The global fund finance market has shown much resilience over the last 18 months. In this article, our team offers their thoughts and insights on the recent developments in Guernsey's fund finance market.
Whilst a typical subscription facility security package in Guernsey consists of the usual security over capital call rights and the account(s) into which capital contributions are deposited, we have recently advised on fund finance transactions where alternative security packages have been put in place, which are, in some instances, novel in Guernsey. Some examples include:
- security over distribution rights arising under the fund's limited partnership documents, coupled with a contractual ability for the lender to be registered as a limited partner of the fund should it so require; and
- cascading capital call security granted by each entity in a fund structure to secure the capital contribution that each entity has committed to its underlying fund, with the ultimate beneficiary (and borrower) of such security then assigning all security interests to the lender as security for the loan monies.
Post Abraaj, lenders appear to be increasingly adamant about investors being notified individually of the creation of capital call security. Where a corporate administrator has been appointed under a fund's limited partnership agreement to legally accept notices on behalf of investors, lenders still require notices to be served on each investor individually. Often an acceptable approach is for a notice to be delivered to the corporate administrator acting for and on behalf of each investor and the general partner of the fund to upload the investor notice to the fund's investor portal, and to then provide the lender with evidence or confirmation that this has been done.
GP commitment/NAV facilities
The majority of facilities we are seeing are subscription facilities, although we are also seeing GP commitment facilities and, increasingly, NAV facilities.
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.