On 9 June 2016 the Commission de Surveillance du Secteur Financier (“CSSF”) issued an updated version of its frequently asked questions (the “FAQ”) relating to the Luxembourg law of 12 July 2013 on alternative investment fund managers.
Luxembourg, respectively the CSSF, has now provided the long awaited clarification on debt funds and has finally taken position regarding so-called “Loan Originations” and the aspects to be considered when those Loan Originations are performed by AIFs.
This long awaited clarification as well as confirmation will now serve for more comfortable tempers in the funds sector when dealing with debt funds.
In this respect the CSSF provides following definitions:
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Loan Origination: Loan origination by an AIF is the process, initiated by its AIFM or, where applicable, by the AIF itself, of actively creating/granting/extending a loan as part of its investment policy. For the purpose of section 22 of part II of these FAQs, this concept refers to, and may comprise all relevant steps in the origination process, that is, among others, receiving and processing loan applications, performing the credit assessment and borrower selection, setting the characteristics of a specific loan (e.g., pricing (interest rates and fees), type of documentation, collateral requirements), monitoring, servicing and provisioning. Thus, the AIF becomes the original lender and the lending process is part of its investment policy.
- Loan Participation/Acquisition: Loan participation/acquisition by an AIF is the process, initiated by its AIFM or, where applicable, by the AIF itself, of purchasing/acquiring all or parts of an existing loan or package of loans (whether fully drawn or not) on the secondary market from a third party after its origination. It also refers to any other way for the AIF to acquire loans as an investment apart from loan origination (such as e.g. participation (or sub-participation) in syndicated loans, consortiums, club deals). Loan participation/acquisition is thus only relating to parts of the overall loan process, while loan origination encompasses in particular the process of the initial granting and pricing of the loan. “
For more information on this topic please refer to the FAQ on the CSSF website or contact Mrs. Mevlüde-Aysun Tokbag, Rechtsanwältin / Partner at Wildgen.