ILPA Subscription Credit Facilities Guidance: Sponsor Skepticism Over the Value and Potential Harms of Excessive Disclosures to LPs About Facilities (Part Two of Two)

Although transparency about subscription credit facilities (SCFs) has grown with their use, the practice still varies widely among sponsors. The Institutional Limited Partners Association (ILPA) sought to address that ongoing concern by issuing guidance (2020 Guidance) listing specific details of SCF terms sponsors should provide to investors. As with previous ILPA guidance, market reactions have been mixed. Sponsor-side counsel acknowledged the value of increased disclosure but also expressed skepticism about the level of detail about SCFs that ILPA recommended. Conversely, investor-side counsel favored the 2020 Guidance’s potential to appease the increasingly demanding investment boards of institutional investors. This second article in a two-part series explores the market reactions to – and potential impact of – the recommendations, including potential ramifications of the industry adopting the expansive disclosure sought by ILPA. The first article examined the specifics of the 2020 Guidance, the industry practices necessitating its issuance and ways it expanded upon earlier guidance issued by ILPA. For more on other areas of ILPA guidance, see “Trends in PE Funds’ Core Economic Terms and Adoption of Recent ILPA Recommendations” (Sep. 24, 2019); and “ILPA Makes Recommendations for LPs Participating in GP‑Led Secondary Fund Restructurings” (Jul. 9, 2019).

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