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ARTICLE · 17 APRIL 2025

Subscription Credit Facilities: Understanding The Collateral

Mayer Brown
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Subscription credit facilities, commonly referred to as "sub-lines" or "capital call facilities," are a cornerstone of private equity finance.

United StatesCorporate/Commercial Law
Kiel Bowen
Kiel Bowen
Caitlin Woolford
Caitlin Woolford
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Subscription credit facilities, commonly referred to as "sub-lines" or "capital call facilities," are a cornerstone of private equity finance. These facilities are secured by a bespoke collateral package that protects lenders in the event of default. Because the collateral structure directly impacts the fund's borrowing capacity via a borrowing base derivative of the facility's collateral structure, an understanding of the collateral framework is essential to grasp how these facilities operate.

What Defines a Subscription Credit Facility?

A subscription credit facility is, at its core, a loan to a private equity fund (the Fund), underwritten primarily on the strength of the investors' capital commitments (Capital Commitments).1 These commitments are contractual obligations for investors to contribute capital to the Fund when requested. Unlike immediate capital contributions, investors commit funds that are drawn down gradually through capital calls, aligning

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This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

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