How does an equity investment within a debt fund work?
I work at a commercial bank who recently partnered with a private credit shop to launch a joint private credit fund. We are being told that this fund is "off-balance sheet" and "non-consolidated" for our bank, but that our bank also contributed an "anchor equity commitment of $xx" to the fund.
Can someone help me understand this (i.e., how we are off-balance sheet, non-consolidated but we committed equity to the fund)? FWIW - our equity commitment is "up to" ~30% of the targeted initial equity raise for the fund.
You won't own enough equity of the JV to require consolidating it onto your balance sheet; i.e., you'll just be a minority equity partner.
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