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Lending to Private Credit Funds: ABL, Mezzanine and Other Facilities, Rated Notes, Partner Loans

Assessing Ability to Transfer and Modify Underlying Loans, Durational Risk, Remedies

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

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Conducted on Thursday, June 8, 2023

Recorded event now available

or call 1-800-926-7926

This CLE course will examine the structuring of loans for private credit funds, including NAV/ABL credit facilities, rated notes, partner loans, and other methods by which private lenders finance their lending capabilities. The panel will discuss special concerns with private credit funds, including the assignability and ability to modify or exercise remedies on underlying loan assets.

Description

Private credit funds employ a wide range of leverage strategies and products to facilitate investments (i.e., loans), improve returns, manage cash flows, and to achieve other goals. This program will provide an overview of some of the main types of leverage employed by private credit funds, as well as considerations that private credit fund managers/sponsors and legal counsel to such funds, and lenders to those funds and their legal counsel, need to take into account.

Private credit funds often use subscription-backed credit facilities for numerous reasons, including as a bridge to capital calls or other permanent or asset-level financing. As funds mature beyond their investment or commitment periods, they then often seek NAV credit facilities with availability based on the value of the underlying portfolio investments of the fund.

These two phases of financing have historically been distinct transactions, but borrowers and lenders are now also increasingly exploring hybrid credit facilities which provide lenders with recourse to both uncalled capital commitments (the typical collateral under subscription credit facilities) and underlying investment assets (the traditional credit support under NAV credit facilities). It is beneficial for counsel to have a thorough understanding of subscription and NAV credit facilities, and how components of each factor into a hybrid credit facility.

Listen as our authoritative panel discusses the different credit facilities available to private credit funds, and the nuances of each. The panel will also address UCC perfection issues concerning the various interests pledged.

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Outline

  1. Brief overview of what is and is not a private credit fund
    1. Publicly traded or otherwise registered funds (BDCs)
    2. Investment in CUSIP or a mix of private and CUSIP loans
    3. Warrants and equity co-investments as part of the primary investment strategy
    4. Single-investor vehicles or JVs between institutions
  2. Private credit strategies: direct lending, ABL, mezzanine, opportunistic/distressed investing, portfolio lender, and fund finance strategies
  3. Target return profiles and how that can impact funds' use of leverage
  4. Ways that private credit funds use leverage
    1. Subscription credit facilities
    2. NAV/ABL credit facilities
    3. Hybrids (mostly applicable in credit)
    4. Rated notes/rated feeder structures
    5. TRSs
    6. Back leverage
    7. Other products: GP/partner loans, management company lines of credit
  5. Considerations specific to private credit funds
    1. Ability to leverage capital commitments in the form of debt
    2. Restrictions on assigning/pledging/transferring loans
    3. 1940 Act or non-1940 Act fund
    4. When to exercise which remedies (foreclosure vs. collateral manager replacement)
    5. Ability to modify loans (restrictions thereon)
    6. Challenges of providing revolver facilities/accessing quick capital for this purpose
  6. Best practices/summary

Benefits

The panel will review these and other important issues:

  • How does a fund's lending strategy affect its own financing options?
  • What types of credit facilities and other leverage options are available to private credit funds?
  • What questions or concerns should a private credit fund or its legal counsel, or a lender or its legal counsel have with respect to a fund whose primary assets are its underlying loans?

Faculty

Dempsey, Mark
Mark C. Dempsey
Partner
Mayer Brown

Mr. Dempsey is a partner in Mayer Brown's Banking & Finance and Fund Formation & Investment Management...  |  Read More

Kaup, Anastasia
Anastasia N. Kaup
Managing Director and Partner
Fund Finance Partners

Ms. Kaup has represented asset managers, fund sponsors, investment funds, bank and non-bank lenders, and other parties...  |  Read More

Ramirez, Shana
Shana E. Ramirez
Partner
Katten Muchin Rosenman

Ms.  Ramirez’ multi-disciplined practice spans deals ranging from multibillion-dollar, broadly syndicated...  |  Read More

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