Secondaries, GP stakes and private credit: Here’s a look at what we’re reading this week.
On March 21, the Federal Deposit Insurance Corporation published for comment a proposal to revise its Statement of Policy on Bank Merger Transactions. In a recent Client & Friends Memo authored by Andrew Karp and Chris Van Heerden, we focus on how if adopted as proposed, the proposal would modify the Statement of Policy substantially, effectively creating an entirely new policy.
Read more here.
Join the Fund Finance Association for the first Women In Fund Finance Ladies Poker Night at the Hearst Tower in New York City, cohosted by Fitch Ratings, Deloitte and WFF.
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?
The Fund Finance Association wants to say thank you again to all those who attended the 13th Annual Global Fund Finance Symposium and remind you to save the dates for the upcoming global symposiums!
The Bank of England this week flagged concerns about the financial stability risks posed by private equity in light of higher interest rates and the resulting pressure on valuations. While the announcement has been widely covered in the financial media, no concrete actions were announced. The BoE’s Financial Policy Committee plans to report back on its analysis at a June meeting.
Global M&A deal value jumped 30% to $690 billion in Q1 according to London Stock Exchange Group data cited in the Financial Times. We have previously suggested that the recent easing in financial conditions could support improvement in investment, exit, and distribution trends in private markets. Dealmaking activity during the quarter, however, skewed to larger transactions, and the recovery in Europe outpaced the improvement in the U.S.
The direct lending share of global private debt fundraising declined again 2023 after reaching an all-time record of 47% in 2021, according to data from Pitchbook. Until the 2012, distressed, special situations, and mezz strategy funds dominated private debt fundraising, accounting for as much as 90% of dollars raised in 2006, and reflecting interest and returns in difficult-to-access, non-commoditized fixed income. That interest appears to be making a return.
Meanwhile, Bloomberg reports that private credit funds are giving up fees to attract capital as competition between closed-end funds, BDCs, and banks intensify. Illustrating the point, Apollo recently waived the first year of fees on its Middle Market Apollo Institutional Private Lending BDC for its anchor investor Mubadala Investment Co.
NAV facilities come in all shapes and sizes and, unlike subscription facilities, there is no standardised collateral package for these kinds of transactions. In the European market, many lenders - particularly investment banks - are focused on ensuring that they have recourse to the underlying assets of the fund via their security documents. This might take the form of direct security over: (i) each of the topcos through which a fund (indirectly) owns the relevant underlying portfolio company; (ii) any aggregator vehicle through which the fund (indirectly) owns all or a large number of the underlying portfolio companies; or (iii) a combination of (i) and (ii). Recently, we have seen an uptick in the number of financings in Europe that are structured as what are commonly referred to as “security-lite” transactions: these transactions involve no security being granted over the underlying assets of the fund, with lenders (often non-bank in this context) only given secured recourse to the bank accounts into which distributions from the fund’s investments are paid. In this article, we shine a light on some of the key factors to take into account for these kinds of transactions.
Join partner Leah Edelboim as she sits down with Adam Zotkow from Goldman Sachs for a captivating Industry Conversation.
Join Women in Fund Finance for Wine-d Down Wednesday at Fotografiska Museum NYC, where you can connect over world-class photography and wine!