As the investment fund industry has grown to encompass a profusion of investment strategies across the full spectrum of asset classes and geographies, the fund finance industry has evolved to serve the financing needs of investment funds at all stages of a fund's life. In recent years, that has resulted in growing interest, both from fund sponsors and lenders, in so-called "net asset value" ("NAV" for short) and other asset-based structures to provide liquidity backed by a fund's asset portfolio. Compared to traditional subscription finance, the collateral packages for these facilities, and the implications of potential enforcement, often present challenges that require careful diligence and structuring at the outset of a NAV financing to ensure that, should the worst case occur, the lender will have a sufficiently clear path to enforcement to be comfortable that it will be able to exit the trade without undue cost or delay.1 This chapter will examine these challenges and some of the structuring solutions that have been devised to provide fund lenders with liquidity in an enforcement scenario.
Collateral for NAV facilities
Unlike subscription credit facilities, which "look up" and rely on the uncalled capital of an investment fund as collateral, NAV facilities "look down" to the investment portfolio of the fund for credit support. The aim in structuring the collateral package for a NAV facility is two-fold: (i) to ensure that cash proceeds from the portfolio, whether resulting from payments of interest and/or dividends by the underlying investee companies or from proceeds of the sale of portfolio investments, are "trapped" at the NAV borrower so that any required repayments of the loan are made first before any amounts are available for distribution to the fund sponsor; and (ii) to enable the lender to monetise the equity value of the underlying portfolio to recoup its loan should the facility default.
Achieving the first of these goals is generally straightforward. Virtually every NAV facility will feature a pledge by the NAV borrower of any bank account into which investment proceeds will be paid, coupled with covenants to require that all proceeds from the portfolio be directed to the secured account (i.e. proceeds cannot be diverted around the NAV borrower without the lender taking its share). In most jurisdictions, taking security over a bank account is a simple matter of entering into the relevant security document and either providing notice of the security to the account bank or entering into a tri-party account control agreement among the NAV borrower, the lender and the account bank. No third-party consents or other burdensome procedures are required. Having security over the NAV borrower's bank account(s) provides the lender with comfort that any cash proceeds flowing from the portfolio that are not used to make permitted reinvestments in new portfolio assets will be used to pay any cash sweeps or other mandatory prepayments on the NAV facility before distributions are paid to the fund sponsor.
The second aim is more complicated. Beyond bank accounts, the collateral package for a NAV facility will depend on the nature of the underlying assets. For credit portfolios, it is often possible to take security directly over the portfolio assets (although care still needs to be taken that any transfer restrictions in the underlying loans do not create any issues on enforcement, especially as it is not necessarily the case that the underlying loans themselves will have defaulted when the fund-level facility is in default). Similarly, for facilities made available to hedge funds with liquid assets, lenders may require that the assets be credited to a custodial account over which the lender can take security. For other types of assets, taking direct security over portfolio investments often ranges from impractical to impossible. In these transactions, security is typically taken instead over the NAV borrower itself (to create a single point of enforcement) and/or over the first-tier holding company subsidiaries of the NAV borrower through which it holds its investments.
In the following section, we will explore some of the key challenges that NAV borrowers and their lenders face in crafting a NAV facility security package where the underlying assets are illiquid.
Challenges in taking and/or enforcing collateral for NAV facilities
Costs and practical considerations
For private equity and similar assets that have their own portfolio company leverage facilities in place, taking security over the ultimate opcos or their assets to secure a holdco NAV facility will almost certainly be prohibited by the opco finance arrangements. Consequently, security at this level is rarely contemplated. Instead, any security to be taken over the portfolio investments will be taken in the form of a pledge of the equity of one or more intermediate holding companies that sit above the opco credit group. In most cases, that security will be governed by the law of the jurisdiction of formation of the pledged entity. Depending on the number of companies and jurisdictions involved and the relevant local law requirements in those jurisdictions, taking security over a large portfolio of diverse global assets can quickly become a cumbersome and expensive exercise.
Transfer restrictions in underlying investments
A second issue that must be considered is to what extent a pledge of the equity of an investment holding company or the NAV borrower will conflict with transfer restrictions further down the corporate chain. As an example, investment fund limited partnership agreements customarily prohibit transfers of an investor's partnership interest without the consent of the fund's general partner (that is, the fund sponsor). In underwriting a NAV facility for a secondaries fund or other fund-of-funds, the parties must be mindful of the potential impact these restrictions may have both on the ability to create the security at the outset and on the lender's ability to enforce the security should the need arise.
