Travers Smith's Alternative Insights: Subscription Line Financing

A regular briefing for the alternative asset management industry.

Subscription line financing has been around for decades. It began as the solution to a problem: investors wanted a more regular drawdown cycle from their sponsors, and the sponsors needed to be able to access cash at short notice to do deals. The obvious answer was that a lender – usually a bank keen to cement its presence in the more lucrative leverage finance market – would provide a bridging loan. The lender would provide short term liquidity at relatively low rates of interest against the (excellent) security of the LPs' undrawn capital. On the next regular drawdown date, capital would be called from investors to repay the loan.