Fund Finance

Market participants ponder what the future of the market looks like, and wonder which borrowers might suffer should a supply/demand imbalance persist.

Bankers discuss what the future of subscription credit could look like, should the current supply/demand dynamics continue while demand increases.

New lending is happening, but it’s a different world out there for some, and you may find yourself looking for a new bank. Experts weigh in with their advice on getting subscription finance in the new environment.

Is $500bn in sub line supply not enough anymore?; PEI podcast and a new survey on managers’ outlooks in light of the pandemic.

Was the supply/demand imbalance some insist exists now a pre-existing condition? And what does the future look like for the sub line market?

It’s gotten harder to find a syndicate for new, large transactions. And some banks are trying to sell down existing pre-covid exposures, in some cases to make room for new loans at new, higher prices.

Even some blue-chip sponsors have been rejected by relationship lenders. This has forced them to branch out, sometimes only to be rebuffed by banks dealing with their own limits on their ability – and appetite – to lend.

NAV covenants and capital call minimums are increasingly being used in subscription credit line deal documents, say market participants. Even recourse to assets may be on the table.

The traditional collateral for subscription credit lines, LPs' uncalled capital, has performed strikingly well, so far. But some lenders are re-evaluating the risk of these loans, and there is an increased focus on whether LPs have the incentive to meet capital calls for some funds.

Major lenders in subscription credit facilities reined in new lending shortly after the crisis began in March, focusing on existing clients and facing various constraints. Smaller banks stepped in to pick up new business they might otherwise not have been able to compete for.