In many limited partnership and shareholders' agreements, the transfer restrictions are worded such that they apply only to a direct transfer of the relevant equity interest by an investor. In those cases, so long as the security being granted for the NAV facility is over equity of an entity further up the ownership chain, parties can be comfortable that neither the contemplated pledge nor its enforcement would constitute a "transfer" within the meaning of the limited partnership or shareholders' agreement, and thus no consent of any other party to those agreements is required. In many other limited partnership and shareholders' agreements, however, the transfer restrictions apply broadly to both direct and indirect transfers of the underlying equity interest. The drafting of these provisions varies widely in scope, with some being triggered by a transfer of the equity of any direct or indirect holding company, some by any change of control of any direct or indirect holding company and some even more broadly by any derivative transaction (such as a total return swap) having the effect of transferring the legal and/or economic interest in the underlying equity interest.
To make matters even more complicated, what constitutes a "transfer" of an equity interest may or may not include a pledge.2
For a lender to understand the scope and potential impact of these transfer restrictions, it (or its counsel) must review the limited partnership or shareholders' agreements and related documents for each investment in the portfolio to determine (i) whether pledging the equity of an upstream company breaches an indirect transfer restriction, and (ii) if so, whether the transfer restriction would be breached by the pledge or only upon foreclosure. Once the scope of the applicable transfer restrictions is understood, the lender and its counsel must consider the extent to which applicable law may provide some protection for the lender by overriding the enforceability, in whole or in part, of any applicable transfer restrictions.3 Finally, a decision must be made whether to require the NAV borrower to seek consent to the pledge in order to ensure that any effective transfer restrictions are overcome.
For a facility covering a small number of underlying investments, these decisions can be made on a case-by-case basis and the parties may well decide to seek consent to remove any doubt in questionable cases. For large portfolios, however, the time and cost involved in reviewing individual limited partnership or shareholders' agreements can be prohibitive. In those instances, the parties will need to agree on parameters for a more targeted review and make a judgment call as to – and possibly adjust advance rates, loan-to-value ("LTV") ratios or other deal terms to address – the attendant risk.
Regulatory consent requirements
The nature of the underlying portfolio investments may also impact the ability of a lender to take a pledge of the equity of a NAV borrower or its interest in an investment holding company. If the underlying portfolio company is in a regulated industry such as insurance, financial institutions, energy, telecoms, etc., a transfer of a controlling interest, whether directly or indirectly, may involve a lengthy regulatory approval process. In most cases, these provisions will apply only if and when the lender seeks to transfer the equity interest in foreclosure. There are instances, however, where regulatory consents are required for the pledge itself.
Where companies of these sorts are included in a portfolio, both the fund sponsor and the lender will need to consider carefully whether the pledge raises regulatory concerns. Assuming it does not, and any regulatory approvals would be required only upon enforcement of the pledge, the lender will need to factor the time and cost of that process into its analysis of project recovery in default. While these considerations are not different in nature from those of lenders to operating companies in these spaces – who routinely are comfortable with these risks – they differ in quantum relative to the value of the collateral, given that the collateral for a NAV is limited by definition to the equity value of the underlying portfolio company after its own debt is repaid.
Change of control provisions in opco financings
Even if there are no contractual or regulatory restrictions on the ability of a NAV lender to take and ultimately enforce a pledge over the equity of the NAV borrower or its direct subsidiaries, enforcement of the pledge may trigger change of control provisions in underlying operating company finance documents. If enforcement of the NAV facility collateral would result in the fund sponsor ceasing to have voting control of the underlying portfolio companies, including by enforcement of a pledge over the general partnership interest in the NAV borrower, this is likely4 to trigger any change of control provisions set out in the portfolio company debt agreements. For a NAV lender, this means that, regardless of the validity and perfection of its security interest over the NAV facility collateral, actually enforcing that collateral could result in a value-destroying free-for-all at the portfolio company level. Some operating company lenders may be happy to grant consent to the change of control, but others (more likely to be those lending to any problematic credits in the portfolio – precisely those to whom the NAV lender does not want to offer an escape route) will require their debt to be refinanced or repaid as a result of the change of control. In either case, there will be significant time and costs involved in addressing these portfolio company issues in connection with an enforcement, time and costs the NAV lender will want to avoid wherever possible.
