Introduction to fund finance—capital call facilities

Produced in partnership with Leon Stephenson of Reed Smith

Practice notes

Introduction to fund finance—capital call facilities

Produced in partnership with Leon Stephenson of Reed Smith

Practice notes

This Practice Note discusses:

•
what is meant by capital call facilities, NAV, or asset backed facilities, and hybrid facilities
•
the commercial use of capital call facilities
•
the due diligence that lenders will conduct
•
the standard security package requested by lenders, and
•
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

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Leon Stephenson

Partner, Reed Smith

Leon is co-head of the Reed Smith fund finance team, based in London. Leon and the team work with banks, other financial institutional lenders, managers, general partners and limited partners of funds on specialist fund financing transactions with private equity, secondaries, real estate, direct lending and infrastructure funds.

Leon has particular specialist knowledge of NAV/asset-backed and hybrid facilities, secondary funds facilities, capital call facilities, co-investment and GP/manager support facilities and other types of liquidity facilities provided to funds.

Leon is recognised as a Leading Individual in Fund Finance by The Legal 500 UK 2021 and the team was awarded Band 1 in Fund Finance by The Legal 500 UK 2021. Leon was recognised as “Partner of the Year for Banking” at the Client Choice Awards 2017. Leon represents a large proportion of lenders that provide fund financing as well as a number of private equity and other funds on complex fund finance transactions.

Jurisdiction(s):

United Kingdom

Key definition:

Fund definition

What does Fund mean?

Includes any estate or property held for the benefit of any person or class of person and any fund to which a trustee or representative'>personal representative is entitled in that capacity

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