Welcome change to Central Bank requirements for Loan Originating Qualifying Investor AIFs

Some good news, on 25 November, the Central Bank announced an important change to their requirements for loan originating Qualifying Investor AIFs (LQIAIFs) which is to take effect from 3 January 2017 when a revised AIF Rulebook will be published.

Details of the change

Up until now LQIAIFs were obliged to limit their operations to the business of issuing loans, participating in loans, participating in lending and to operations directly arising therefrom, to the exclusion of all other commercial business. This was seen by many industry participants as being too restrictive.

The Central Bank has now confirmed that LQIAIFs will be entitled to invest in debt and equity securities of entities or groups to which the LQIAIF lends. In addition, debt and equity securities may be held for treasury, cash management or hedging purposes.

This is a very welcome change as the inability to make an equity investment in a target company to which an LQIAIF had made a loan was a significant inhibiting factor that made the Irish LQIAIF regime unattractive to a lot of international managers. Hopefully, this change will broaden the appeal of the Irish LQIAIF regime and see the growth of regulated loan originating funds as such entities can have a key role to play in the real economy.

Date Published: 28 November 2016