Structuring Umbrella Credit Facilities in Fund Finance: Multiple Funds With Different Borrowing Bases
Drafting a Single Credit Facility With Distinct Covenants, Reps and Warranties, and Events of Default for Each Borrowing Base
Course Details
- smart_display Format
On-Demand
- signal_cellular_alt Difficulty Level
Intermediate
- work Practice Area
Banking and Finance
- event Date
Thursday, December 14, 2023
- schedule Time
1:00 p.m. ET./10:00 a.m. PT
- timer Program Length
90 minutes
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This 90-minute webinar is eligible in most states for 1.5 CLE credits.
This CLE course will discuss the structuring of credit facilities comprised of multiple funds having similar sponsorship but different borrowing bases. The panel will discuss how the fund group concept should be documented to provide a single credit facility with distinct covenants, reps and warranties, and events of default applicable to each borrowing base.
Ms. Sanford is a partner in the Finance Practice Group of Haynes and Boone. Her practice is focused on the representation of financial institutions and borrowers in commercial loan transactions. Ms. Sanford has experience in representing lenders with negotiating and documenting loans to real estate private equity funds in connection with subscription secured financings as well as negotiating and documenting other secured and unsecured transactions. Additionally, she has represented borrowers in intercreditor relationships and in subordinated financing transactions, and has represented issuers in connection with offerings of senior secured notes.
Mr. Draper is Co-Chair of the firm’s Debt Finance Practice. As one of the leading finance lawyers in New England, he represents a number of companies and private equity sponsors in a range of acquisition financing transactions, including asset-based credits and large syndicated term loans. Mr. Draper has considerable experience representing borrowers in a variety of debt transactions, from acquisition finance to bank credit facilities to high yield bonds. He also represents fund lenders in senior, second-lien and mezzanine loans. In the fund borrower area, Mr. Draper is a national leader. He has spoken on several panels and has worked on dozens of capital call facilities, portfolio leverage and liquidity financings for private and registered funds.
Ms. Tiller leads the firm’s Fund Finance Group in New York. Her practice covers a broad range of financings, including complex acquisition and leveraged transactions, fund finance transactions and other alternative capital transactions. Ms. Tiller has extensive experience in borrower and lender-side fund finance and structured finance transactions, regularly representing clients in PE NAV facilities, secondaries and credit fund NAV facilities, subscription credit facilities, GP financings and collateralized fund obligations. She also regularly represents insurance companies in multiple financings, including those related to reinsurance sidecars, and other transactions. Mss. Tiller is a frequent speaker on finance-related topics and routinely writes on fund finance topics.
Umbrella credit facilities are increasingly being used to provide financing to private equity fund groups with a single sponsor but hold distinct sets of assets and liabilities. In an umbrella facility, a single set of loan documents applies to multiple funds, but representations and warranties, financial covenants, events of default, and other provisions are tailored for each fund or funds with a shared borrower base (the fund group).
Drafting such provisions is a complex undertaking and should be done with care. Various defined terms throughout the loan documents will need to reflect the multiple borrower base structure, with terms like "borrower" or "borrowing" taking each fund group into account. Umbrella facilities also involve higher administrative costs than standard facilities; provisions must be made to share expenses among fund groups.
Fund groups may take on differing structures, including a traditional umbrella where the borrowers share a common borrowing base cross-collateralized concerning each other borrower in the fund group, multiple funds with a single investor but each with a different borrowing base, or a fund in which capital commitments and holdings are segregated within the fund's partnership agreement. Finance counsel must understand the nuances of each.
Listen as our authoritative panel discusses the mechanics and documentation of umbrella credit facilities.
- Umbrella facilities: multiple borrower bases and the fund group concept
- Advantages and disadvantages of the umbrella structure
- Documenting umbrella facilities
- Types of fund groups
- Multiple borrowers with a shared borrower base
- Multiple funds with common investor(s) but each with a different borrower base
- Funds with capital commitments and assets segregated within the partnership agreement
- Luxemburg umbrella
The panel will review these and other key issues:
- When is an umbrella facility a desirable option for a borrower or a lender? What are the pitfalls?
- In structuring the facility, what kinds of amendments must be made to each fund's partnership documents?
- How should the loan documents address partial ownership of multiple assets by multiple funds?
- How do the different types of fund groups affect the deal structure?
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