Subscription Lines of Credit in Private Equity

In this video, we discuss subscription line of credit. A SLoC is basically a bridge loan between the deal closing time and the capital call to the investor.
0:00 - Introduction
0:26 - Committed Capital (Context)
01:06 - Subscription Line of Credit -
01:14 - Trends with Subscription Line of Credit -
01:55 - Issue No. 1 with Subscription Line of Credit - Calculation of IRR -
04:26 - Issue No. 2 with Subscription Line of Credit - Private equity secondaries -
05:02 - Issue No. 3 with Subscription Line of Credit - Liquidation of private equity fund -
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Disclaimer: All investment and financial information expressed in this video is for educational purposes only.
#MinkLearning #privateequityfund #credit #IRR #secondaries

[@diegoaznar8356]

Your explanations are impeccable. Thank you and I hope you keep uploading this kind of videos, they are really interesting

[@SteveBalaban]

Hi Diego, Thanks for your message. I'm going to do my best to continue to upload these types of videos!

[@enrico1976]

Thank you Mike

[@charlesrice4023]

Good easy-to-follow example of juicing IRR. Most importantly, LPs enjoy the benefit of funding capital calls at a regular cadence with a sub-line. If it's an actual Bank, it will almost always be in a first-lien position. The collateral package includes a blanket lien on all assets and an assignment of capital call rights.

[@heyitsoscarito4418]

Can you share what you mean by LP’s enjoy the benefit of funding capital calls at a regular cadence? is the LP the investor or the owner of the fund?

[@alexolah5758]

Hey Steve! I came to this video from your newest one about NAV loans, your mentioning of capital calls caught my attention because I did one at my intership at Dream and was curious why a company/fund would include debt in that situation. Definitely learned something 👍 I love to see that your videos are doing well. Keep it up!

[@SteveBalaban]

Thank you for your comment, Alex!

[@fxj.7334]

Your videos are very clear and instructive. Keep up the great work please! Thanks for all the work!

[@SteveBalaban]

Thanks FX J. I greatly appreciate your feedback!

[@valentinashaveyko815]

Thank you very much for the clear explanation 🙏

[@SteveBalaban]

Thank you, Valentina!

[@jackchowchikit]

well explained as in many of yr other videos, thanks. pls give me more insights like this last video

[@SteveBalaban]

Thanks Jack. I appreciate your comment. I'll do my best to release more videos soon.

[@peterhaberlehner6749]

this is GREAT knowledge, greetings from Perú

[@SteveBalaban]

Hi Peter, thanks for writing from Peru! I was there ten years ago and still remember how incredible the ceviche was! Thanks again for your message.

[@faable94]

Very good channel. Could you please explain how the equalisation payments work? Also, I would like to learn more about vintage years in the funds.

[@jasdeepsingh2711]

Thanks for sharing your knowledge so succinctly, Professor. Very useful and helpful. Watched all your videos on the channel. Keep enlightening us.

[@SteveBalaban]

Thanks for your comment, Jasdeep!

[@alpsam1406]

Great job and thank you.

[@SteveBalaban]

Thank yo for your comment, Alp!

[@midasofficial4532]

Well explained, thank you.

[@SteveBalaban]

Midasofficial, thank you for your comment!

[@shengsheng2085]

Nice videos, very clear

[@SteveBalaban]

Thanks Sheng!

[@guillecobo_]

Amazing Steve... Could you please make a video on venture capital secondary markets? Are there official ones? Or it just takes different parties to make a deal by their own? Boss!

[@SteveBalaban]

Thanks Guillermo. Have you seen our video on the PE secondary markets: th-cam.com/video/nXmUgrnHWEc/w-d-xo.html
Does this help?

[@henryhu5758]

For the liquidation problem, if the banks are still creditors to the PE fund, then doesn't that mean the LPs with committed capital are not really invested in the company? If so, doesn't the liquidation problem not really matter? Or are you referring to the portion they paid upfront? Thanks for helping in advance!

[@SteveBalaban]

Thanks for your question, Henry. During the life of the fund, there are times where the LPs will have some capital invested (already "called") and some capital committed (that has yet to be "called"). For the Subscription Lines of Credit, I was referring to the capital that has been committed that hasn't been called.
Does that answer your question? If not, please reply to this comment and I'll make sure to answer it.

[@charlesrice4023]

LPs are under a contractual obligation to fund all of their commitments to the Fund. If, for example, the Fund had an outstanding balance on a subscription line with a Bank and chose to close shop without satisfying the debt, the Bank would likely have rights and remedies provided in the loan agreement. In most cases, the Bank will have an assignment of capital call rights. This gives the Bank the right to step into the shoes of the GP and call capital from LPs to satisfy its debt. This assumes there is remaining uncalled capital. If not, they would sell the underlying assets.