Worldwide: Private Equity In Africa: Subscription Credit Facilities On The Rise

Last Updated: 22 December 2015
Article by Samantha Hutchinson and Raj Kulasingam

Private equity deals in Africa totalled $8.1bn last year, according to the African Private Equity and Venture Capital Association (AVCA). This is the second highest on record after the $8.3bn posted in 2007. Today, investing in Africa is increasingly seen as a necessary part of a balanced investment portfolio as investors look to the continent – home to many of the world's fastest growing economies and a growing middle class – for higher returns. As capital that is looking to be deployed in Africa increases and competition for Africa PE deals hots up, financing techniques and instruments used by private equity (PE) in developed markets are now being utilised by African PE funds. Whilst it will be a while before we see a true PE leveraged finance deal, we are increasingly seeing the emergence of the "subscription credit facility". These facilities are perceived by many US and European alternative asset fund managers as a staple components of the fund administration process.

The PE fund manager perspective
Subscription credit facilities (also known as investor bridge facilities or capital call facilities) have been utilised by US and European PE fund managers for over a decade because of the multitude of benefits they bring. They include:

  • giving the fund manager fast and reliable access to liquidity (typically within a couple of business days) which can help facilitate the speed and certainty of deal execution;
  • lowering the cost of capital and therefore enhancing a PE fund manager's return strategy; and
  • allowing a fund to more efficiently manage its drawdown process by consolidating drawings.

The lender's perspective
From a lender's perspective, the relatively low risk profile of this type of product and its strong track record has made this one of the fastest growing debt products in Europe and the US. However, the saturation of these markets resulting from an abundance of new providers in recent years is driving lenders to look outside of their traditional geographies to emerging markets.

Africa is an increasingly popular destination for PE fund managers. It is now a clear focus for banks and other financial institutions that offer this type of product, and increasingly African PE fund managers are getting the significant benefits that their European and US counterparts have been enjoying for over a decade.

What's the difference?
What is it that distinguishes this type of facility from other types of debt products? The main differentiator is that the facility is either put in place directly at fund level or otherwise involves some form of recourse to the fund, as opposed to the PE asset that the fund is investing in.

This recourse could be by way of guarantee. This means that the underlying credit/security for the facility is the contractually committed but uncalled capital of the limited partners (LPs)/investors in the fund.

Competition drives lower pricing
These facilities are often put in place early in the life cycle of the fund to allow fund managers to enjoy the benefits described above. However, they can also be put in place much later in the life of the fund to allow PE fund managers to accelerate distributions. This is an important tool for PE fund managers in a competitive market where speed of returns to investors can be a critical differentiator. Depending on the level of diversification and quality of the underlying LP/investor base that comprises the credit/security for this type of facility, these products generally attract relatively low pricing compared to other types of debt product including leveraged debt.

This low pricing is in no small part due to the increasing levels of competition amongst lenders in the subscription credit market. However, whilst the pool of banks and financial institutions able to offer this type of product has expanded significantly over the past few years, there can be significant variations between the terms offered by lenders. As terms are driven by lenders' internal credit policies and credit criteria, it pays to understand this market properly and the different terms on offer.

Price is not the only criterion
Whilst pricing is clearly important, our experience is that it is often not the most important factor for a PE fund manager in determining  which lender should be chosen for the mandate. Factors such as the provider's track record and experience in the subscription credit market and the type of collateral package required are equally (if not more) important factors.

Understanding what these terms will mean in practice in terms of the day-to-day administration of one of these types of facilities is crucial for a PE fund manager in identifying the right credit subscription facility lender. The answers to questions such as the following will help identify which lender will be suitable for a PE fund:

  • how often will the fund be required to call capital during the life of the facility;
  • what level of control over the LP/investor base will the lender require; and
  • whether the LP/investors will be required to directly acknowledge the debt package.

Make a plan and the benefits will come through
As always, early planning is critical. For a PE fund manager, this planning starts during the fund formation process in terms of initial discussions with LPs/investors and ensuring that the fund documentation adequately provides for the facility and associated collateral security package to be implemented.

However, the benefits are clear, as evidenced by the increasing popularity of this type of product across all asset classes, geographies, industries and fund sizes. In the story that is the subscription credit facility, Africa looks set to be the next chapter. Just remember to get an adviser who understands the market – from both the lender and borrower perspective – to make sure that the deal that is reached is the right one for both parties.

This article was first published in African Banker 4th Quarter 2015 Issue 34.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
28 Sep 2017, Seminar, London, UK

On 26 July the FCA published its long-expected consultation paper on the extension of the SMCR to all FCA-authorised firms. The so-called "core regime" introduces the key concepts of regulator-approved senior managers, firm-approved certification staff and conduct rules applicable to virtually all staff.

3 Oct 2017, Conference, Zurich, Switzerland

As the founding Partner of the Europe-Iran Forum, Dentons Europe will once again support this year’s event. This compelling event which explores all Iran-related topics will take place in Zürich on 3rd and 4th October.

4 Oct 2017, Workshop, London, UK

We are hosting an interactive workshop where we will run a mock High Court trial of an employee competition case – where the members of the audience are the judges. The session, aimed at in-house counsel and HR professionals, will offer an insight as to how disputes involving employees moving to a competitor play out in practice.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.