, and growing the group’s SBIC investment and capital call lines of credit portfolio.
The Fund Finance Association this week announced the inevitable: that the European and Singapore conferences scheduled for the fall will be converting to virtual. The FFA is going to host “FFA Virtual Week” (sort of like The Discovery Channel’s Shark Week?), which will include web-based programing for all regions spread across a single week. The FFA will be releasing dates and more information in the near future.
The Loan Syndications and Trading Association (LSTA) set forth the following model provision (the so-called “yank-a-bank” provision and usually captioned “Replacement Lenders” in loan agreements) in the wake of the 2008 financial crisis.
In today’s video version of Fund Finance Friday: Industry Conversations, Mike Mascia of Cadwalader hosts Mike Breaux, Director at Stifel Bank, who gives an update on the bank’s fund finance practice and his market observations; Tess Virmani, Associate General Counsel at the LSTA, who discusses the LIBOR transition and incorporating ESG standards in loan transactions; and Tina Meigh of the Maples Group, who offers a practical viewpoint from the trenches on obtaining Cayman registrations to comply with the Private Funds Law.
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Private Equity Wire recently published an article highlighting Investindustrial’s recent EUR 600 million facility as one of the first European subscription credit facilities linked to Environmental, Social, and Governance (ESG) initiatives.
Private Equity International published an article last week on the recent popularity of NAV facilities as a tool to access liquidity. The article discusses how NAV facilities have emerged in “record numbers” as an answer to the liquidity crisis stemming from the COVID-19 pandemic. But the article goes on to warn that the practical challenges accompanying these facilities cannot be overlooked.