Subscription Facilities for LPs - Factors to Consider

Attorney Zac Barnett is the co-founder of Fund Finance Partners. An Illinois-based lawyer, Attorney Zac Barnett provides clients with a range of products and services including hybrid subscription facilities, which are being used more widely in private equity funding. Subscription facilities offer several benefits to investors as well as limited partners (LPs).

Limited partners are comprised of investing interests that come from institutional accounts, pensions, and wealthy individuals. In private equity, limited partners commit capital to a fund while a general partner (GP) or a private equity firm invests the money in companies (both public and private). The GP charges performance and management fees.

As it relates to LPs, subscription facilities allow sponsors to properly manage capital calls, thereby reducing the administrative burden on limited partners. Even with these benefits, LPs have to pay attention to a few factors. Among the number of considerations, negotiating the contract is important. GPs negotiate with both the lender and the LPs when setting up the contract. However, LPs have to make sure they understand all of the restrictions and limitations that are a part of the ending contract because the GP will not necessarily divulge this information.

Another consideration closely related to negotiating the contract relates to lender contact with LPs. Typically, lenders do not contact LPs. However, this would still happen especially when the limited partners prefer to have more transparency around the lender’s perception of the fund, fund’s creditworthiness, and fund’s track record.

Disclosure is an additional factor to consider. Information is typically disseminated among LPs as to how the fund is going to be used, but local law dictates disclosure of the facility.

Published: Advantages of Subscription Credit Facilities

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Fund Finance Partners Launches New Fund Advisory Business

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With nearly 20 years of experience as an attorney in the fund finance sector, Zac Barnett is a cofounder of Fund Finance Partners (FFP) in Chicago. Having served as an attorney for several investment banks and fund sponsors, Zac Banett is a lawyer with extensive experience in real estate, private equity, secondaries, private credit, hedge funds, and other fund financing vehicles.

FFP recently announced the launch of its new fund advisory business. Led by FFP cofounders Mr. Barnett and Richard Wheelahan, who possess more than 35 years of experience in the fund finance space, the fund advisory business aims to increase returns for fund sponsors through implementing strategies that lead to the best terms and pricing and an expedited loan closing process.

Backed by professional expertise, FFP’s principals have collectively executed more than 600 financing arrangements adding up to over $150 billion in lender commitments. In addition, FFP’s leadership earned early financing mandates from several private equity, credit, and real estate investment firms prior to FFP’s launch.

The Basics of Private Equity

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Zac Barnett, an attorney and debt advisor, provides debt placement advice fund sponsor clients on a variety of topics. Private equity funding is one of the many topics Zac Barnett covers, and in the attorney's many years of experience, he has represented both lenders and borrowers in these transactions.

Private equity funds are investments made up of shares that are not publicly traded or listed on the stock market. Private equity is usually made through a fund or firm and typically occurs as the result of a buyout of a public company that goes private.

Investors use private equity firms/funds for a number of reasons. The funds are used to:

- raise capital for mergers and acquisitions,

- stabilize the company’s balance sheet,

- raise money, and/or

- begin new projects.

The money that is raised is contributed to accredited investors (private or institutional).

Private equity funds can work to the investor’s advantage because they generate a lot of money, becoming financial powerhouses in one of two ways. Private equity firms raise money by buying struggling companies, turning them around, and/or restructuring them. Alternatively, pension funds invest in private equity funds to see a large return on their investment. Either way, private equity funds become influential in determining company policy.

FFA Diversity Initiative Connects with Students Early in their Career

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Attorney Zac Barnett leverages nearly 20 years of experience as a lawyer to represent lenders and borrowers tied to various funds. Based in Chicago, attorney Zac Barnett regularly attends Fund Finance Association (FFA) events.

Dedicated to educating members, advocating for the fund finance industry, and sharing information about policies and regulations affecting the industry, the FFA facilitates several initiatives, including the Diversity Initiative, which addresses the current lack of diversity in the fund finance industry.

To improve diversity in the industry, the FFA’s Diversity Initiative primarily focuses on building relationships and fostering engagement habits among students at the beginning of their careers in fund finance. The FFA creates a forum where students can learn about fund finance and the industry as a whole. Meanwhile, the organization brings together industry professionals who want to change the industry through their actions.

Connecting with students expands the organization’s reach and helps the FFA educate new professionals and provide opportunities for diverse individuals entering into the industry.