What is a capital call facility?
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Simply so, what does a capital call mean?
A capital call (also known as a draw down or a capital commitment) is a legal right of an investment firm or an insurance firm to demand a portion of the money promised to it by an investor. The fund might also borrow funds instead of using the investor's money.
Also, how do private equity capital calls work? A capital call, also known as a "draw down," is the act of collecting funds from limited partners whenever the need arises. When an investor buys into a private equity fund, the firm makes an agreement with the investor that these funds will be available when the firm requests them.
Also asked, what is a capital call line of credit?
A capital call line is a revolving line of credit that a lender provides to a private equity group (PEG). Committed Capital represents the amount of capital each investor pledges to invest in a PEG. This is contractual and the failure to fund a call of capital would result in a total forfeiture of the investment.
What happens if you miss a capital call?
The remedy for a missed capital call is in the Limited Partnership agreement that the LPs sign with the GP. It's fairly standard that the LP loses half of the current value of their holdings. They are locked into the partnership at that value and get their (now reduced) pro-rata of gains when they are realized.