What is a capital call facility?

Asked By: Plamenka Aristegui | Last Updated: 23rd March, 2020
Category: business and finance private equity
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Capital call facilities provide short-term funding on a revolving basis to private equity funds to bridge the time between when an investment is made by the fund and when capital contributions are received from investors to finance that investment (typically between 30 and 90 days after a capital call notice is

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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.

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How do you make a capital call?

Capital Calls Maximize Investor Returns
When the fund is preparing to make an investment, it issues a capital call to its Limited Partners. The LPs then typically wire funds to the VC escrow account and when all funds are collected, the fund then closes on the investment and wires funds to the portfolio company.

What is a promote fee?

A key term to a real estate private equity deal is the sponsor “promote.” This term is really just industry jargon for the sponsor's disproportionate share of profits in a real estate deal above a predetermined return threshold.

Is TVPI net or gross?

TVPI – Total Value to Paid-in
As explained above, TVPI can be expressed as a gross or net figure depending on which perspective or level of investment that you are referring to, and depending on if it's gross or net, there are some nuances to be aware of.

What is a call notice?

Call Notice means the written notice (which may be delivered in electronic form) by which the Company indicates its decision to repurchase shares of Common Stock pursuant to the provisions of this Section 8(c).

What is first loss capital?

Catalytic first-loss capital refers to socially- and environmentally-driven credit enhancement provided by an investor or grant-maker who agrees to bear first losses in an investment in order to catalyze the participation of co-investors that otherwise would not have entered the deal.

What is a capital distribution?

Generally, capital distribution is defined as the payment of money or other property to owners, based on their ownership.

What is a good Moic?

MOIC is important for performance reporting because of its simplicity. It is easy to understand that a multiple of 1.50x means that the principal investment amount has increased in value by 50%. This metric, which is directly tied to the dollar amount invested, is often a more digestible performance indicator than IRR.

How is TVPI calculated?

The investment multiple is also known as the total value to paid-in (TVPI) multiple. It is calculated by dividing the fund's cumulative distributions and residual value by the paid-in capital. It provides insight into the fund's performance by showing the fund's total value as a multiple of its cost basis.

What is carried interest deduction?

Carried interest is a contractual right that entitles the general partner of an investment fund to share in the fund's profits. The managers pay a federal personal income tax on these gains at a rate of 23.8 percent (20 percent tax on net capital gains plus 3.8 percent net investment income tax).

What is committed cash?

Committed Cash means, as of the end of each fiscal quarter of the Company beginning with the quarter ended December 31, 2018, the sum of all Cash and Cash Equivalents reserved by the Company or its consolidated Subsidiaries (i) in respect of any incentive fees received in Cash during the applicable quarter to the

Can a corporation make a capital call?

S corporations -- like other types of business structures -- can make capital calls under certain circumstances. Partners in S corporations can also make capital calls to other partners, provided the requested contribution is for good reason.

What is subscription financing?

Subscription credit facilities typically take the form of a senior secured revolving credit facility secured by the unfunded capital commitments of the fund's investors. The purpose of subscription credit facilities is usually to provide liquidity for the fund on a faster basis than calling for capital contributions.

What is unfunded capital?

Definition of Unfunded Capital Expenditures
Unfunded Capital Expenditures means Capital Expenditures made through Revolving Advances or out of Borrowers' own funds other than through equity contributed subsequent to the Closing Date or purchase money or other financing or lease transactions permitted hereunder.

What is unfunded capital commitment?

Unfunded Capital Commitment means the portion of a Member's Capital Commitment that has not been drawn down pursuant to one or more Contribution Notices, as such amount may be adjusted pursuant to this Agreement.

What is private equity investment?

Private equity is an alternative investment class and consists of capital that is not listed on a public exchange. Private equity is composed of funds and investors that directly invest in private companies, or that engage in buyouts of public companies, resulting in the delisting of public equity.

What is a drawdown fund?

The Drawdown Fund is a growth equity fund that invests in catalytic businesses that generate attractive returns for all stakeholders. Our investments span Sustainable Cities, Food & Agriculture, and Energy.

What is drawdown in private equity?

When the private equity firm withdraws money from the pool of Committed Capital of the Private Equity fund it is known as Drawdown. The Committed Capital comes from the Limited Partners who agree to invest in the fund.