As the fund finance market continues to expand, we have seen a growing interest among real estate and other private equity funds (each, a “Fund”) in unleashing the value of their assets to optimize investment returns. In order to meet the financing needs of these Funds, a growing number of banks and other credit institutions (each, a “Lender”) are providing credit facility products supported by a pool of the Fund’s unencumbered assets (each a “UAP Facility”). While loan availability under UAP Facilities is most often based on the value of a Fund’s unencumbered real properties, recently we have seen unencumbered private equity assets serve as a basis of loan availability in an increasing number of transactions. In light of this trend, this article will discuss common features of UAP Facilities and compare UAP Facilities to subscription-backed credit facilities (also known as “capital call” or “capital commitment” facilities, and each a “Subscription Facility”), net asset value credit facilities (each a “NAV Facility”) and hybrid credit facilities (each a “Hybrid Facility”).
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