Amendments to Loan Origination Qualifying Investor AIF Requirements

08-02-2018

On 7 February 2018, the Central Bank of Ireland issued a notice of its intention to make a change to the AIF Rulebook in respect of loan origination Qualifying Investor AIFs (“LO-QIAIFs”).

LO-QIAIFs are currently prohibited from engaging in activities other than lending and related operations.  The Central Bank has previously clarified that not all of a LO-QIAIF’s lending has to be structured as bilateral loans; lending can be structured as an investment in debt securities or as a participation in a syndicated lending arrangement. It has also clarified that investment in equity securities of a borrower as part of a typical loan package is also permitted.  However, LO-QIAIFs have still been constrained in their investment in debt securities or other credit instruments when not part of a lending arrangement.

Following a review of these restrictions, the Central Bank has concluded that it is appropriate to allow LO-QIAIFs to have broader credit strategies. As a result, the AIF Rulebook will be amended with effect from 7 March to allow for direct investment by LO-QIAIFs in debt/credit instruments.

This amendment is a welcome relaxation of the investment restrictions imposed on LO-QIAIFs and will allow investment managers more flexibility to manage broader credit strategies within a LO-QIAIF.

The full text of the notice and the proposed AIF Rulebook change can be seen on the Central Bank’s website here.

If you would like to discuss this development, please feel free to contact a member of our team.