{"id":1598,"date":"2025-08-20T15:36:50","date_gmt":"2025-08-20T15:36:50","guid":{"rendered":"https:\/\/iqeq.com\/us\/case-studies\/conflict-management-in-fund-structures-the-role-of-the-compliance-consultant\/"},"modified":"2026-01-06T14:00:38","modified_gmt":"2026-01-06T14:00:38","slug":"conflict-management-in-fund-structures-the-role-of-the-compliance-consultant","status":"publish","type":"case_study","link":"https:\/\/iqeq.com\/us\/case-studies\/conflict-management-in-fund-structures-the-role-of-the-compliance-consultant\/","title":{"rendered":"Conflict management in fund structures: The role of the compliance consultant\u00a0"},"content":{"rendered":"
\n

Case study<\/p>\n

By Sean Wilke<\/a>, Head of Growth Strategy, U.S.<\/span><\/i>\u00a0<\/span><\/p>\n

Scenario: Fund portfolio company needs cash injection, but options are limited<\/h2>\n

A U.S.-based fund sponsor operates several investment vehicles, assets in which include commercial real estate as well as private equity and private credit.<\/span>\u00a0<\/span><\/p>\n

The sponsor\u2019s 2020 vintage Delaware fund (the \u201c2020 Fund\u201d) is the owner of Office Building A and the land on which it\u2019s situated. The 2020 Fund\u2019s investment period expired in 2024, and no extension was sought. The anchor tenant of Office Building A, renting approximately 50% of the space in the building, is MediaCo, an operating business majority owned by the sponsor\u2019s 2024 vintage fund (the \u201c2024 Fund\u201d), which is also domiciled in Delaware. The lease agreement predates the 2024 Fund\u2019s acquisition, which was funded through a combination of cash and debt financing.<\/span>\u00a0<\/span><\/p>\n

MediaCo is experiencing a cash crunch and requires a capital infusion to stay afloat and continue operating as a going concern. The 2024 Fund has deployed all committed capital and exhausted its credit facility and, regardless, an additional investment in MediaCo would violate its stated concentration limits.<\/span>\u00a0<\/span><\/p>\n

The 2020 Fund has several million dollars sitting in money markets \u2013 these were proceeds from an earlier sale and the cash reserve was earmarked for potential add-ons investments. However, such an investment may not be necessary as a U.S. banking institution has offered to provide MediaCo with financing. The proposed interest rate is relatively high though, and the deal would require subordination of the 2024 Fund\u2019s debt interest.<\/span>\u00a0<\/span><\/p>\n

Meanwhile, a wealthy family office from Eastern Europe has offered to provide financing on more competitive terms. The catch this time? The family appears to have tenuous ties to allegedly corrupt foreign officials, although there have been no court findings and there are no definitive prohibitions on conducting business with such family.<\/span>\u00a0<\/span><\/p>\n

All things considered, what is the best course of action?<\/span><\/b>\u00a0<\/span><\/p>\n