Potential US tax issues for fund sponsors
For NAV borrowers that are "US Persons" for purposes of the US Internal Revenue Code, pledging the equity of any non-US entities can have significant US tax implications. First, just as with borrowers in leveraged finance transactions pledging the equity of foreign subsidiaries, US NAV borrowers pledging the equity of non-US holding companies that are "controlled foreign corporations" ("CFCs")5 for US tax purposes may constitute a "deemed dividend" of the CFC's accumulated earnings to the NAV borrower, which would have US tax implications for the fund sponsor and its investors.
Secondly, pledging the equity of a non-US entity that is treated as a "Passive Foreign Investment Company" ("PFIC")6 might be treated as a deemed disposition of the PFIC by the NAV borrower, meaning that any taxable gain or loss would flow through to the fund sponsor and its investors at the time of the pledge.
Understanding how, or even if, these elements of the US tax regime would result in incremental tax costs in a particular transaction requires a detailed analysis of the fund structure and the companies involved. Where they do present issues, there are structural alternatives that can minimise any additional costs, but there is no one-size-fits-all solution.
Structuring alternatives and key considerations
In the simplest NAV structures, portfolio assets are moved into a single aggregator vehicle sitting just beneath the primary fund entities. That new aggregator serves as the borrower and pledges its interests in the underlying portfolio investments, either directly or indirectly via pledges of intermediate holding companies. In addition to taking security over the underlying portfolio assets, this structure may enable7 the lender to also take a pledge of the equity of the special purpose vehicle ("SPV") aggregator in order to obtain a single point of enforcement over the value of the entire underlying portfolio. Helpfully, this structure creates a separation between any fund-level indebtedness, such as a subscription facility or equity commitment obligations, and the NAV facility, eliminating the need for an intercreditor agreement to define the relative rights of the various interested parties to the funds' assets.
To provide greater protection for the NAV lenders against claims of other fund creditors in a US bankruptcy, some lenders in US transactions require that the SPV aggregator be established as a "bankruptcy remote" entity8 and that the transfer of assets into the aggregator be accompanied by "true sale" and bankruptcy non-consolidation opinions. This is most commonly seen where the underlying portfolio consists of credit assets, but it could be applied to other classes of assets. Additional consideration may also need to be given to whether or not such structures constitute the issuance of asset-backed securities and/or a securitisation, which could trigger minimum hold and other securitisation regulations.
Structuring a NAV facility in this manner can present any or all of the challenges discussed earlier in this chapter. Depending on the number of assets being pledged and the number of jurisdictions represented, taking security over each asset or its indirect holding company may require separate local law pledge agreements (and attendant local counsel costs) in several jurisdictions. In addition to increased costs of implementation, this structure may also increase the costs of administration and enforcement. As assets in the portfolio are sold by the fund sponsor, security over those assets will need to be released. If this is expected to be a frequent occurrence, the administrative burden on the lender may be significant. Moreover, should the lender need to enforce the security, it will be required to ensure that any investments sold in foreclosure are effectively transferred under each applicable local law to the foreclosure purchaser.
Before executing a foreclosure sale of any underlying portfolio investment, the NAV lender will need to fully understand (to the extent this was clearly determined by diligence at deal inception) any transfer restrictions and/or regulatory consent requirements applicable to the proposed sale as well as whether any change of control provisions at the portfolio company level would be triggered. For credit portfolios and most secondaries portfolios, this analysis should be straightforward and generally will permit a quick and efficient enforcement, absent a high proportion of highly restrictive transfer provisions or "indirect" transfer restrictions. For private equity, infrastructure and similar portfolios, however, indirect transfer restrictions in operating company shareholders' agreements, regulatory consent requirements and change of control provisions in operating company debt agreements can all make for a complex, costly and time-consuming enforcement process.
All of these potential costs and delays will need to be considered by the lender and factored into its credit analysis as it determines the LTV at which it is willing to lend against the portfolio.
On a positive note, in those cases where the lender is also able to take security over the equity of the borrower, the lender will have the greatest optionality, as it may choose between foreclosing on individual cherry-picked assets sufficient to recover its outstanding obligations while leaving the more problematic assets behind or foreclosing on the portfolio as an entirety by selling the shares of the borrower.
