Loan financing with liquidity-dependent knockout feature

摘要

A Prime Broker's method for financing a Hedge Fund includes extending a Committed Loan Facility from which the Hedge Fund can borrow funds. The maximum amount of funds made available under the Committed Loan Facility to the Hedge Fund may be proportional to current loan balances maintained by the Hedge Fund. The Committed Loan Facility has a knock out mechanism that allows the Prime Broker facing a liquidity squeeze to suspend the Committed Loan Facility. The Prime Broker can activate the knock out mechanism upon occurrence of one of an enumerated list of events that affect its liquidity.