Standstill Provisions in Subscription Facilities
Summary
This article discusses standstill provisions in subscription facilities. In recent years, private equity fund (Fund) requests for "standstill" provisions in subscription credit facilities have become more commonplace. A standstill provision offers a Fund the first opportunity to issue a capital call to repay the subscription facility after an event of default has occurred. This right is conditioned upon satisfaction of certain conditions and the existence of certain circumstances, but if exercised, results in lenders being temporarily precluded from exercising one of their most powerful remedies under a subscription facility – the right to directly issue a capital call to the Fund's investors. After outlining the historical evolution and competing concerns related to standstill provisions, this article will examine a number of considerations for parties to consider during negotiations.