One drawback of the single aggregator structure above is the necessity to take and rely on security over the underlying portfolio of assets. As discussed above, the costs and complexity of doing so can be considerable. As an alternative, lenders may prefer to have a single point of enforcement in the form of a pledge of the equity of the NAV borrower.
Whether the fund vehicles are permitted to grant that pledge, however, will require a review of the fund's limited partnership agreements and other governing documents as well as any subscription facility or other debt agreements it may have in place. In many cases, the granting of security by the fund over its directly held portfolio assets may be problematic on both fronts.
To address these difficulties, a double aggregator structure is often used. In this structure, two new SPVs are created with one (the "parent") wholly owning the other (the "subsidiary"). The portfolio investments are transferred to the subsidiary, which serves as the NAV borrower. The parent guarantees the facility and pledges the equity of the borrower (importantly, no longer a direct asset of the fund vehicles) as security for the facility. Together with the pledge of the borrower's bank accounts, this structure provides the lender the ability to foreclose on the entire portfolio by executing the sale of a single interest and obviates the need to take security over individual portfolio investments.
This structure can also be used to avoid transfer restrictions, regulatory consent issues and change of control risks, although this requires the lender to be comfortable leaving the fund sponsor in control of the underlying assets even during and after foreclosure. For example, the parent and subsidiary aggregators can both be established as limited partnerships. The fund sponsor remains the general partner as it normally would, and the parent pledges only the limited partnership interest in the subsidiary to the lender. This limited partnership interest evidences 100% of the economic interests in the underlying portfolio but carries none of the control or governance rights. Consequently, neither the pledge nor any foreclosure sale impairs the fund sponsor's voting control of the portfolio assets.
The transfer restrictions in some equityholders' agreements are drafted very broadly to include (at least arguably) even an indirect transfer of a purely economic interest in the underlying investment as a "transfer" requiring consent of the other equityholders. While experience has shown this to be the exception rather than the rule, neither a lender nor a proposed NAV borrower can blindly assume that the double aggregator structure will cure all ills, but it cures many.
Separate aggregator for problematic investments
A second structuring alternative, which can be used as an alternative to either of the structures above, is to create two borrower aggregator vehicles: one to hold the assets that are more problematic from an enforcement perspective – due to underlying transfer restrictions, regulatory consent requirements, change of control provisions or otherwise; and one to hold the remaining "easy" assets. Whether the assets are pledged directly as in the single aggregator structure or both asset aggregators are held and pledged by a single parent SPV, this structure offers the lender the ability to quickly and efficiently foreclose and monetise the value of the "good" aggregator while commencing the more laborious process of enforcement over the more problematic assets. In an ideal scenario, the LTV contribution of the "good" borrower alone will be sufficient to provide a full recovery to the lender.
Pledges of GP interests/right to replace GP
As noted above, the double aggregator and related structures often avoid transfer restrictions and change of control issues by pledging only the economic interest of the underlying portfolio and leaving the fund sponsor in control as general partner of the aggregator SPVs and the portfolio assets. While this solves one set of problems, though, it creates another – in an enforcement situation, the lender would be unable to transfer control of the underlying portfolio to a buyer, potentially reducing both the universe of potential buyers and the price a buyer would be willing to pay for the assets.
To preserve the option to transfer control without losing the benefit of the double aggregator structure, lenders may require the fund sponsor to also pledge the general partnership interest in the aggregator vehicles and/or to ensure that the relevant limited partnership agreements permit a transferee to replace the general partner without cause following a foreclosure. The lender thus has the option to foreclose on both the general and limited partnership interests where it finds it advantageous to do so, or it can foreclose only on the limited partnership interest, leaving the buyer the option to replace the general partner as and when practicable.
Preferred LP interests
A variant on the double aggregator structure above that avoids the risk of triggering transfer restrictions or changes of control upon enforcement uses a preferred limited partnership interest to bifurcate the economic and ownership interests in the underlying portfolio. In this structure, the fund establishes a single aggregator SPV to hold the portfolio investments that will form the basis of the NAV facility. This SPV issues both a preferred limited partnership (or membership, depending on the nature of the entity) interest as well as an ordinary limited partnership or membership interest. The ordinary equity interest is issued to the fund vehicles in the usual manner. The preferred interest is issued to a second SPV, which is set up as an independent entity wholly owned by an orphan trust. This second SPV acts as the borrower for the NAV facility and pledges the preferred equity interest as collateral for the facility.
