Sponsors of secondaries and funds of funds should be mindful of several key issues that can arise when structuring and negotiating these financing arrangements, according to law firm Dechert.
The use of subscription facilities by funds has seen its criticism, but the practice is not without its positives, write Thomas Smith and Almas Daud.
Providers of subscription lines are increasingly looking to take control of LP transfers, according to lawyers at Debevoise & Plimpton.
Buyers are using levels of leverage that 'haven't been seen before', according to Mario Giannini.
Some investors are in favour of reducing the frequency of capital drawdowns; many are concerned about the risks of extending loan periods.
The number of leverage providers in secondaries has more than doubled over the last four years, according to the report obtained exclusively by Secondaries Investor.
Drivers include increasing competition and record high dry powder, according to a report by the Swiss bank obtained by Secondaries Investor.
Fewer buyers sought IRRs of above 15% last year compared with a year earlier, a survey by advisory firm Cebile Capital has found.
While more aggressive financing structures such as payment-in-kind notes may be off the table, deals are ongoing, experts say.
The majority of secondaries and fund of funds respondents to a recent survey by Investec said that while they use debt, they don't need it to be competitive.