Author Archives: Hamish Masson

A guest blogger, Hamish is a finance lawyer who worked in London before moving to the BVI. Having recently (and reluctantly) sold his sail boat, he now spends his time on the BVI waters as a medic with the BVI’s volunteer marine search and rescue team (VISAR).

What lenders look for

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Lending to Funds — Subscription Finance Part II

Part one of this topic covered what subscription finance is, (loans to a fund secured on the undrawn capital commitments of its investors), and how it can benefit funds and their investors (increased liquidity, returns and simplicity).  This final instalment covers (briefly) the mechanics of this type of financing.

How does it work?

The subscription finance facility would work the same way as a standard loan facility.  As security for the subscription finance facility, the lender will be granted a power of attorney from the fund’s general partner (the GP) to step into its shoes and make the capital call to the investors, and/or an assignment of the right to make the capital call and to receive the proceeds of the capital calls.  Finally, there will be a charge over the bank account into which the capital commitments are paid into.

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Don’t forget to look up

Lending to Funds – an introduction to subscription finance

Nuts

“Neither a borrower nor a lender be” wrote Shakespeare and in the aftermath of the credit crunch and the global slowdown, it seems that many banks are reacquainting themselves with the words of the Bard.  And when they do lend, they are increasingly looking for more security, “safer” borrowers and higher fees.

On the face of it, a newly launched fund might not have the track record or the assets to persuade commercial lenders to lend monies to it. But these funds do have assets which they can make available to lenders – the uncalled capital commitments of their investors.

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