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.
Cadwalader’s Mike Mascia connects with Jeff Johnston, Managing Director and Head of Subscription Finance at Wells Fargo and Chairman of the Fund Finance Association, in this week’s podcast edition of Fund Finance Friday: Industry Conversations. In the podcast, Jeff and Mike have a wide-ranging conversation, covering not only what Jeff is seeing in his portfolio and how the FFA is adjusting to the uncertainty, but also some of the challenges of leading large teams during stressful circumstances while in WFH, potential fund finance innovations coming out of the disruption and a deeply personal discussion of the passing of Jeff’s father-in-law in March.
Alice Murray of The Drawdown wrote an article earlier this week titled “Nothing to see here: LP defaults are fake news.” The article covers the Fund Finance Association’s response to the COVID-19 market disruption and reports on how well investor capital call funding has held up through the crisis to date. Cadwalader’s Mike Mascia is quoted throughout.
There has been a flurry of articles relevant to the fund finance community that were published this week and last. In a follow-up to an earlier article about two instances of European LPs defaulting on capital commitments, Private Equity International (PEI) issued a brief response aptly labeled “Investor liquidity: reading the runes."