Here's a look at what we're reading outside the four corners of fund finance.
The Fund Finance Association this week hosted a call with representatives of its major event sponsors. Following the call, the FFA released a statement summarizing what its constituents are seeing in the market, addressing many of the narratives in recent press reports and providing suggestions for best practices for managing the challenges in the market.
Cadwalader’s Mike Mascia connects with Matt Posthuma, a Partner in Ropes & Gray’s fund formation group, in this week’s podcast edition of Fund Finance Friday: Industry Conversations. In the podcast, Matt gives an update on how the disruption is impacting fundraising in the real estate space, the state of real estate fund operations and capital call activity from his vantage point, and Investor performance on capital calls.
As part of the routine “know-your-customer” onboarding process, lenders are required to obtain the employer identification number (“EIN”) and other tax and beneficial ownership information from borrowers and guarantors to their credit facilities. Yet borrowers and guarantors formed in foreign jurisdictions, such as the Cayman Islands and Luxembourg, have recently had difficulty obtaining an EIN because the Internal Revenue Service has shuttered many of its offices in response to the COVID-19 outbreak.
The Private Funds Law, 2020 of the Cayman Islands (the Law) came into effect on 7 February 2020 and heralded a new regime for the registration of certain closed-ended funds with the Cayman Islands Monetary Authority (CIMA). The advent of the Law has led to discussion on whether to include an express covenant and event of default (or any other related provisions, such as conditions precedent and subsequent) relating to the Law into credit agreements.
The International Comparative Legal Guide to: Lending and Secured Finance 2020 was published this week by Global Legal Group (the same publisher that produces the Pink Book) in conjunction with the LSTA. Mike Mascia and Wes Misson submitted the chapter on Fund Finance.
PEI this week hosted a podcast with editors from its various publications in the buyout, private debt, real assets and secondaries spaces. They discuss the article they published on LP defaults, as well as the fund finance market, including NAV-based facilities and the impact on credit availability resulting from the drop in asset values, availability of assistance for private equity portfolio companies under the CARES Act, the level of communication between GPs and LPs, the impact of loan level defaults on the CLO market, the forecasted increase in tenant lease defaults, and more.
Looking for more on the Paycheck Protection Program, the Fed’s lending programs or the CARES Act? Cadwalader maintains a compendium of COVID-19 resources available here.
Here's a look at what we're reading outside the four corners of fund finance.
With the end of March came the close to a quarter that many investors will be eager to forget. Down more than 23%, the Dow Jones Industrial Average suffered its worst first quarter in 124 years and its worst quarter overall since the 1987 “Black Monday” stock market crash. The S&P 500 didn’t fare much better, declining 20% during the first quarter, its worst decline since the 2008 financial crisis. The price of a barrel of oil dropped to $20, energy, airline, and hotel stocks plummeted, and bitcoin fell by 10%. Other than gold and toilet paper, there were few places to hide. This overall decline was punctuated by bouts of extreme volatility, with equity markets whipsawed up or down on a near-daily basis. All of which contributed to an interesting few weeks in equities finance. Below are some observations as to what we have seen and what we expect to see in the near-to-medium term.