Albert Tan Discusses Capital Commitment Finance With Privcap Panel

11/11/2013

DALLAS – In a recent Privcap website panel discussion and interview, Haynes and Boone, LLP Partner Albert Tan explored the reasons that capital commitment financing has expanded in importance for a growing number of private equity firms worldwide.

The video sessions entitled “Capital Commitment Financing: How it Works” highlighted how these facilities have spread from their traditional use in real estate transactions to infrastructure and other real assets. At the same time, they have also proliferated geographically. Today’s market for these financings is estimated to be over $100 billion.

“This is really a global product available for not only private equity funds in the United States, but also for Asia- and Europe- and Latin America-based private equity funds,” said Tan. “It has evolved in the past 25 years in a dynamic market with more lenders active in the market.” 

Tan explained that the capital commitment finance is a form of bridge financing. The product is used by private equity funds, particularly in the real estate space but expanding to other alternative assets, as a way to finance a transaction in lieu of calling capital from investors during the life of the investment period of the fund. 

He noted that the funds are typically used for business needs such as investments, payment of fees, expenses and cure shortfalls of defaulting investors who fail to fund on time. The facility can be used for a wide range of purposes as long as they are aligned with the business purpose of the fund as approved by the fund investors. 

In many cases, capital commitment facilities have been necessities to meet deadlines on swiftly moving transactions overseas where funds have to be converted into different currencies. 

“The product has become second nature to have for real estate private equity funds,” said Tan. “Without it, funds are competing at a disadvantage with other real estate funds that have this financing in place.” 

Haynes and Boone clients Century Bridge Capital’s chief operating officer, Jeff Tucker, and Sumitomo Mitsui Banking Corporation’s Executive Director, David Wasserman, also served on the panel. The video on the panel is available here. A separate interview with Tan is posted here

Haynes and Boone’s Texas-rooted and nationally known practice is well known for its pioneering work in the capital commitment financing marketplace. Private Equity Real Estate’s 2012 Global PERE Awards ranked the firm among the top Asia Law Firms of the Year for transactions based on the firm’s wide-ranging 2012 representation of Asia-based lead arrangers and administrative agent banks and Asia-focused real estate funds in capital commitment financing transactions. 

“The firm was one of the first to help structure this type of financing and has one of the largest dedicated full-time practices in structuring, representing lenders and PE funds in this particular space,” said Tan. “The databases and knowledge that we have strengthened through experience allows us an advantage in executing transactions efficiently and effectively, which satisfies the interest of funds, as well as the lenders.” 

At Haynes and Boone, Tan serves as the Global Capital Commitment Financing Practice Group co-chair. Its lawyers are leaders in the representation of agent banks and private equity funds in capital commitment financings in Asia, Latin America and North America. Haynes and Boone lawyers had a leading role in the creation of the structure and documentation of this financial product in the late 1990s and have earned global recognition for their extensive representation of agent banks and funds. Since 1994, the firm has handled more than 500 capital commitment subscription financings, with an approximate aggregate value of over $43 billion.

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Media Contacts

Nathan Koppel
Director of Media Relations
+1 512.867.8431
nathan.koppel@haynesboone.com
Linda Campbell
Communications Manager
+1 214.651.5362
linda.campbell@haynesboone.com

Privcap Interview

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Q&A with Albert Tan

In this one-on-one interview, Haynes and Boone, LLP partner Albert Tan discusses the firm's Capital Commitment Financing Practice Group and its global reach.

Panel Discussion

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Capital Commitment Financing: How it Works

During this Privcap panel, partner Albert Tan discusses how capital commitment financing can help make the operation of a private fund more efficient by allowing general partners to draw on a line of finance instead of a capital call.

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