Middle Market Review quoted McGuireWoods’ Mark Kromkowski in a Sept. 17 article titled “A Rise in Subscription Credit Facilities.” The article addressed how private equity firms increasingly are leveraging subscription credit facilities, also called bridge loans or fund finance, to finance transactional costs.
Kromkowski, a partner in McGuireWoods’ Chicago office, discussed what he called “two distinct segments of the market.”
“The traditional short-term subscription facility is truly bridging the capital calls for 30, 60, or 90 days. These are bridge facilities,” he said.
“On the other side of the spectrum, some private investment firms are using them for two or three years or even longer,” he added. “They are pushing the upper limits of semi-permanent leverage.”
Kromkowski stressed, “We are definitely seeing more use of these and similar credit facilities than we have ever before. After 2008 and 2009, there were very few defaults, so lenders feel comfortable extending these facilities to borrowers even in today’s market.”