The limited partnership agreement or other governing document of the aggregator entity contains a waterfall such that any cash proceeds of the portfolio investments must first be paid to the preferred interest holder (that is, the NAV borrower) to the extent any amounts are owed under the NAV facility before any amounts can be distributed to the fund sponsor. Furthermore, any amendments to those governing documents that would negatively affect the NAV facility borrower (such as by changing the allocation of proceeds, permitting the incurrence of debt or liens, etc.) require the consent of the preferred interest holder. The NAV facility documentation further prohibits the preferred interest holder from granting that consent unless approved by the requisite lenders.
While this structure puts the NAV lenders further away from the portfolio investments, it has the advantage of potentially offering more liquid collateral. Because the preferred equity interest held by the NAV borrower is not a voting interest and does not carry with it general partner or other control rights (save for ordinary minority shareholder rights), any transfer of that interest in foreclosure would not result in a transfer of any underlying portfolio investment that might otherwise trigger transfer consent requirements, regulatory consents or a change of control.
Cash is key
In all of the above structures, regardless of whether a NAV lender takes direct security over the portfolio investments or only over a preferred equity interest issued by an aggregator vehicle that indirectly holds the assets, ensuring that any cash proceeds of the investments are "trapped" for the benefit of the NAV lender is critical to the success of any structure. This does not mean that the fund sponsor cannot expect to take dividends from the portfolio until the NAV facility is repaid; quite the opposite, in fact. It does mean, however, that the documents must provide as a fundamental principle that all cash proceeds of the portfolio must flow through a waterfall, which ensures that any amounts required to prepay the NAV facility, whether to maintain a specific LTV ratio or otherwise, must be paid first to the NAV lender pursuant to the facility documentation before amounts may be distributed to the fund sponsor.
As discussed above, NAV facility lenders take as a given that security will be provided over the bank accounts of the NAV borrower into which portfolio proceeds will be paid. This is only one piece of the puzzle. It is equally important to ensure that value from the portfolio cannot be captured by the fund sponsor other than by flowing up through the established waterfall. For example, the documentation should ensure that the fund sponsor cannot invest into the underlying portfolio investments other than via the relevant aggregator(s). This prevents the fund sponsor from making further investments into the portfolio via debt, preferred equity or other preferential instruments at an entity structurally senior to the NAV facility, which would enable the fund sponsor to be repaid gains from the portfolio in preference to the NAV facility.
Self-interest of the fund sponsor
As a final consideration, it is worth mentioning that NAV lenders often justifiably take at least some level of comfort in the fact that even in most worst-case scenarios, the fund sponsor will continue to be incentivised to manage the portfolio so as to ensure full repayment of the NAV facility, whether by assisting in a foreclosure transfer or otherwise. This incentive derives both from its own self-interest as well as from its continuing duties to its investors. In any fund environment, the fund sponsor has a fiduciary duty to its investors to manage the portfolio for the benefit of the investors. If a NAV facility goes into default at a 50% LTV, that means that 50% of the value of the underlying portfolio remains equity value that runs to the benefit of the fund's limited partners. A fund sponsor in that situation cannot simply walk away or neglect its management obligations, but must continue to manage the portfolio to the best of its ability to recoup as much of that 50% equity value as possible for the limited partners after the NAV facility has been paid.
In addition, any fund sponsor will be loath to notify its limited partners or make it known in the market that a NAV facility established by it has defaulted. Unless the fund sponsor is already closing up shop, it will be looking toward raising additional funds and financing its existing portfolios. A NAV facility that goes into default as a result of an unexpected sharp decline in the value of portfolio assets but which is worked through and repaid in a sensible fashion is not a story that anyone wants to be telling, but it is explainable. A defaulted NAV with respect to which the fund sponsor does not make every effort to resolve quickly, however, will raise questions from both potential fund lenders as well as, most importantly, potential fund investors as to whether that fund sponsor is one that should be included in the next allocation of investible capital.
