Default Remedies Under Subscription Credit Facilities: Pre-Enforcement Strategies, Capital Calls, UCC Foreclosure

A live 90-minute premium CLE webinar with interactive Q&A


Tuesday, March 17, 2020

1:00pm-2:30pm EDT, 10:00am-11:30am PDT

Early Registration Discount Deadline, Friday, February 21, 2020

or call 1-800-926-7926

This CLE webinar will discuss the exercise of remedies available to secured lenders under subscription credit facilities in an event of default by the fund manager or investors. The panel will discuss suggested actions to take at the pre-enforcement stage, the options available in exercising capital calls and other remedies, and pitfalls to avoid.

Description

While most market participants have a general understanding of the fundamental nature of subscription facility collateral, sometimes overlooked is how an agent, acting for the benefit of the secured parties, would practically enforce the lenders' remedies against such collateral following an event of default. Subscription facility lenders and their counsel should understand and be prepared to enforce their rights under such a facility quickly.

Several actions should be taken before actually enforcing remedies. These include confirmation that UCC filings are valid and unexpired, delivery of investor notices, review of the account control agreement and complying with any notice requirements, posting a capital call on the investor portal (if applicable), and confirming capital call mechanics and excuse rights. The agent and secured parties might also want to use the default to negotiate a restructuring of the subscription facility.

Once the stage is set, the agent can enforce (or leverage its right to enforce) the enumerated remedies outlined in the fund's governing documents against any defaulting investor. These include collecting default interest (which may require separate notice), taking exclusive control over the collateral account, issuing a capital call, terminating any revolving commitments, and applying proceeds under the enforcement waterfall found in the subscription facility documentation to settle secured hedges and to pay expenses.

Listen as our authoritative panel explains the complex process of exercising remedies under subscription credit facilities and the preliminary actions to consider before commencing with enforcement.

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Outline

  1. Subscription credit facilities--key parties, what constitutes a default
  2. Pre-enforcement stage
    1. Confirm UCC filings are valid and refresh lien searches
    2. Deliver investor notices
    3. Review and deliver notices under an account control agreement
    4. Capital call on investor portal
    5. Review all existing defaults under the subscription facility
    6. Calculate outstanding obligations
    7. Consider restructure of the subscription facility documentation
  3. Enforcement stage
    1. Charge default interest, if available
    2. Suspend the availability of LIBOR loans
    3. Take control over the collateral account
    4. Notify investors of the default
    5. Make a capital call--alternative methods
    6. If necessary, enforce remedies outlined in the fund's governing document
    7. Terminate the revolving commitments
    8. Accelerate the maturity date and declare all obligations due and payable
    9. Apply the enforcement proceeds according to subscription facility documentation
    10. UCC foreclosure

Benefits

The panel will review these and other critical issues:

  • What are the first steps a lender should take when a subscription facility default has occurred?
  • When might a restructuring of the facility be appropriate as opposed to exercising other remedies?
  • What is the process for taking control of the cash collateral account? Under what circumstances should a new account be opened?
  • What are the different methods for exercising a capital call?
  • What are other remedies available to the lender in the event of default?

Faculty

Deveau, Kevin-Paul
Kevin-Paul Deveau

Partner
Reed Smith

Mr. Deveau is a banking and finance partner with Reed Smith in London. He advises clients on a broad range of domestic...  |  Read More

Jones, Bronwen
Bronwen Jones

Partner
Reed Smith

Ms. Jones acts for banks and other financial institutions, sponsors, general partners and fund managers on a range of...  |  Read More

Stephenson, Leon
Leon Stephenson

Partner, European Head of Funds Finance
Reed Smith

Mr. Stephenson is a member of the Financial Industry Group and Head of Funds Financing in London. He and his team work...  |  Read More

Tabas Carson, Elizabeth
Elizabeth R. Tabas Carson

Partner
Reed Smith

Ms. Tabas Carson is a partner in the firm's Financial Services Group. Experienced in a wide range of U.S. and...  |  Read More

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