This is Part 1 of a series of articles in which we take a close look at some of the provisions and issues in loan agreements that are specific to subscription finance transactions. The commentary is based on LMA (i.e., UK/European) forms of Capital Call/Subscription Finance Loan Agreements, rather than the LSTA (i.e., U.S.) forms. Much of the commentary will be relevant to both but, where principles or considerations differ, this will be flagged in the relevant article. We hope you will follow the series and, to help you do so, the articles will as far as practical follow the same order as the loan agreement.
SEC registrants, including banks, will be required to record allowances for credit losses at loan origination based on a life-of-the-loan loss forecast effective January 1, 2020, under an accounting standard that has been years in the making. Net, net, we think current expected credit losses ("CECL") may aid the relative attractiveness of subscription lending over other bank assets.
The Dubai Financial Services Authority (DFSA) this week announced fines totaling $314.6 million against two Abraaj group companies for unauthorized activities and misusing investors’ money.
What you might have missed in private markets news this week . . .
Subscription facility borrowing is used for administrative ease, and performance is reported to LPs on a gross and an ex-facility basis, according to comments from KKR’s CFO, William J. Janetschek, on the company’s Q2 earnings call Q&A earlier this week.
James is Head of Fund Finance Advisory at Intertrust, advising Private Market Funds on the raising of Fund Finance Facilities across Private Equity, Credit, Real Estate and Infrastructure. James has over 20 years of banking experience within Private Markets, spanning the areas of Fund Finance, Leveraged Finance and Sponsor Coverage. He has worked with both Large and Mid-Market sponsors in the UK and Europe and is highly experienced in all aspects of transaction origination and execution, both at the fund and portfolio company level. He was previously with the Lloyds Banking Group Fund Finance team based in London. James is a Chartered Accountant and holds a Master's in Finance from London Business School.
East West Bank is currently seeking a senior Relationship Manager for its Private Equity business in the Eastern U.S.
Here are updates to our Fund Finance Calendar.
Back in 2008, you had to make a choice. You could either get your work done or you could stay current on market developments. With multiple daily bank failures, mergers, CEO changes and TARP investments, it was hard to do both well. The last few weeks sort of reminded me of that conflict, albeit on less distressing substance. So many interesting macro events are occurring right now that warrant attention and have the potential to impact fund finance.
Equity commitment letters (or ECLs) have become an increasingly common feature of the fund finance landscape, providing flexibility for private-market funds which, for a variety of reasons, either cannot or do not want to assume a primary debt obligation in respect of a particular transaction. We see this particularly with funds in jurisdictions where the incurrence of a financing at fund level may result in adverse tax consequences for the fund (and/or its investors) and where the fund has reached its borrowing/guarantee limits in its fund documentation.