Featured
One of the important components of the collateral package for a subscription finance facility is the lender’s perfected security interest in the fund’s bank deposit account into which the actual cash constituting the proceeds of the capital calls are deposited (frequently called the “collateral account”). As many of our readers and market participants are well aware, there are two avenues to perfecting a lender’s security interest in a collateral account in the U.S.: (1) entering a tri-party control agreement with the fund and the third-party account holder (establishing control pursuant to Section 9-104(a)(1) of the UCC); or (2) maintaining the collateral account in house at the lender’s institution (establishing control pursuant to Section 9-104(a)(2) of the UCC). However, what do you do if the fund cannot give a lender “control” using either of these methods because it has already ceded control to another bank?
Articles
When the U.S. Small Business Administration’s revised rules for its Small Business Investment Company program went into effect last August, it looked like a greenfield market for capital call financing had been opened. For the first time, the agency permitted capital call financing to levered SBICs without requiring SBA pre-approval. Given that the 298 active SBICs manage more than $40 billion in AUM and hold more than $10 billion in unfunded commitments, the opportunity looked rather compelling. But for reasons that we expand on here, limitations the collateral package and lender remedies may lead lenders to treat SBIC capital call lines more like a low advance-rate, unsecured product (with certain enhancements) and less like traditional subscription line of credit.
December 2023 saw the publication by the EU of the near-final version of its ‘Banking Package’ that makes significant changes to the Capital Requirements Directive known as ‘CRD VI’. This article is going to focus on the CRD VI prohibition on the provision of cross-border ‘core banking services’ into the EU by non-EU institutions; currently, it is up to individual European member states to decide whether and how non-European institutions can provide services to their citizens, and that is going to change and national waivers currently in place will terminate.
The Fund Finance Association has announced the agenda for the upcoming European Fund Finance Symposium! The event is an excellent opportunity for private equity industry professionals to network, exchange ideas, and learn from some of the most influential leaders in the field.
We're thrilled to announce the 8th Annual Cadwalader Finance Forum will take place on Wednesday, October 23, in Charlotte.
Although we all still remember the after effects of the 2007-08 financial crisis, we’re actually still feeling the impact of the Great Depression in our loan documents. The Crash of ’29 was precipitated in part by margin lending, a popular tool in the early 1900s to enhance infrastructure investments by allowing the purchase of stock with borrowed funds where the stock acted as collateral for the loan. A rush on margin calls as stock prices collapsed wiped out fortunes and eventually led the Federal Reserve Board to issue margin regulations. Better known to fund finance practitioners as Regulations T, U and X, they appear almost universally in our credit agreements and opinions. This article provides an introduction to these regulations and how they may be related to fund finance transactions generally. Although note that certain fund finance transactions require a deeper dive into the margin regulations. Stay tuned!
Conservative structures that prioritize debt repayment and limit leverage supported consistent performance for Fitch rated PE CFOs in recent months despite a decline in distributions. Overcollateralization and improving liquidity ratios (distributions to capital calls) are expected to support deal performance in 2024. The full report is available via subscription here.
We're thrilled to announce the 8th Annual Cadwalader Finance Forum will take place on Wednesday, October 23, in Charlotte.
Women in Fund Finance EMEA and Maples Group are pleased to invite you to the first WFF Industry Gathering in Ireland.