January 15, 2013 - Mayer Brown Program Agenda ... Ann Richardson Knox, Partner, Mayer Brown LLP (Moderator) John Janicik, Partner, Mayer Brown LLP Wes Misson, Associate, Mayer Brown LLP

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  • January 15, 2013

  • Table of ContentsTab

    Program Agenda A

    Presentation Materials B

    Fund Formation Market and Structuring Updates. 1

    Investor Issues and Side Letter Update. 2

    The Basics of Subscription Credit Facilities. 3

    European and Asian Market Update 4

    Related Fund Financing Products. 5

    The DBRS Rating Methodology. 6

    Working Session on Overcall Limitations. 7

    Regulatory and Legal Updates. 8

    Industry Panel. 9

    Speaker Biographies C

    Recent Mayer Brown and Appleby Legal Alerts.. D

    Sovereign Immunity Analysis in Subscription Credit Facilities,November 27, 2012 1

    Addressing UBTI Concerns in Capital Call Subscription CreditFacilities, November 12, 2012 2

    DBRS Publishes Updated Methodology for Capital Call SubscriptionCredit Facilities, July 12, 2012

    Subscription Financing Are Side Letters Binding? October 2011

    Enforceability of Capital Commitments in a Subscription CreditFacility, July 7, 2011

    3

    4

    5

    DBRS Rating Methodology Global Subscription Loan (Capital Call)

    Mayer Brown Subscription Credit Facility Practice

    E

    F

    Mayer Brown Banking & Finance Practice G

    Mayer Brown Private Investment Funds Practice H

  • 3rd Annual Subscription Credit Facility Symposium |1

    Program AgendaJanuary 15, 2013

    1:30 2:00 Registration

    2:00 2:15 Welcome and Introduction (Wharton Ballroom)

    Mike Mascia, Partner, Mayer Brown LLPJulian Black, Global Head of Structured Finance and Partner, Appleby LLP

    2:25 3:20 Break-Out Panels Session I

    Panel A: Fund Formation Market and Structuring Updates (Soho) Current Issues in the Fund Formation Market

    Investor Reporting Requests

    Fundraising and Investment Environment

    UBTI and other Tax Structuring Issues

    Zachary Barnett, Partner, Mayer Brown LLP (Moderator)Ian Gobin, Partner, Appleby LLPAnne Marie Konopack, Partner, Mayer Brown LLPMatt Posthuma, Partner, Mayer Brown LLPRichard Wheelahan, Director, CapitalSouth Partners

    Panel B: Investor Issues and Side Letter Update (Wharton Ballroom) Credit Linkage between Pensions and their Corporate and Municipal Sponsors

    Municipal Bankruptcies

    Proliferation of SPV and Pooled Vehicle Investors

    Placement Agent Withdrawal Rights Update

    Sovereign Immunity Updates

    Unique Side Letter Provisions

    Ann Richardson Knox, Partner, Mayer Brown LLP (Moderator)John Janicik, Partner, Mayer Brown LLPWes Misson, Associate, Mayer Brown LLPSimon Raftopoulos, Global Partner, Corporate & Commercial, Appleby LLP

  • 3rd Annual Subscription Credit Facility Symposium |2

    Victor Rutenberg, Director, Citibank, N.A.

    Panel C: The Basics of Subscription Credit Facilities (Tribeca)

    Designed for those new to the asset class or seeking a refresher

    A condensed version of our popular Nuts & Bolts of Subscription CreditFacilities Presentation

    Kristin Rylko, Partner, Mayer Brown LLP (Moderator)Mark Dempsey, Associate, Mayer Brown LLPJeremy Grubb, Vice President, Bank of America, N.A.Benjamin Woolf, Senior Associate, Appleby LLP

    3:30 4:25 Break-Out Panels Session II

    Panel A: European and Asian Market Updates (Tribeca)

