Despite the growing adoption of subscription credit facilities (SCFs) in the PE industry, standardized disclosure of information critical for investors to understand their overall exposure from SCFs remains scarce. In an effort to rectify that issue, the Institutional Limited Partners Association (ILPA) recently issued guidance (2020 Guidance) on best practices when using SCFs, as well as recommendations for disclosures on SCF exposure, capital calls and effects on performance. The 2020 Guidance is meant to supplement ILPA’s 2017 guidance (2017 Guidance) on the topic. This first article in a two-part series examines the specific recommendations contained in the 2020 Guidance, ways it expands on the 2017 Guidance and the current industry practices that prompted ILPA to issue its recommendations. The second article will explore market reactions to – and the potential effect of – the recommendations, including how well the 2020 Guidance will dovetail with sponsors’ actual practices. See our two-part series on trends in the use of SCFs: “Advantages for PE Investors and Sponsors Have Led to Adoption by Some Hedge Funds and Credit Funds
” (Jan. 24, 2019); and “Structuring Considerations Negotiated With Lenders and Important LPA and Side Letter Provisions
” (Feb. 7, 2019).