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It is an exciting time to be in the fund finance space. Sponsors continue to seek liquidity to fund investments, and banks and alternative lenders are thinking creatively about how to offer this additional leverage. There isn’t just increased deal-making volume and transactions getting done, but the deals have interesting and novel features which borrow concepts that we see in other types of financing transactions. Among what we are seeing is parties taking a second look at the value of the collateral package and getting comfortable with the idea of putting a second lien on that collateral. It isn’t so long ago that second-lien loans were a form of distressed debt. Then they went mainstream and became a typical form of financing for companies seeking extra leverage while offering the lenders – which range from money center banks to hedge funds and private equity funds and other direct lenders – a nice return on their capital. It only makes sense that, given this concept is prevalent in other types of financings, it would make its way over to the fund finance space.
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As the universe of asset-based and hybrid facilities continues to expand, fund finance lenders are increasingly encountering pledges of equity interests issued by funds or SPVs domiciled in popular jurisdictions outside of the U.S. – such as the Cayman Islands. Such pledges raise issues distinct from pledges of the capital call rights of Cayman-domiciled private equity funds, and we regularly field questions from lenders as to the best way to take and enforce such security. This article aims to answer some of the most frequent questions that lenders ask in respect of security over shares of Cayman exempted companies.
Kroll Bond Rating Agency (KBRA) this week released a recap of Informa Connect’s SuperReturn North America conference on private equity, held in Boston on October 4-5, as well as SuperReturn Private Credit U.S., held in Chicago on October 25-26.
Women in Fund Finance (WFF) U.S. will host the fourth session in its ESG Panel Series, “An Emphasis on Governance,” next Wednesday, December 8, from 10:30 - 11:30 a.m. EST. To view a full speaker line-up and to register, visit here.
Cadwalader partner Brian Foster spoke at Practising Law Institute’s 2021 Fund Finance Conference on November 17. He participated with other industry leaders on a panel discussion of NAV facilities for private equity primary and secondaries funds. Panelists discussed why sponsors use such facilities, key legal considerations in structuring and documenting such transactions, due diligence issues and notable developments over the past year. Issues related to management fee loans and GP stake deals were also discussed. A replay of the panel discussion is available through PLI.
The women of Cadwalader’s New York fund finance practice hosted our inaugural women’s client event this week. We were delighted to be joined by so many of our accomplished women clients.
Scott Aleali and Jeff Maier recently released a Fund Fanatics episode featuring Dee Dee Sklar, which is available here.
Lux law firm SJL Jimenez Lunz published a fund finance article this week addressing RAIF vehicles. The article is accessible here.
Most people who have had a reasonable degree of interaction with Cayman funds and fund finance transactions will be well aware that different Cayman vehicles have distinct constructions and legal characteristics (in particular, Cayman exempted limited partnerships and their general partners). A recent decision of the Cayman Courts in a case named In the matter of Padma Fund LP (“Padma”) has, for now at least, added an extra factor to consider when engaging with such funds. While Padma provides no reason for immediate alarm from the perspective of lenders in fund finance transactions, it does merit mentioning so that lenders and their advisors can be aware of the prospective issues it could create in practice. Before giving a very high-level (we promise!) summary of the Padma decision and its implications, it is helpful by way of background to run through the most commonly seen Cayman vehicles and highlight some of their notable features.
With the end of LIBOR approaching, PE sponsors entering into new subscription credit facilities will be seeing a non-LIBOR benchmark rate – for U.S. Dollar, most likely the Secured Overnight Financing Rate (SOFR) – in their loan agreements. In this part two of a two-part article, the Private Equity Law Report spoke with multiple borrower-side and lender-side counsel – including Cadwalader's Mike Mascia and Jeff Nagle – about important aspects of LIBOR remediation in the subscription line space that managers should monitor, including the amount of the spread adjustment and the timing of the actual transition. To access the subscription-required article, click here.
The Wells Fargo Fund Finance team is hiring for two Analyst positions to support the bank’s fund-level financing activities to private equity funds and other asset managers through structured credit facilities. The role will be based in London and calls for a Bachelor’s or Master’s degree and prior experience (or long-term internship) at an investment bank, asset manager or another reputable financial services firm.