Subscription Line Lending: Due Diligence by the Numbers

Financial institutions engaged in subscription line lending must take a fundamental and systematic approach to due diligence. The foundation of subscription line lending is the strength of the commitment of the diverse pool of investors to fund their capital commitments when called. Due diligence should have two broad focuses: credit and legal. Lenders can assess the overall credit quality of the mix of investors presented by the fund, while counsel can review the legal documents that make up the lender’s basket of collateral. After all, well-drafted and enforceable fund and investor documents are essential for success in these markets; if the contracts of the investors and the fund do not provide sufficient comfort that the obligations of the investors to the fund will be enforceable, the credit quality of the investor pool will be meaningless.

In this chapter of Global Legal Insights: Fund Finance 2022 (Sixth Edition), Loeb & Loeb partners Bryan G. Petkanics and Anthony Pirraglia and senior counsel Richard Facundo provide a step-by-step road map for the due diligence critical to building a solid structure of legal agreements that ensures the enforceability of investors’ obligations in a default scenario.

The sixth edition of Global Legal Insights: Fund Finance 2022 covers legal trends and developments in the greater fund finance markets, providing law firms, financial institutions, funds and investors with comprehensive insights. The book includes 24 product-oriented chapters together with individual chapters covering 18 jurisdictions.