Experience with capital calls on Syndication

[AJ Shepard]

Has anyone had some experience with syndicators performing a capital call? Would be nice to know some of the ways it is performed.

Has anyone heard of the preferred return being stripped from the LP during the call if they don’t put in more capital, essentially providing the syndicator gets paid on their split before a preferred return is paid for the original capital and not the additional capital?

[Chris Seveney]

@AJ Shepard

Devil is in the details of the PPM and my suspicion is we are going to see ALOT of capital calls in next 2-3 years if loans are maturing because banks will want to reset the DSCR based on current rates.

Typically the agreement states a sponsor can do a capital call and how long you have to provide the funds, if you do not there can be consequences. Without seeing the deal it’s tough to gauge but yes it can be if you do not contribute you can forfeit any potential future returns and or pay penalties