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Partner | Fund Finance

Previous FFF articles have discussed an increase in demand for GP and co-invest facilities over recent years. In light of current circumstances, some market participants are already predicting an increase in the popularity of these products, with GPs, managers and co-invest participants wanting to ensure they have an available source of liquidity to meet their obligations to provide capital to their funds. Anecdotally, and in line with these predictions, we have seen a healthy uptick in work around existing GPPS facilities (increases, additional borrower accessions) over recent months.

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Partner | Corporate Finance, Fund Finance
Senior Attorney | Fund Finance

NAV-backed facilities have been the talk of the town for several weeks now in the fund finance world. It seems not a day passes without this financing solution being touted as one of the key liquidity options GPs are currently considering. Whilst NAV facilities have been around for a long while, they have historically been used to finance large diversified portfolios of assets, particularly in the secondaries, fund of funds and private credit spaces. However, many primary managers are increasingly looking to these facilities for both defensive and offensive purposes. Why is it that these facilities are becoming so popular with primary managers and what are the challenges to putting one of these types of facilities in place?

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Associate | Fund Finance, Corporate
Associate | Fund Finance

On February 7, 2020, the Cayman Islands Private Funds Law, 2020 (the “PF Law”) came into effect, requiring certain closed-ended Cayman-domiciled funds (“Funds”) to register with the Cayman Islands Monetary Authority (“CIMA”) by August 7, 2020. With the August 7 deadline fast approaching, Lenders are increasingly seeking the inclusion of language to safeguard the enforceability of their security, and there is certainly no shortage of negotiation involved in this process. While we have seen various Fund Finance Friday articles from Cayman counsel on the new PF Law itself, this article focuses on drafting concerns and mechanics in subscription credit facilities, and the implications for Lenders and Funds alike.

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Jan Sysel and Adam Summers, Partners at Fried Frank, join Cadwalader’s Mike Mascia in this week’s podcast edition of Fund Finance Friday: Industry Conversations. Jan and Adam cover what Fried Frank is seeing in fund formation and fund finance as the market stabilizes into month three of the disruption. They cover the current fundraising market and the pipeline for subscription facilities, and give forecasts around the impact on NAV facilities of mark write-downs when 2nd quarter financials become available. Adam also provides an update on the leverage finance markets. 

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Jeff Maier, Senior Managing Director – Private Equity Finance at First Republic Bank, published a May 15 article on LinkedIn titled “Sailor! I Order You to Give Me a Market Deal! – The Subscription Credit Facility Market in the COVID-19 Era.” The article discusses the application of “market” concepts within the context of bespoke fund structures and investor scenarios. It also includes a recipe for a Fund Finance Mai Tai. 

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Arthur Cox recently published “Fund Finance: Market Update,” providing a summary of issues and trends they are seeing in fund finance during the pandemic, including changes observed in market activity, expectations with regard to pricing, and how regulators have been responding to issues caused by the disruption to business.  

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Private Funds CFO circulated a newsletter Monday highlighting, among other things, a potential trend for limited partners to use leverage as a way to meet capital call obligations, including lenders providing NAV loans to help manage cash flows during low distributions and continuing capital calls.

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Mourant hosted a webinar panel last Friday, discussing COVID-19’s impact on private equity and fund financing, with a focus on Asia-Pacific as well as potential industry-wide effects. The panelists discussed the lack of LP defaults, COVID-19’s impact on the secondary market, lender appetite for financing new subscription facilities, the importance of GP-LP and sponsor-lender relations and future opportunities in fund finance.

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Partner | Fund Finance

Fund finance clearly survived the opening flurry of COVID-19 punches. Our transaction structures held solid; deal volume for many market participants actually accelerated through March and April and into May. And we are still busy on new deals. But I think this is going to be a long game. Below are my updates on what we have seen in the market the last two weeks and what I’m forecasting going forward.

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Jesse Hurley, Head of Global Fund Banking at Silicon Valley Bank, connected with Cadwalader’s Mike Mascia in this week’s podcast edition of Fund Finance Friday: Industry Conversations. In the podcast, Jesse covers what Silicon Valley Bank is seeing in their fund finance portfolio, including investor capital call funding performance, facility utilization and pipeline opportunities. He also discusses the growth of the SVB Fund Banking team and their many new hires, predictions for the venture capital and angel investment space for the remainder of 2020 and the corresponding impact on the innovation economy. 

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The funded status improved meaningfully for pension funds in April. The Milliman 100 Public Pension Funding Index, which tracks the 100 largest government-sponsored defined benefit pension plans, showed an investment return of 5.92% for the month, reducing the group’s estimated deficit by $200 billion to end the month at $1.619 trillion. The funding ratio for index constituents improved to 69.8% from 66.0% at the end of March. The group controlled total assets of $3.750 trillion at the end of April.

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May 22, 2020 | Issue No. 78
May 15, 2020 | Issue No. 77
May 8, 2020 | Issue No. 76
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Recent Issues

May 22, 2020 | Issue No. 78
May 15, 2020 | Issue No. 77
May 8, 2020 | Issue No. 76
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