The Cost-Saving Advantages of Umbrella Facilities

Zac Barnett, attorney and co-founder of Fund Finance Partners (FFP), LLC, has extensive experience in the subscription facility industry. As a lawyer, Attorney Zac Barnett has represented both borrowers and lenders in the fund finance space.

One of the products offered by FFP is the umbrella facility, which provides fund sponsors with a few cost-savings benefits. The umbrella facility streamlines multiple subscription-backed credit lines by placing them under one category. For example, a fund titled Fund Finance I would contain several subscription-backed credit lines.

While the benefits to this funding strategy run the gamut from fund autonomy to quicker execution times, there are also cost-savings advantages. For one, consolidating subscription credit lines can turn a $150 million borrower from four financial institutions into a $600 million borrower at one, which translates into leveraging better pricing, spreads, and fees.

The umbrella allows fund sponsors to distribute fees across the fund as needed, which reduces unused fees. One scenario when this might be applicable is when a sponsor chooses to move a commitment from an older vintage fund to a newer one.

Finally, using umbrella facilities reduces legal costs. Each additional tranche or subcategory decreases legal costs by 70 percent because only a simple joinder and deliverables are needed for a new investment vehicle.