Share Subscription Facility Agreement

One`s fund subscription facilities are all the rage, as fund sponsors and investors recognize both the operational efficiency and competitive advantages they can offer. In addition, more lenders are ready and able to meet demand due to changes in the subscription facility market. Historically, lenders have not shown much enthusiasm for the funds, given their concentrated risk and the lack of overwork rights relative to larger and more diversified funds. More recently, however, lenders are increasingly available to this type of product, in order to expand their Rolodex and expand relationships with existing customers. Nevertheless, even experienced fund sponsors might be cautious about what they can expect when organizing the financing of a fund by a fund. This chapter aims to demystify this process. When a company wants to raise capital, it often issues shares issued either by the general public or through a private placement to purchase. The primary disclosure form for potential public investors is a prospectus. The prospectus is a publication document containing information about the company and its underlying security. Underwriting credit facilities are usually in the form of a priority guaranteed revolving credit facility, guaranteed by unfunded capital commitments from the fund`s investors. Facilities are subject to a credit base based on the value of the liabilities mortgaged by investors who meet certain eligibility requirements, the advance rates being based on the credit quality of the investors concerned.

As a threshold question, the Fund`s sponsor should confirm whether the Fund`s constituent documents allow either relevant fund to appease the other`s commitments. Assuming cross-protection is permitted by the existing elements, the fund sponsor should also confirm that investors have been properly disclosed and that such a cross-guarantee meets investor expectations. If a fund cannot be guaranteed by the main fund or, conversely, cannot be guaranteed, a fund`s fund can still be included in the existing facility. However, the credit contract would probably need to be amended to provide for two separate credit bases. In addition, the lender may request an amendment to accommodate the Joinder, which may, in the first place, call into question the effectiveness of joining a fund. It is not surprising that lenders offering credit facilities generally only provide loans on the credit base for unused liabilities of creditworthy investors that meet certain requirements, i.e. “inclusive investors”. Investors rated to the BBB/Baa1 or higher audience are generally included. Advance rates for rated investors may be higher for investors with higher credit ratings and generally range from 80% to 100% of the nominal amount of the unfunded commitment.