- Client: UK National and Resident
- Net Worth: Circa £25 million+
- Profile: General Partner in a private equity firm with more than $2.6 billion in committed capital under management
- Financing Requirement: £15 million
- Terms: 4-year term at 18% annual PIK interest
Enness was approached by an ultra-high-net-worth individual looking to raise £15 million against a diversified portfolio of illiquid assets. The client had more than 25 years of experience investing across Europe and globally and had most recently held a senior global private equity position, with responsibility for managing significant assets across Europe and North America.
The client had built a net worth of more than £25 million, comprising a diversified portfolio of General Partner (GP) and Limited Partner (LP) interests in private equity funds, real estate and private equity positions in various companies. While the portfolio represented substantial underlying wealth, much of it was held in assets that could not easily be used as collateral for conventional bank financing.
The client wanted to use their wider net wealth, alongside a personal guarantee, as combined collateral to access liquidity for further investment opportunities. The primary objectives were to pursue additional real estate development projects and private equity investments without having to liquidate existing positions.
Given the nature of the assets, Enness structured the transaction as an illiquid asset lending facility. This form of finance can provide liquidity against assets that would typically fall outside the parameters of conventional bank lending, including interests in private companies, investment funds and other non-traditional assets. Such facilities are highly bespoke and need to be structured around the underlying assets, their value and the lender’s requirements.
The facility included a number of financial covenants, including specific requirements relating to certain LP interests and real estate holdings. These covenants were agreed between the client and lender and included a minimum net asset value (NAV) requirement to provide the lender with additional protection throughout the term of the facility.
The structure also incorporated a cash sweep mechanism at portfolio level. Under the arrangement, the lender could receive an agreed proportion of cash generated through LP interest realisations, crystallised carried interest and realised rental income. The remaining cash flow was shared with the client, allowing them to retain an element of the liquidity generated by the portfolio.
Importantly, the facility also allowed approximately 20% of the proceeds to be retained for personal use without a defined use of proceeds. This gave the client additional flexibility within the overall liquidity structure and meant that not all of the borrowing had to be allocated to a specific investment opportunity at the outset.
Enness ultimately secured a £15 million facility on a four-year term with an annual 18% payment-in-kind (PIK) interest rate. The bespoke structure provided the client with access to liquidity against a complex portfolio while allowing them to retain their underlying investments and pursue additional opportunities.
This case demonstrates how specialist lending can provide an alternative source of liquidity for investors whose wealth is concentrated in private equity, real estate and other illiquid assets. By considering the portfolio as a whole and negotiating a structure around the characteristics of the underlying assets, Enness can help clients explore financing solutions that may not be available through traditional lending channels.
If you hold significant interests in private equity funds, private companies or other illiquid assets and are looking to unlock liquidity without immediately selling those investments, speak to a finance specialist to discuss your circumstances.
Risk Warning:
Illiquid asset lending carries significant risks. The value of private equity interests, real estate and other underlying assets can fluctuate, and illiquid investments may be difficult to sell or realise at short notice. Failure to meet the terms of a facility or applicable financial covenants could result in enforcement action against the assets provided as security. PIK interest increases the amount owed over the term of the facility and should be considered carefully alongside the proposed repayment strategy.
Disclaimer:
This case study is for illustrative purposes only and does not constitute financial, legal, tax or investment advice. Enness does not provide investment advice. Finance is subject to status, underwriting, asset assessment and lender criteria. Terms and availability will vary depending on individual circumstances and the proposed transaction.
Information contained in our case studies is for market and illustrative purposes only. In some cases, these may be made up of multiple cases and are for illustrative purposes only.
Some case studies are made up of enquiries that have come into the business, not all business completes, and the posting of a case study does not represent a completed piece of business.
Property values can fall as well as rise, and you may not get back the amount originally invested. Property investments can be illiquid and may take time to sell. Where borrowing is used, your property may be repossessed if you do not keep up repayments on a mortgage or other loan secured against it.
