Structuring Capital Call or Subscription Loan Facilities for Investment Funds: Strategies for Lenders and Funds

Understanding Current Trends and Terms, Drafting Loan Provisions, and Conducting Due Diligence

Recording of a 90-minute CLE webinar with Q&A


Conducted on Thursday, July 10, 2014

Recorded event now available

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Program Materials

This CLE webinar will provide finance counsel for lenders and funds with a briefing on current trends and terms of subscription loan or capital call commitment facilities for investment funds. The panel will outline approaches for structuring the loan facility, examining the underlying fund structure and fund document provisions, artfully drafting loan provisions, and performing comprehensive legal due diligence.

Description

As obtaining financing continues to be difficult, capital call, also known as subscription or equity bridge, lending facilities have gained favor with lenders and investment funds due to their sustained solid performance over the past three years. Though initially seen mostly in real estate transactions, the facilities have grown to all types of equity funding and are expected to continue to gain popularity with banks and funds.

Capital call lending facilities provide bridge funding between a private equity fund's investment and its collection of capital contributions from investors. Before establishing and structuring a capital call facility, lender's counsel must first conduct a detailed due diligence review of all of the fund's underlying documentation to ensure it is authorized to enter into an unfunded loan and to repay the loan from capital investments.

Thorough due diligence depends on a detailed review of the fund's organizational documents, investment management agreement, offerings statements, subscription agreements and any relevant investor agreements. Counsel must take equal care in structuring the facility documents based on its findings in the due diligence and to address potential unrelated business income tax (UBIT) for some investors.

Listen as our authoritative panel of finance practitioners discusses the advantages and potential pitfalls of subscription or capital call facilities, current market terms and trends, best practices in negotiating and drafting loan document provisions, and due diligence for both lenders and investment funds.

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Outline

  1. Benefits for fund managers, investors and lenders
  2. Understanding the fund structure
  3. Current market trends and terms
  4. Potential pitfalls
    1. Investor regulatory concerns
    2. UBIT
  5. Key provisions for the facility agreement
  6. Due diligence for lenders and funds

Benefits

The panel will review these and other key questions:

  • When are capital call facilities the best option for obtaining funding?
  • What are best practices for conducting comprehensive due diligence of the fund involved prior to structuring a capital call facility?
  • What are the key provisions to include when structuring the capital call facility?
  • What provisions must be included in the capital call facility to comply with regulatory requirements and address UBIT issues?

Faculty

Albert C. Tan
Albert C. Tan

Partner
Haynes Boone

Mr. Tan is a member of the firm’s Board of Directors and Co-Chair of its Global Capital Commitment Financing and...  |  Read More

Timothy E. Powers
Timothy E. Powers

Partner
Haynes Boone

Mr. Powers is a member of the firm’s Board and Directors and oversees its international practice. His practice...  |  Read More

Richardson Knox, Ann
Ann Richardson Knox

Partner
Mayer Brown

Ms. Knox has spent her entire career structuring complex leveraged financings to US and global private funds, sponsors...  |  Read More

Michael C. Mascia
Michael C. Mascia

Partner
Mayer Brown

Mr. Mascia is a partner in the firm’s Banking & Finance practice group. He has extensive experience...  |  Read More

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