LPAs slow to address changing fund finance options
In this Private Equity International article, partner Jocelyn Hirsch discusses the rapid growth use of NAV loans and how it's left most fund sponsors relying on LPAs.
"... Every time a fund moves to the next vintage, they ought to refresh and relook at their borrowing provisions, because often they were written with plain vanilla subscription facilities in mind. There are a lot more fund finance options out there now than existed in the past, so we encourage clients to re-look at everything and consider a dialogue with LPs on options like NAV loans.
The level of negotiation on these points really depends on the type of fund and what they think they are going to accomplish. Some funds want to be very clear that they might want to do a NAV deal and here is how it would work. Others don’t really know, so they are not spending a lot of time introducing a bunch of NAV language just in case. NAV issues come up at the end of a fund’s life and so they are not necessarily something that GPs want to focus on when fundraising.”