    Market Analysis and Comparison to the United States

    Facility Structural Evolutions

    Challenges and Opportunities for 2013

    Barney Lee, Partner, Appleby LLP (Moderator)Tim Nosworthy, Partner, Mayer Brown International LLPThomas Rapp, London Branch, Director, Wells Fargo Bank, N.A.Gavin Rees, Director, Barclays plcDavid Wasserman, Executive Director, Sumitomo Mitsui Banking Corporation

    Panel B: Related Fund Financing Products (Wharton Ballroom)

    Hybrid Facilities

    SCF Credit Default Insurance Options

    Fund of Fund Facilities

    Unsecured Facilities

    Fund Sponsor/General Partner Facilities

    Open-End Fund Facilities

    Zachary Barnett, Partner, Mayer Brown LLP (Moderator)Lawrence Beller, Director, PNCDavid Goldman, Chief Product Officer, Awbury Insurance Ltd.Perry Hicks, Partner, Mayer Brown LLPRam Rao, Managing Director, Macquarie Bank LimitedRobert Wieser, Vice President, Goldman Sachs Bank USA

  • 3rd Annual Subscription Credit Facility Symposium |3

    Panel C: (Soho)

    Panel C- 1 (3:30-3:55) The DBRS Rating Methodology

    Understanding DBRSs Updated SCF Rating Methodology

    Q & A with DBRS and Natixis

    Mike Mascia, Partner, Mayer Brown LLP (Moderator)Matt LaCapra, Managing Director, DBRS, Inc.Nick Mitra, Director, Natixis

    Panel C-2 (3:55-4:25) Working Session on Overcall Limitations

    Mathematical Examples of Overcall Limitations

    Mathematical Examples

    Stress Testing and Underwriting Analysis

    Potential Mitigating Covenant Protections

    Mike Mascia, Partner, Mayer Brown LLP (Moderator)Brad Boland, Director, Wells Fargo Securities, LLCAna Hudson, Director, SunTrust Robinson Humphrey, Inc.

    Panel D: Regulatory and Legal Updates (Nolita)

    Regulatory Capital Updates

    Volcker Rule

    Regulatory Updates Impacting Fund Sponsors

    FATCA Update

    LIBOR Uncertainty

    Julian Black, Partner, Appleby LLP (Moderator)Jason Bazar, Partner, Mayer Brown LLPRory Cohen, Partner, Mayer Brown LLPCarol Hitselberger, Partner, Mayer Brown LLPDavid Sahr, Partner, Mayer Brown LLP

    4.35 5:35 Industry Panel (Wharton Ballroom)

    2012 Market Review and Performance Update

    Fundraising Trends and Investment Environment

    Beneficial Facility Features from the Fund Perspective

  • 3rd Annual Subscription Credit Facility Symposium |4

    Key Issues Impacting the Facility Market

    Challenges and Opportunities for 2013

    Mike Mascia, Partner, Mayer Brown LLP (Moderator)John Gilb, Principal, Member of the Investment Committee, CBRE GlobalInvestorsJim Hutchinson, Managing Director, President of the Income and GrowthFund Series, LaSalle Asset Management, Inc.Charles Purse, Managing Principal, Park Hill Real Estate GroupMike Robin, Managing Director, Citibank, N.A.Dee Dee Sklar, Managing Director, Wells Fargo Securities, LLCJoshua R. Weiner, Managing Director, First Reserve Corporation

    5:35 7:00 Cocktail Reception Sponsored by Wells Fargo Securities, LLC (Atrium)

  • 1/9/2013

    1

    Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: MayerBrown LLP and Mayer Brown Europe-Brussels LLP both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnershipincorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown,a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnershipwith which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

    3rd AnnualSubscription Credit Facility andFund Finance Symposium

    January 15, 2012

    3RD ANNUAL SYMPOSIUM

    Subscription Credit Facilities

    2012

    Despite challenges in the fundraising market, again a positive year for theasset class.

    Limited Partner Capital Commitments:

    In the U.S., private equity firms raised $130+ Billion in the 1st threequarters of 2012, up 36% from 2011.

