Subscription Finance

Moses & Singer's role in the subscription finance market is well known, and we have developed long and productive relationships with many fund sponsors and their counsel, many significant institutional investors and their counsel, and leading ERISA counsel throughout the country. There are few law firms with substantial experience in representing the lenders in subscription facilities, and we believe we have had an innovative role. For example, the now-common waiver of Bankruptcy Code Section 365 (found in fund organizational documents and in Investor Letters addressed to the agent bank or sole lender) originated in our office. Emphasis on the fund's constituent documents as the essential element of the lenders' collateral and as the focal point of sensitivity in subscription-secured financing is a viewpoint that we believe distinguishes our role as counsel in these transactions.

The Attorneys

The co-chairs of our Banking Department, Thomas Volet and Michael Evan Avidon, have both been involved intensively in this practice from the outset, and their backgrounds help explain our distinctive perspective. Tom's background includes over ten years of practice as a tax attorney specializing in subchapter K (partners and partnerships). He has published several articles on issues relating to partnership allocations (including analysis cited as authority by the U.S. Tax Court), and his experience with the governing agreements of partnerships and other pass-through entities was the firm's original link to involvement in this area. Mike is a nationally recognized expert in letters of credit (where he has been active in the revision of UCC Article 5 and rules of practice) and secured transactions, whose knowledge and experience in the area of intangible collateral further distinguishes our emphasis on the fund constituent documents as the critical feature of the lenders' collateral position. Other partners in the department with substantial experience in these transactions include Paul M. Roder, who has been working on subscription financings since joining Moses & Singer at the outset of his career and is known and welcomed as an industry colleague by borrower counsel throughout the industry, and Howard L. Siegel, who brought a dozen years of finance practice experience when he joined us in 2007 and has since worked on numerous subscription financings. In addition, our counsel, Joshua H. Zakheim, formerly part of the legal department of one of the major lenders in this area, brings his sensitivity to the lender's needs, and we have other attorneys who have worked extensively in this area.

More About the Particular Transactions

We have structured, negotiated, and documented a wide range of facilities. Over the past decade, the facilities have evolved from having a single-fund limited partnership as borrower to include (i) multiple fund structures (e.g., onshore and offshore funds as well as alternative investment vehicles and feeder funds), (ii) different types of legal entities as borrowers and guarantors (e.g., limited liability companies, and even corporations with assessable shares qualified as REITs), (iii) multi-currency facilities and multiple loan tranches with multi-level borrowing bases, (iv) structures where the fund guarantees the obligations of a borrowing entity and structures where the fund instead supports the borrowing entity by subscribing (through a highly stylized secured subscription instrument) for equity interests in the borrower, (v) collateral in underlying investments as well as a host of guarantees and pledges of equity interests, and (vi) special collateral or other arrangements to qualify various investors in the borrowing base. In addition to real estate, the funds' target investments have included mezzanine debt, private equity, and distressed debt. Foreign jurisdictions in which the funds have been organized (and we have worked with local counsel) have included the Cayman Islands, England, the Bahamas, Bermuda, Luxembourg, and Guernsey. The size of the funds has ranged from under a hundred million to billions of dollars in subscribed investor commitments, and the size of the credit facilities from tens of millions to billions of dollars of lender commitments. ERISA profiles of the funds have ranged from REOCs and VCOCs to funds with ERISA participation under the 25% test or with no ERISA participation at all.

Following are brief descriptions of some of the credit facilities we have structured, negotiated, and drafted on behalf of the agent bank for the lending syndicate:

  • Facility exceeding $1B for a $4B real estate fund of prominent fund sponsor. Investors include government pension plans, endowment funds, private pension plans, bank investment vehicles, insurance companies, private equity funds, and foreign governments. Structure involves an onshore fund for domestic investors, an offshore fund for foreign investors, and an onshore fund for a domestic investment vehicle of a substantial foreign investor. Multi-level borrowing base, alternate investment vehicles (parallel funds), subsidiary borrowers, and multiple currencies, with multiple tranches and classes of lender commitments.
  • Multi-billion dollar facility including revolving and term loans in multiple currencies for several-billion dollar private equity fund of major investment bank, involving onshore and offshore funds and feeder funds.
  • $400MM facility for nearly $2B mezzanine debt fund network with onshore and offshore funds, alternate investment vehicles, borrowing subsidiaries, and feeder funds. Multiple currencies, with collateral and borrowing base also including underlying assets and equity interests.
  • Facility exceeding $700MM for one of world's largest private equity funds, with diverse investor pool, multiple-fund structure, and multi-level borrowing base. Subscription collateral shared under certain circumstances with other extensions of credit by syndicate members.
  • Facility exceeding $500MM for over $1B real estate fund of prominent fund sponsor. Traditional domestic LP structure, with investors including private pension plans, endowment funds, bank investment vehicles, insurance companies, private equity funds, and foreign governments. Multiple currencies. Eventually established $85MM "aftercare" (post investment period) facility.
  • $400MM facility for $600MM real estate fund of prominent fund sponsor. Investors include private pension plans, government pension plans, and endowment funds. Eventual aftercare facility. Multiple currencies, parallel funds and subsidiary borrowers.
  • €150MM facility for €1B UK-based real estate fund. Predominantly non-U.S. institutional investor base across wide spectrum. UK limited partnership structure (commitments almost entirely in form of loans). Multiple currencies.
  • $150MM facility for $450MM REIT-based fund system with structure involving secured subscription agreement and related documentation by investor-subscribed vehicle rather than conventional guarantee. Broad institutional investor participation.
  • Facility exceeding $250MM for $900MM fund investing in debt instruments. Broad institutional investor base. Structure includes a Master Fund for certain U.S. investors and an onshore and offshore feeder fund structure (each with several intermediate entities), with significant foreign investor participation, domestic and foreign feeder funds, and subsidiary borrowers.

The preceding list is a very abbreviated account of more than a decade of experience in syndicated subscription facilities. In addition, we have often served as counsel in connection with bilateral subscription facilities.

Community Development Financing

We also have represented money center banks in connection with a large number of community development financings, a related form of financing in which the majority of investors are themselves banks (as well as quasi-governmental entities).

Further Information

We would be very pleased to hear from you. Please feel free to call or email Thomas Volet (212.554.7824, thomasv@mosessinger.com) or Michael Evan Avidon (212.554.7854, mavidon@mosessinger.com) if you have any questions.

Prior results do not guarantee a similar outcome.