(This video was initially released as part of the Alternative Credit Council (ACC) Global Virtual Summit 2021, held on 20 and 21 April 2021)
For several years, interest in private debt funds has been growing. Indeed, it has become more difficult for small and medium-sized companies to borrow from banks to finance their projects. Borrowers, looking for flexible financing solutions, have turned to private investors.
Being involved in the growth of the debt fund industry since its inception, Arendt has created a special private debt team dedicated to the structuring and operation of these funds. The team can support you with all your private debt strategies from direct lending, loan origination, distressed debt, infrastructure debt, mezzanine debt, special situations, real estate debt as well as venture debt or secondaries.
A private debt team dedicated to fund structuring and operation
Along with our fund formation specialists and regulatory lawyers, we can assist you, asset manager or general partner, with:
- The structuring of your private debt fund, in the form of an SLP/SCSp, RAIF, SICAR or SIF, advising on the most suitable governance and management model, the structuring of the financial flows and more globally with your project management;
- Advice on market terms, depending on the investment strategy of the fund (investment terms, management fees, fund expenses, carried interest structure, governance and investor-protection clauses, etc.)
- The drafting of your fund documentation (constitutive documents, marketing documents, subscription documents) and the negotiation of fund service agreements;
- The coordination with the Luxembourg regulator of the financial sector, the CSSF (for regulated funds only);
- The marketing channels and pre-marketing rules, distribution and compliance requirements of your fund;
- The handling of investor negotiations, side letter requests and investor due diligence questionnaires;
- The formation of fund entities, the closing and launching of your fund, including customary closing opinions;
- Subscription facilities and other fund financing arrangements, including the structuring, negotiation with lenders, and implementation of the security package;
- The formation of additional fund vehicles, as may be necessary to accommodate investor requests (parallel funds, feeder funds, AIVs, co-investment funds, etc.);
- The day-to-day operations of your fund an ongoing compliance with legal and regulatory requirements, including AML requirements.
We also provide you, investor or limited partner, with:
- The reviewing and drafting of the fund documentation, subscription agreements, side letters, etc.
- The reviewing of Luxembourg legal opinions in connection with your admission as investor in the fund;
- Advice during the negotiation on compliance of the fund and the manager with legal requirements, alignment of interests and market standards.
We work closely with our tax team to advise on all aspects of the fund formation phase as well as underlying investments, such as:
- STRATEGY: Tailored advice on the optimal strategic approach, taking into account your commercial objectives, regulatory/fund structuring constraints and the current tax landscape;
- RISK ANALYSIS: Identification of tax risks (withholding tax, income tax, VAT, etc.) and advice on complex areas of tax regulation such as anti-hybrid and interest limitation rules;
- COMPREHENSIVE ADVICE: Advice on the tax and transfer pricing implications of debt financing and refinancing, including deductibility, withholding tax and VAT consequences;
- CARRIED INTEREST AND REMUNERATION: Tailored advice on the structuring of carried interest and manager remuneration;
- INTERNATIONAL ASPECTS: Collaboration with foreign tax advisors to monitor and handle foreign constraints;
- REPORTING PREPARATION: Assistance and advice on tax reporting questions pertaining to measures such as DAC 6, CRS, FATCA;
- REPATRIATION: Assistance in the implementation of cash repatriation mechanisms defined during project structuring and vehicle set-up;
- TAX RECLAIMS: Enhancing portfolio performance through assistance with withholding tax reclaims;
- TAX RETURNS: Preparation of subscription tax returns (where relevant), corporate tax returns and VAT returns;
- TAX AUTHORITIES; Assistance and advice on communication with the tax authorities, as well as any tax, transfer pricing or VAT litigation ;
- EXIT STRATEGY: Review of planned exit strategy and arrangements, and tailored advice on the most efficient implementation solutions;
- TERMINATION: Monitoring of tax-related developments to mitigate tax risks and assistance in all termination related tasks, incl. final tax or VAT returns, management of closing audits or obtaining tax and VAT certificates for liquidation.
Moreover, as an independent law firm, we have close contact with leading specialists in the jurisdictions where investors and borrowers are located, critical to delivering a comprehensive and efficient service to our clients.