    In Europe, private equity firms raised $47.8 Billion in the 1st threequarters of 2012, up 20%.

    Prospects look good: Preqin and Deloitte both released surveys andopinions recently indicative of increased Investor appetite for privateequity.

    2

  • 1/9/2013

    2

    3RD ANNUAL SYMPOSIUM

    Subscription Credit Facilities

    What did we see at Mayer Brown:

    Mayer Brown closed 46 subscription credit facilities.

    Larger volume of smaller transactions.

    Continued interest from new fund sponsors and new entrants on thelender side.

    Increased activity in the 2nd half of 2012 compared to the first.

    Mild tightening of spreads and pricing generally.

    No reported transaction defaults or institutional investor exclusion events.

    The SCF product and its market recognition are maturing.

    3

    1. Cayman Islands

    Active Partnerships in the Cayman Islands

    Source: Cayman GeneralRegistry, 2012

    Year Total

    2009 9,397

    2010 10,222

    2011 11,501

    2012 12,622

  • 1/9/2013

    3

    2. Guernsey

    Active Partnerships in Guernsey

    Source: Guernsey Registry,2012

    Year Total

    2011 1,293

    2012 1,402

    3. Jersey

    Active Partnerships in Jersey

    Source: Jersey FSC, 2012

    Year Total

    2009 735

    2010 831

    2011 953

    2012 1,097

  • 1/9/2013

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    3RD ANNUAL SYMPOSIUM

    Subscription Credit Facilities

    Agenda

    2:00 2:15 Welcome and Introduction (Wharton Ballroom)

    2:25 3:20 Session I Break-Out Panels

    Panel A: Fund Formation Market and Structuring Updates(Soho)

    Panel B: Investor Issues and Side Letter Update (WhartonBallroom)

    Panel C: The Basics of Subscription Credit FacilitiesSubscription Facility Market (Tribeca Room)

    7

    3RD ANNUAL SYMPOSIUM

    Subscription Credit Facilities

    Agenda

    3:30 4:25 Session II Break-Out Panels

    Panel A: European and Asian Market Updates (Tribeca) Panel B: Related Fund Financing Products (Wharton

    Ballroom) Panel C: (Soho)

    3:30 3:55 The DBRS Rating Methodology

    3:55 4:25 Working Session on OvercallLimitations

    Panel D: Regulatory and Legal Updates (Nolita)

    8

  • 1/9/2013

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    3RD ANNUAL SYMPOSIUM

    Subscription Credit Facilities

    Agenda

    4:35 5:35 Industry Panel (Wharton Ballroom)

    5:35 7:00 Cocktail Reception Sponsored by Wells FargoSecurities

    9

  • 1/9/2013

    1

    Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: MayerBrown LLP and Mayer Brown Europe-Brussels LLP both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnershipincorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown,a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnershipwith which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

    Panel A: Fund Formation Marketand Structuring Updates

    [Month Year]

    3RD ANNUAL SYMPOSIUM

    Subscription Credit Facilities

    Panel A: Fund Formation Market and StructuringUpdates - Speakers

    Zachary Barnett, Partner, Mayer Brown LLP (Moderator)

    Ian Gobin, Partner, Appleby LLP

    Anne-Marie Konopack, Partner, Mayer Brown LLP

    Matt Posthuma, Partner, Mayer Brown LLP

    Richard Wheelahan, Director, CapitalSouth Partners

    2

  • 1/18/2013

    1

    Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: MayerBrown LLP and Mayer Brown Europe-Brussels LLP both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnershipincorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown,a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnershipwith which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

    Session I/Panel B: InvestorIssues and Side Letter Update

    Presented by: John Janicik, Wes Misson, SimonRaftopoulos, Ann Richardson Knox and Victor Rutenberg

    January 15, 2013

    3RD ANNUAL SYMPOSIUM

    Subscription Credit Facilities

    Investor Issues and Side Letter Update

    Agenda

    Market Impacts on Investors

    Updates on Investor Credit Linkage

    Municipal Sponsors and Bankruptcy

    Side Letters and Related Issues

    Questions and Closing

    2

  • 1/18/2013

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    3RD ANNUAL SYMPOSIUM

    Subscription Credit Facilities

    Market Impacts on Investors

    Historical 2011 and 2012 activity

    Number of funds in market

    Size of capital raise

    Timing of investor closings

    What does it look like for 2013?

