Introduction to fund finance—capital call facilities
Produced in partnership with Leon Stephenson of Reed Smith

The following Banking & Finance practice note produced in partnership with Leon Stephenson of Reed Smith provides comprehensive and up to date legal information covering:

  • Introduction to fund finance—capital call facilities
  • 'Capital call facilities' and other types of fund finance
  • Capital call facilities—commercial objectives
  • The security package
  • Due diligence
  • LPA review
  • Management Agreement review
  • Subscription Document and side letter review
  • The facility agreement
  • Parties
  • More...

Introduction to fund finance—capital call facilities

This Practice Note discusses:

  1. what is meant by capital call facilities, NAV, or asset backed facilities, and hybrid facilities

  2. the commercial use of capital call facilities

  3. the due diligence that lenders will conduct

  4. the standard security package requested by lenders, and

  5. the main terms of capital call facilities

'Capital call facilities' and other types of fund finance

Capital call facilities: A capital call facility is a form of finance provided by a lender to a fund and typically secured against investors’ undrawn commitments. As such, capital call facilities are often requested by funds early on in their life cycle, when the amount of undrawn commitments is at its highest but the fund has no or a limited number of investment that can be secured in favour of lenders.

'NAV' or asset-backed facilities:By contrast, funds approaching the end or halfway point of their life cycle may find that 'NAV' or asset-backed facilities are better suited to their needs. Unlike capital call facilities, NAV facilities are secured against the cashflows and distributions from underlying portfolio investments.

'Hybrid' facilities: Hybrid facilities, which combine elements of capital call and NAV facilities, are also offered to funds by some lenders. Hybrid facilities are secured against both the undrawn commitments and underlying assets of the fund. These facilities are particularly useful to funds looking for a long

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