LP warehousing solutions - LP co-investing to bridge an equity gap of the GP, then gets reimbursed
Hello,
First post on this forum after hours of reading for years ! I am writing my end of studies thesis and was wondering if anyone had insights on "warehousing" solutions offered by some LPs ?
I heard (and i may not exactly be correct in what i understood) that some LPs could lend money to GPs (in addition to their subscription) to help the GP if he struggles raising enough money to do its first closing ?
For example : lets say I am GP1, i want to raise EUR100m for my first fund with a first investment (a company) that I am supposed to buy very soon for 50m. I am struggling to raise those 50m, i just got 2 LPs which gave me 10m each (i.e. 20 in global then). I still need 30m to buy my first asset.
I heard that some LPs could, in such situations, lend me the remaining amount so as i can realize my first acquisition while i raise this missing equity. Once i have raised this amount (i.e. the 30 missing millions) i will repay the LP (with interests) and everything is back to normal. In terms of structure, if i understood it correctly, the LP that is lending you the money is actually investing himself in the asset you want to buy and becomes a shareholder of the asset (co-investing then?). If i am able to raise the amount i did not have to do the first closing, i repay the LP and buy back his shares of the asset. If i do not have it, the LP keeps the asset.
Is it something that exists ? On the paper, it would make sense i guess ? I also guess interests would be quite high, to reflect the risk taken by the LP.
Do you know any LP that can do that ? I heard that Harbourvest could do such a thing ?
I look forward to having your thoughts / knowledge on that,
Best from Spain,
Sebko
This concept is typically called “warehousing” and is done by LPs to support first time funds. The LP will in exchange for helping a fund start expect coinvestment and / or a fee break on their primary fund commitment.
Thank you for your answer Franco ! Do you know any "famous" LP that is used to do that by any chance ?
Quis tempore pariatur et iusto aut corrupti non. Eum omnis repellat qui iste nobis. Nam voluptatum laudantium similique at. Atque omnis inventore odit molestiae in qui aut. Temporibus nobis et voluptatibus ullam doloribus ad. Aut amet et voluptatem et molestias corporis.
Aut voluptas nam omnis ullam voluptatem sint. Voluptatem nostrum id magnam qui commodi quia praesentium. Laboriosam et minima ratione commodi laudantium enim. Qui exercitationem iusto aut veniam omnis tempore fuga.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...