Irish Central Bank Update : Third Party Guarantees And Cascading Security

New guidance from the Central Bank of Ireland (Central Bank) signals a change to the rules on Irish regulated funds granting third party guarantees and security. But has Cascading Security in Irish Fund Finance deals gone the way of the Dodo?

The Central Bank's AIF Rulebook provides that a Qualifying Investor Alternative Investment Fund (QIAIF) may not act as a guarantor in respect of a third party. For many years this has been broadly interpreted as prohibiting the giving of guarantees or security by an Irish QIAIF in respect of the obligations of any party other than itself or a wholly owned/controlled subsidiary/limited partnership.

On subscription finance deals involving a master/feeder structure this has meant that, where the Irish QIAIF is a feeder fund rather than the borrower, the Irish QIAIF cannot give security directly to the lender but must instead grant security to the borrower (or the intermediate fund into which it invests) to secure its