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Course Details

Course Information
  • smart_display Format

    On-Demand

  • signal_cellular_alt Difficulty Level

  • work Practice Area

    Banking and Finance

Date & Time
  • event Date

    Tuesday, February 28, 2023

  • schedule Time

    1:00 p.m. ET./10:00 a.m. PT

  • timer Program Length

    90 minutes

Credit Information

  • This 90-minute webinar is eligible in most states for 1.5 CLE credits.

$347.00
CLE
ALL

This CLE course will examine issues associated with the formation and operation of direct lending funds, including those organized to lend to small and medium-sized businesses, certain real estate developers, and other real estate market participants.

Faculty

Seth Lebowitz
Partner
Sadis & Goldberg, LLP

Mr. Lebowitz advises clients on the tax-efficient planning and execution of a broad range of transactions, with a particular focus on the formation, operation and investing activities of private equity and hedge funds.

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Steven Huttler
Partner
Kilpatrick Townsend & Stockton LLP

Mr. Huttler has extensive experience in corporate, finance, investment fund, securities, and family office matters, including the representation of U.S. and foreign investment funds, large corporate issuers, underwriters and family offices, in various registered public and private offerings of debt and equity securities totaling in excess of $15 billion. In recent years, he has served as corporate counsel to many private investment funds and partnerships, including those based in the U.S. and in offshore jurisdictions, such as the Cayman Islands, Bermuda, the British Virgin Islands, Ireland, Luxembourg, Isle of Man, Jersey, Guernsey, Cyprus, Mauritius, United Kingdom, Austria, Russia, India, and Gibraltar. Mr. Huttler's legal practice has exposed him to a variety of fund clients, from large mutual funds to sophisticated offshore funds to small start-up hedge funds and financial industry entrepreneurs. His practice has included the structuring and establishment of start-up funds and managed accounts; advising management companies and fund managers on compensation structures; the restructuring and reorganization of such funds; structuring and advising on fund trades; and a range of sophisticated transactional work for such funds (including PE and VC transactions).

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David Fitzgerald
Partner
Sadis & Goldberg, LLP

Mr. Fitzgerald is a Partner in the firm’s Financial Services and Corporate Groups. His practice focuses on investment funds, securities, joint ventures, regulatory compliance and investment advisers. Mr. Fitzgerald regularly structures and organizes hedge funds, private equity funds, funds of funds, separately managed accounts and hybrid funds. Additionally, he advises private fund managers on structure, compensation, employment and investor issues, and other matters relating to management companies.

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Description

For more than a decade, small and medium-sized businesses and real estate bridge financing borrowers have increasingly looked to direct lending funds, as opposed to banks and other traditional lenders, as a source of capital.

Post-2008, in particular, the imposition of additional regulatory requirements on banks in the calculation of their capital and conducting various banking activities was one of the most influential historical drivers behind this disintermediation between banks and borrowers.

Conversely, gyrating and unpredictable capital and credit markets in this period have created an exciting opportunity for many private investment funds to offer this same financing abdicated by many banks. As a result, direct lending funds, a subset of general credit-focused investment funds, have become an essential part of the mix of strategies to which many institutional investors and family offices desire exposure.

The discussion will include corporate structures, and related tax and regulatory considerations in relation thereto.

Listen as our authoritative panel examines the structuring options available and considerations relevant to direct lending funds, and the related tax, ERISA, and regulatory issues driving many of these alternatives--as well as their crucial compliance obligations.

Outline

  1. Comparing open to closed-end structures, including the following key considerations: liquidity and valuation
    1. Avoiding liquidity mismatches
    2. Frequency of withdrawal periods
    3. Length of notice periods
    4. Gates
    5. More current strategies
      1. Length of payout periods
      2. Novel payout calculations (e.g., disassociate from NAV?)
  2. Selected structures/strategies for U.S. federal income tax issues posed by direct lending strategies
    1. Issues for U.S. taxable investors
    2. Strategies for non-U.S. investors
    3. Foreign-owned U.S. corporate lenders
    4. Post-tax reform: Are corporate structures, even for U.S. taxable investors, the wave of the future?
  3. Recurring regulatory issues unique to the direct lending funds
    1. Conflicts
      1. Investment Advisers Act Section 206: principal transactions
      2. Conflicts among typical affiliates
        1. Credit funds: originator, servicer, principal investment vehicles
        2. RE related
    2. Balancing Securities Act/private placement requirements with marketing for business of the fund

Benefits

The panel will review the following key issues, among other matters:

  • Comparing open to closed-end structures, including liquidity and valuation
  • U.S. federal income tax issues posed by direct lending funds and strategies for addressing them 
  • Recurring regulatory issues unique to the direct lending funds
  • Ramifications of a higher interest rate environment