In conclusion, structuring a NAV facility to have a perfected security interest over the given collateral (e.g. the equity in an aggregator vehicle) can be quite straightforward. Enforcing that collateral, however, can give rise to significant challenges, both in terms of cost of enforcement and the time and effort needed to obtain necessary consents. A NAV lender wants to ensure that, should the portfolio LTV rise above the "red flag" level, it can quickly and efficiently enforce its security and exit the trade. As discussed above, there are a myriad of structures that can be used to avoid these challenges to a greater or lesser degree, but, as with most things in life, these often come with trade-offs in terms of complexity and "closeness" to the underlying assets. In structuring any NAV facility, it is thus paramount to understand the nature of the underlying portfolio of assets, the degree to which one or more of these challenges is present, and the priorities of the lender and borrower as they balance LTV/advance rates, pricing and other deal terms against the path to enforcement in any given structure.
1. In addition to pure NAV facilities, the market has also introduced the concept of "hybrid" facilities, which include features of both subscription credit facilities and NAV facilities. Designed to provide a one-stop-shop solution to address a fund's financing needs at all stages of its lifecycle, these facilities are secured both by the uncalled capital as well as by the underlying asset portfolio (as and when it arises). They behave more as subscription lines in the early years, as the borrowing base comprises primarily the fund's uncalled capital. As that capital is invested, the proportion of the overall borrowing base represented by uncalled capital declines and is replaced by greater reliance on the NAV of the portfolio investments. These facilities raise several key issues that go beyond the scope of this chapter, but to the extent they rely on the ability to take security over the portfolio investments, they present the same issues discussed in this chapter.
2. For secondaries investors, underlying limited partnerships that consider a pledge of the limited partnership interest, whether directly or indirectly via a pledge of the equity of an upstream holding vehicle, as a "transfer" can be particularly problematic. Where the general partner consent requirements are limited to an actual transfer on enforcement, one can assess and price in the risk that one or more general partners may refuse consent to a proposed foreclosure transferee. Where the general partner's consent is required for the pledge itself, however, there are no assurances that the general partner's consent would be forthcoming. This is because fund subscription facilities are increasingly drafted to exclude from the borrowing base any unfunded commitments of limited partners who have pledged their limited partnership interests to their own lenders. As a result, consenting the pledge by the limited partnership would result in the fund losing the ability to include the unfunded portion of that interest in the borrowing base that supports its own liquidity needs.
3. As discussed in detail in this chapter, several of the structural solutions used to overcome the challenges outlined here draw a distinction between the economic interests in the underlying portfolio and the ownership or controlling interest, pledging the former but not the latter as collateral for the NAV facility. The general view is that Sections 9-406 and 9-408 of the Uniform Commercial Code ("UCC") render ineffective restrictions on transfer commonly found in equityholders' agreements, at least to the extent they prohibit the assignment of economic rights. However, Delaware, the most popular jurisdiction chosen by funds formed in the United States, deviates from the standard UCC provisions in that it excludes interests in limited liability companies and limited partnerships from the provisions of these sections. A more detailed discussion of the interplay between the UCC and the variety of potential transfer restrictions is beyond the scope of this chapter but should be considered by lenders and fund sponsors in appropriate cases.
4. Some portfolio company debt agreements may have "portability" provisions that would enable a change of sponsor without defaulting or requiring prepayment of the facility, but these provisions are not sufficiently widespread or standardised for a NAV lender to count on a clear path to enforcement with no change of control implications.
5. A "CFC" generally is a non-US business entity (that is treated as a corporation under US tax rules) where US persons who own at least 10% of the stock of the entity (by vote or value) collectively own more than 50% of the stock of the entity (by vote or value). In addition, due to certain attribution rules, an entity generally is a CFC if it is part of a group of commonly owned companies where at least one of the companies in the group is a US entity.
6. A "PFIC" generally is a non-US business entity (that is treated as a corporation under US tax rules) if either (i) 75% of its income during a year is "passive income" (such as dividends, interest, rents, royalties or gains from property that produces such income), or (ii) 50% of its assets produce passive income. In general, if an entity is a PFIC for any year, it remains a PFIC for all years. There are certain elections a US holder can make that eliminate many of the consequences of holding a PFIC.
7. Or may not. For more on this point, see the discussion under the heading "Double aggregator".
8. This typically involves appointing at least one director who is independent of the fund sponsor and drafting the charter documents to include a fairly standardised list of "separateness" covenants and requiring that certain actions by the SPV, such as incurrence of material liabilities and, most importantly, filing a voluntary bankruptcy petition, have the consent of the independent director.
This article was first published in GLI - Fund Finance 2022.
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