Practices

Fund Finance

Our expertise:

Our funds practice brings together fund formation, legal, regulatory, derivatives, stock exchange listing, corporate governance, tax and business advisory expertise with a client list that encompasses many of the largest investment managers and institutional clients in the international and domestic funds markets and a reputation for innovation and seamless delivery.

Our banking lawyers advise on the full range of loan, structured finance and debt capital markets transactions found internationally, both in the public and private markets. Our clients include Irish and international financial institutions, corporate issuers, private equity firms, investment managers, investors and rating agencies.

Our market leading fund finance practice leverages this experience and know-how and brings to bear a commercial, client-centric approach to enable us to deliver the best possible service and outcome for our clients.  We advise investment managers and lenders on the whole range of financing solutions available in the market.

Frequently asked questions

We set out below some of the most frequently asked questions that we encounter in the early stages of engagement with clients in this space along with our answers.

What is the difference between fund vehicles from a lender perspective?

The Irish funds industry has evolved a range of specialist investment vehicles to meet the fullest range of investment manager needs. Fund vehicle types include, amongst others, ICAVs, Investment Companies, Unit Trusts, Common Contractual Funds, Investment Limited Partnerships and “1907 Act” Partnerships. However, the wide range of fund types available can cause some initial confusion for some lenders, many of whom are most familiar with Limited Partnerships as borrowers. 

In addition, Irish funds divide into regulated and unregulated structures, with the former being the most common.  These may be regulated as UCITS under the UCITS Regulations or as AIFs under AIFMD. In addition, while AIFMD predominately regulates managers, most Irish alternative funds are also separately regulated at the fund level as Qualifying Investor Alternative Investment Funds (“QIAIF”) by the Central Bank of Ireland (the “Central Bank”).  Each type of vehicle brings with it its own legal considerations, of which we have plenty of experience.

Can the fund create security over all its assets to secure its debt facilities?

Both UCITS and AIFMD structures are impacted by regulatory restrictions in how they can deal with their assets. Early engagement with the range of regulated service providers that act as gatekeepers to the fund and its assets, including in particular the Depositary, is important so as to secure their co-operation. 

The usual blanket “catch-all” security assignments may not work as it may not be possible to assign certain contractual rights without the prior consent of the Depositary and/or the Central Bank of Ireland.  As it is generally not practical to obtain these consents, the security package needs to be structured to make sure that what assets are available are appropriately captured.  Our expertise allows us to deliver a security package to the standard required while avoiding consent-related pitfalls – usually achieved through a combination of some or all of the following - documentary due diligence, qualified assignments, security account control agreements and side-letters, and investor notices.

Can we have a hybrid security structure?

As a mature market for funds domicile, the funds industry in Ireland has evolved in step with the wider global market, keeping pace with new innovations and event-driven preferences. In recent years we have increasingly seen lenders look to enhance their security, and borrowers improve their lending terms, through a hybrid mix of capital call, net asset value, umbrella and/or preferred equity transactions, often in conjunction with the use of so-called “Section 110” SPV holding companies. 

Can we get third-party guarantees from other entities in the structure?

Irish regulated funds are required to be independent standalone entities, and it is a general constitutional requirement that they remain technically independent from the Sponsor and/or related master or feeder entities and/or other sub-funds within the same umbrella platform.  Irish regulated funds cannot generally guarantee or provide intra-group type security for the obligations of these “third parties”. This can raise issues in particular in so-called Master-Feeder structures, where the borrower may be the feeder fund entity but the master fund entity that holds the substantive assets.  However, with careful consideration, it is sometimes possible to implement structures that achieve the same result, and it is possible to get to a position where one is satisfied that guarantees of 100% subsidiaries are not captured by this restriction.