Here are some updates to our Fund Finance Calendar.
A handful of state pensions and other municipal investors in the United States have been including side letter provisions that prohibit principals or persons employed by a fund sponsor from making campaign contributions to a candidate whose elected position can influence the selection of the fund sponsor for investments. Quite similar to the more widely seen placement agent disclosure provisions, the remedy for a breach is often structured to give the municipal investor the right to cease funding capital contributions without being declared a defaulting investor. Not surprisingly, for a subscription lender, this is problematic.
When the fund finance market began to develop in the UK in the early 2000s, it was not uncommon for standard capital call facilities to include various financial covenants regarding the performance of the underlying assets of the fund, including net asset value and loan-to-value tests. Since then, the fund finance market has rapidly evolved, moving away from the use of these provisions in “pure” capital call facilities in favour of their inclusion in genuine hybrid or asset-backed fund finance deals.
Brickfield Recruitment, an executive search and recruiting firm focused exclusively on the Fund Finance market, announced its formal launch this week. Brickfield intends to match candidates with law firms and financial institutions, covering both banking and legal professionals in Fund Finance. The firm will be headquartered in London. More information about Brickfield is available at www.brickfieldrecruitment.com
Secondary funds are using leverage at record rates, according to a report published by Triago that was highlighted in a recent Secondaries Investor article. Because leverage can smooth the traditional cycle of secondary volume, secondaries utilized leverage in 38% of deals by total transaction value in 2018, up from 23% in 2017. Despite a downturn in public markets at the end of 2018, leverage was a significant factor in secondaries deal volume being at $6.3 billion in January and on pace to smash the $13 billion volume mark set in Q1 2018. Yet some prognosticators have concerns that GP-led deals with substantial leverage could suffer if there were a recession. The full Secondaries Investor article is available by subscription here.
Credit Suisse Seeks Fund Finance Attorney
Here are some updates to our Fund Finance Calendar.
This January, we completed a data project in which we examined every fund finance deal we closed in the United States in both 2017 and 2018. The data set is relatively robust and provides some interesting insights into the market.
We are all accustomed to seeing change of control as a mandatory prepayment event, if not an event of default, under subscription line facilities. Even the strongest sponsors accept that a lender’s analysis of a transaction is based on the current management of the fund, such that any change in control should trigger at least the right to prepayment and cancellation. While there are often points for negotiation, this premise is almost universal.
Alexa Schult, of First Republic Bank, was recently promoted to Senior Credit Analyst. Alexa joined First Republic in 2013 and works with a team that specializes in private equity fund finance. In her expanded role, Alexa will have responsibility for supporting clients and working closely with her team to develop customized credit solutions for private equity fund managers. Alexa is also a founding member of the New York chapter of the Fund Finance Association’s Next Gen Network.