This article highlights five key differences between subscription line (capital call) facilities and typical bilateral corporate facilities (based on the Loan Market Association (LMA) documentation).

Capital call or subscription line facilities are facilities which are provided to private equity, real estate, or other funds, usually secured against the limited partner commitments in the fund. The facilities are different from typical corporate leveraged facilities, which are usually provided to operating companies secured against the assets of the operating group. The lender’s recourse for subscription line facilities is typically only to the limited partners who have invested in the fund, by requiring drawdowns from limited partners to be made by the general partner or investment manager of the fund. To ensure drawdowns occur in a timely manner, the lender is usually given a security assignment or power of attorney in order to “step into the shoes” of the general partner or the investment manager and send out drawdown notices to limited partners, in the event that the general partner or investment manager fails to do so.

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