Structuring Capital Call Facilities For Open-End Funds

Law360, New York (December 4, 2013, 12:32 PM EST) -- A subscription credit facility, also frequently referred to as a capital call facility, is a loan made by a bank or other credit institution to a private equity fund. The defining characteristic of such facilities is the collateral package, which is composed not of the underlying investment assets of the fund, but instead by the unfunded commitments (the capital commitments) of the limited partners in the fund (the investors) to make capital contributions when called from time to time by the fund's general partner.

The loan documents for the facility contain provisions securing the rights of the lender, including a pledge...

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