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ARTICLE · 09 AUGUST 2022

Subscription Credit Facilities: Cross-Exclusion Events

Mayer Brown
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The growth of the subscription credit facility market has resulted in many lenders holding significant exposure to the same investors across their entire portfolio.

United StatesFinance and Banking
Kiel Bowen
Kiel Bowen
Caitlin Woolford
Caitlin Woolford
Matthew J.D. Downer
Matthew J.D. Downer
Ethan E. Haddon
Ethan E. Haddon
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The growth of the subscription credit facility market has resulted in many lenders holding significant exposure to the same investors across their entire portfolio. Many lenders are required to track their aggregate overall exposure to these investors in addition to tracking aggregate exposure to sponsors. To mitigate this concentration risk, many lenders are exploring adopting "cross-exclusion events" across their subscription credit facility portfolio. A cross-exclusion event is like a typical borrowing base exclusion event in a standard subscription credit facility, but the exclusion event is not "fund"- or "credit facility"-specific (much like a cross-default). Rather, this cross-exclusion approach resolves a concern that lenders are contractually liable to lend against an investor's capital commitment in Facility A even though they know that this investor is subject to an exclusion event in Facility B.

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