Scenario 06

---
name: draft-lpa-scenario-06
task_id: funds-asset-management/draft-lpa/scenario-06
description: Draft a venture debt (credit) fund limited partnership agreement by adapting an equity fund precedent to the applicable term sheet and counsel notes, replacing equity-fund provisions with credit-fund-appropriate mechanics.
activates_for: [planner, solver, checker]
---

# Skill: Draft Credit / Venture Debt Fund LPA from Equity Precedent

## 1. Subject-matter triage

- Treat the term sheet as controlling for economics, structure, and drafting priorities; use the equity precedent only as a drafting chassis.
- Read the precedent, term sheet, and counsel notes together before drafting so that credit-fund mechanics are inserted where equity-fund mechanics no longer fit.
- Confirm the registered agent and office details against the actual engagement and address before finalizing entity references.
- If a term sheet point and a precedent provision conflict, the term sheet governs unless counsel notes expressly carve out a different treatment.

## 2. Failure modes the skill is correcting

- Carrying over equity-fund investment mechanics without converting them to a credit fund’s lending and portfolio-management model.
- Leaving distributable cash defined for exit-driven equity proceeds instead of recurring credit-fund cash flows.
- Failing to distinguish performing loans from impaired or non-performing loans in the valuation regime.
- Retaining equity-style control, governance, or investment restrictions that are inconsistent with debt investing.
- Omitting credit-fund borrowing mechanics, leverage limits, or their effects on fee and return calculations where relevant.
- Overlooking tax-sensitive issues for investors in a leveraged credit strategy.
- Drafting a precedent-based LPA that looks complete but still contains stray equity-fund concepts, defined terms, or default mechanics.

## 3. Legal frameworks / domain conventions that apply

- Define distributable cash to capture recurring interest, fees, prepayments, repayments of principal, exit or amendment fees, workout recoveries, and other loan-disposition proceeds that are ordinary for a credit fund.
- Separate periodic income distributions from principal-return or realization distributions if the term sheet or notes contemplate different timing mechanics.
- Use a valuation regime that values performing loans consistently on an amortized-cost or par-based convention, while moving impaired or non-performing assets to a fair-value framework based on recovery assumptions and an identified valuation process.
- Tie the impairment trigger to objective credit events, material delinquency, restructuring status, non-accrual treatment, or another standard stated in the term sheet or notes.
- Restrict investments to debt instruments and related credit positions, and address any permitted equity holdings, warrants, or control-like rights only to the extent they are incidental to credit underwriting or workout protection.
- If leverage or a subscription facility is permitted, draft the borrowing authority, collateral package, use-of-proceeds, and any effect on preferred return, fee base, or capital-account mechanics exactly as the term sheet requires.
- Address tax treatment for investors that may be sensitive to debt-financed income, UBTI-like concepts, withholding, or analogous adverse tax outcomes, using the representations, election, or allocation mechanics approved in the deal materials.
- Use governing partnership-law, securities-law, tax, and fiduciary-duty conventions appropriate to the fund’s jurisdiction and investment strategy; do not import equity-fund drafting assumptions that depend on portfolio-company ownership or exit waterfalls.

## 4. Analytical scaffolds

- Start with the approved economic and structural terms, then map each term to the closest LPA section before drafting prose.
- Replace equity-fund terms systematically rather than piecemeal: investment policy, income definition, distributions, valuation, leverage, conflicts, tax, and investor eligibility.
- For each equity precedent clause, ask whether the clause assumes appreciation, control, sale proceeds, or board governance; if yes, convert it to a credit-fund analogue or remove it.
- Draft distributable cash broadly enough to reflect the fund’s credit income stream, but keep the mechanics consistent with the approved distribution cadence and reserve policy.
- Draft valuation provisions in two layers: one for performing assets using a stable credit-oriented basis, and one for impaired assets using a fair-value process with an identified decision-maker or expert.
- Build the borrowing and leverage provisions only to the extent contemplated by the source materials; do not introduce additional borrowing capacity, reserve tests, or return adjustments.
- Check each defined term for equity-fund residue; replace or delete terms that presume exits, proceeds from portfolio-company equity, or control investments.
- Verify that the final agreement is internally consistent across definitions, allocations, capital calls, fee provisions, distributions, and dissolution mechanics.
- Where the source documents are silent, follow standard venture debt fund conventions, but keep the drafting conservative and compatible with the precedent form.

## 5. Vertical / structural / temporal relationships

- The term sheet controls all deal-specific economics and structure; counsel notes control all requested edits and special carveouts; the precedent supplies only organization and style.
- Distribution timing should track the fund’s income profile, which is usually more frequent than an equity realization model.
- Valuation should track asset status over time: performing first, impaired or non-performing upon the relevant trigger, and then fair-valued until the asset returns to performing status or is realized.
- Any leverage provisions should be coordinated with distribution mechanics, fee calculations, and preferred-return mechanics so the same borrowing does not distort multiple provisions in different ways.
- If the fund’s investment authority changes after an impairment, restructuring, or workout event, the LPA should reflect that vertical transition without leaving the earlier regime operative by mistake.

## 6. Output structure conventions

- Produce a single, complete limited partnership agreement draft in the required document format.
- Write the agreement as operative contract text, not as commentary, a summary, or a comparison memo.
- Preserve the precedent’s overall LPA architecture where useful, but ensure all equity-specific drafting has been replaced with credit-fund-appropriate language.
- Use conventional fund-document sectioning, defined terms, and exhibits only as needed to implement the approved terms.
- Before finishing, confirm that the deliverable file named `coppervine-credit-fund-i-lpa.docx` exists, is non-empty, and contains the operative agreement text.