Given the US market’s familiarity with a Delaware LLC, it is likely that we will come to see the Cayman LLC in private equity structures going forward.
Appleby’s Subscription Finance Team considers the potential impact of the use of a Cayman LLC in the subscription credit facility and, in particular, how effective security over the capital call rights of such a vehicle might be obtained.
Currently, the typical collateral package in a subscription credit facility includes the relevant Cayman fund securing its right to make capital calls on its investors. The loan documents for these facilities typically secure the borrower’s obligations by providing for a pledge of (i) the right of the fund to make and enforce a call upon the capital commitments of investors and (ii) the account into which corresponding capital contributions are made.
As the Cayman LLC is essentially expected to be a hybrid between the ELP and a Cayman exempted company, there is much discussion as to how (i) the contractual obligations of members to fund the Cayman LLC and (ii) the security over such obligations, will be documented.