On May 6, the Financial Stability Board (FSB) released its first dedicated report on the private credit market’s vulnerabilities, and the findings land squarely on banks and fund managers. With private credit now at $1.5 trillion to $2 trillion globally, the FSB warns that circular funding structures, opaque borrower credit quality, and deepening interconnectedness between banks and funds could transmit stress across the financial system.
The digital asset landscape took a leap forward this summer when the U.S. Court of Appeals for the Ninth Circuit confirmed[1] that nonfungible tokens (NFTs) qualify for trademark protection under the Lanham Act.[2] This decision, centered on the Bored Ape Yacht Club’s collection of 10,000 distinctive digital ape NFTs, signals a new era for both intellectual property and secured lending.
The landscape of subscription line lending is undergoing significant transformation, with both private credit funds (PCFs) and traditional banks playing crucial roles. PCFs, which pool capital from institutional and high-net-worth investors, are increasingly becoming key players in providing credit facilities to private equity firms, secured by investor commitments. This shift introduces new dynamics alongside traditional banks, which have historically dominated this space. While PCFs offer greater flexibility and customized financial solutions due to fewer regulatory constraints, traditional banks bring extensive experience and stability, relying on deposits and adhering to regulatory requirements. Together, these entities are reshaping the subscription line market, offering diverse options for borrowers.
Private credit funds (PCFs) are emerging as key players in the subscription and net asset value (NAV) line market, significantly impacting fund financing. Regulatory changes, economic trends, and strategic innovations are also driving changes in the subscription facility landscape.
In its highly anticipated decision, the Second Circuit has answered the question of whether a syndicated term loan qualifies as a “security” with a definitive “no”. On August 24, the Court of Appeals for the Second Circuit issued its ruling, affirming the lower court’s holding in Kirschner[1] that leveraged loans are not securities. After the Securities and Exchange Commission (SEC) declined to submit a brief, the court determined, in its application of the Reves test, that three of the four Reves factors weighed against concluding that the complaint plausibly alleged that the loans in question are securities.
In March , the Court of Appeals for the Second Circuit requested that the Securities and Exchange Commission (SEC) submit a brief on whether a syndicated term loan qualifies as a “security.” The brief was highly anticipated after the SEC requested multiple extensions to submit. However, on July 18, the SEC relayed to the court that they will not be filing a brief, stating that “Despite diligent efforts to respond to the Court’s order and provide the Commission’s views, the staff is unfortunately not in a position to file a brief on behalf of the Commission in this matter. We greatly appreciate the Court’s indulgence and regret any inconvenience this may have caused the Court or the parties.”