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Structuring Margin Financing for Private Equity Funds: Securities as Collateral, Margin Calls and Cures, Registration Issues

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

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Conducted on Thursday, May 19, 2022

Recorded event now available

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This CLE webinar will examine margin loan facilities where securities are pledged as collateral. The panel will discuss the pros and cons of margin loan financing for private equity sponsors, the key terms and structural components of margin loan facilities, the mechanics of margin calls and cures, and day-to-day facility maintenance issues.


The recent surge in asset-based lending to private equity funds has often included margin financing where shares are pledged in support of asset-based loans. The collateral may include publicly traded securities, preferred shares, convertible notes, or debt of public companies. Finance counsel must understand the nuances of margin lending with regard to each collateral type and how it fits into the entire transaction.

The method of perfection may vary depending on the type of collateral. Public securities can be deposited into a custodial securities account with a control agreement in favor of the lender. Control over book-entry securities can be effected with a contractual control agreement with the issuer or the lender to take physical control of certificated securities.

Valuation is a key component of margin credit facilities. There must be a valuation method to track LTV, whether by mark-to-market for publicly traded securities, or value as reported by the sponsor investment vehicle to its investors and creditors. If the securities fall in value, a margin call will require a cure to reduce the LTV to the required level.

A cure is accomplished by repayment of a portion of the loan or posting additional collateral. If a cure is not possible, the borrower may be forced to sell shares and apply the proceeds to pay down the loan. If the borrower's shares were not registered in connection with the related IPO, a registration statement must be filed, or the sale must be conducted pursuant to an exemption from registration.

Listen as our authoritative panel discusses the structuring, documentation, and administration of margin loans.



  1. Reasons behind the use of margin loan financing; benefits for private fund sponsors
  2. Types of securities pledged as collateral
  3. Valuation and LTV covenants
  4. Methods of perfection
  5. SPV borrower
  6. Regulation U
  7. Mechanics of a margin facility
  8. Issues with restricted shares
  9. Mandatory prepayments
  10. Release of collateral


The panel will review these and other relevant issues:

  • When is it advantageous for a private equity sponsor to seek margin financing in connection with other PE financing?
  • What are the methods of perfection when the loan collateral is securities?
  • How is LTV determined when pledged securities are not publicly traded?
  • How are margin calls made, and how are they cured, in a margin credit facility?


Chen, LeAnn
LeAnn L. Chen

Haynes and Boone

Ms. Chen represents banks, multinational corporations, hedge funds, mutual funds, private equity funds, and...  |  Read More

Unterberg, Craig
Craig S. Unterberg

Haynes and Boone

Mr. Unterberg concentrates his practice in the areas of representing borrowers and lenders in secured and...  |  Read More

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