    Number of funds in market

    Commitments to new sponsor relationships

    3

    3RD ANNUAL SYMPOSIUM

    Subscription Credit Facilities

    Market Impacts on Investors

    Investor/Fund Trends and Lender Response

    Rolling closings of investors

    Lender flexibility on deal terms in response

    No investor letter transactions

    Increased scrutiny of LPA and side letters

    Investor Mix (included/designated/HNW)

    4

  • 1/18/2013

    3

    3RD ANNUAL SYMPOSIUM

    Subscription Credit Facilities

    Updates on Investor Credit Linkage

    Credit Linkage Overview

    Many investors must be linked to a parent, sponsor, relatedentity or government that has a credit rating.

    Lenders need to be satisfied that the investor has the financialwherewithal to be included in the borrowing base.

    Examples include linking an endowment or an investmentsubsidiary to its rated parent entity.

    5

    3RD ANNUAL SYMPOSIUM

    Subscription Credit Facilities

    Updates on Investor Credit Linkage

    Credit Link Documents

    Financials and organizational documents

    Guarantees

    Comfort Letters

    Keepwell Agreements

    Statement of Facts

    Signature of Investor Letter

    Such documents will be a condition to an investors inclusion inthe borrowing base.

    6

  • 1/18/2013

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    3RD ANNUAL SYMPOSIUM

    Subscription Credit Facilities

    Updates on Investor Credit Linkage

    SPV Investors

    Pooled Vehicle Investors

    Generally HNW Pools

    Concentration Limits

    Look through rights/ Remedies in Default

    Exclusion Events/ Default Triggers

    7

    3RD ANNUAL SYMPOSIUM

    Subscription Credit Facilities

    Credit Linkage between Pensions and theirGovernment Sponsors

    Background on Governmental Sponsors

    Nature of Government Entities

    Types of Public Pension Systems

    Relationships to Government Employers

    8

  • 1/18/2013

    5

    3RD ANNUAL SYMPOSIUM

    Subscription Credit Facilities

    Credit Linkage between Pensions and theirGovernment Sponsors

    Credit Linkage between Pensions and their Corporate andMunicipal Sponsors

    Source of Funds

    Funding Ratio

    Credit of State/Municipal Employer

    Other Statutory and Policy Limitations

    9

    3RD ANNUAL SYMPOSIUM

    Subscription Credit Facilities

    Credit Linkage between Pensions and theirGovernment Sponsors

    Municipal Bankruptcies

    Recent Examples

    Governmental Bankruptcy Generally

    Effect of Bankrupt Employers

    Other Considerations in Enforcement

    10

  • 1/18/2013

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    3RD ANNUAL SYMPOSIUM

    Subscription Credit Facilities

    Sovereign Immunity

    Sovereign Immunity In General

    See Mayer Brown Legal Update

    Practical implication despite legal risk is it likely that Investorwould not fund?

    11

    3RD ANNUAL SYMPOSIUM

    Subscription Credit Facilities

    Sovereign Immunity

    Sovereign Immunity Updates

    Jurisdictional Updates

    Texas

    Michigan

    California Counties

    Sovereign Wealth Funds

    12

  • 1/18/2013

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    3RD ANNUAL SYMPOSIUM

    Subscription Credit Facilities

    Sovereign Immunity

    Sovereign Wealth Funds

    Sections 1605-1607 of the Foreign Sovereign Immunities Actgenerally deny immunity if such immunity has been waived andfor commercial acts

    US Supreme Court when a foreign government acts, not as aregulator of a market, but in the manner of a private playerwithin that market, the fore...

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