Narrative
Full Description
Project narrative
In November 2022, the New York Branch of the Industrial and Commercial Bank of China (ICBC) entered into a $250,000,000 USD subscription secured revolving umbrella facility agreement with The Carlyle Group, Inc. — an American multinational private equity and asset management firm publicly traded on the Nasdaq Stock Market — for unspecified purposes.
Staff comments
1. There is very little information available about this facility, including in various Carlyle Group publications and filings, though its presence in an ICBC booklet is definitive proof of its existence. Among other possibilities, the facility may have been syndicated or the borrower was some Carlyle Group-entity(s) not widely documented in the public view. This issue merits further investigation. 2. A standard fund finance facility will involve a single fund (or several parallel funds) as borrower(s), with the lender(s) providing a single revolving facility, or sometimes both a revolving facility and a term facility, on a committed basis under a single facility agreement to the borrower(s). These facilities can be utilized by the fund for any permitted purpose in the usual way, with multiple drawdowns, repayments and redrawings (in the case of a revolving facility) depending on the needs of the fund. The usual security package for a standard fund finance facility includes security over the uncalled commitments of the fund’s investors, and security over the bank account into which the proceeds from drawdowns of those commitments are paid. In contrast, umbrella facilities are documented under one set of finance documents but apply to multiple borrowers with separate borrowing bases. These borrowers can include multiple funds, or a single fund, and one or more of its subsidiary special purpose vehicles (SPVs). For more information on umbrella facilities, see https://www.globallegalinsights.com/practice-areas/fund-finance-laws-and-regulations/11-umbrella-facilities-pros-and-cons-for-a-sponsor/. 3. Fund-level subscription-secured revolving lines of credit are a well-established instrument in the toolkits of a variety of private equity fund sponsors and managers, including for venture capital funds, hedge funds, debt funds, secondaries funds, and real estate funds. In many respects, real estate funds’ subscription-secured credit facilities are operationally similar to those of funds investing in various other asset classes. Subscription lines are generally secured solely by pledges of a fund’s rights to capital contributions from its investors (in addition to pledges of fund-level accounts into which investor capital is contributed), which allows real estate fund managers to provide collateral to the subscription lender without impairing their ability to pledge equity interests and real property held by the funds’ subsidiaries to property-level lenders. For more information, see https://www.goodwinlaw.com/en/insights/publications/2024/04/alerts-realestate-fs-subscription-secured-credit-real-estate-funds.