Scenario 17

---
name: draft-lpa-scenario-17
task_id: funds-asset-management/draft-lpa/scenario-17
description: Draft a credit fund LPA by adapting an equity fund precedent to a lending strategy, replacing equity-oriented distribution, valuation, tax, venue, and related provisions with terms appropriate for a fund whose cash flows are driven by interest, fees, principal repayments, and similar credit-instrument economics.
activates_for: [planner, solver, checker]
---

# Skill: Draft Credit Fund LPA — Equity Precedent Adaptation

## 1. Subject-matter triage

- Treat the equity precedent as a clause-by-clause source, not a template to paste wholesale.
- Isolate provisions that are inherently equity-strategy concepts and replace them with credit-fund mechanics before any stylistic cleanup.
- Confirm the approved term sheet and counsel notes control over conflicting precedent language.
- If the source materials identify a facility provider, lender, or consent right tied to leverage or subscription financing, preserve that relationship in the draft architecture and reflect any transfer, amendment, or structural approval mechanics where needed.

## 2. Failure modes the skill is correcting

- Drafter retains equity fund distribution mechanics instead of mechanics appropriate for periodic interest, fee income, principal repayments, prepayments, and similar loan receipts.
- Drafter leaves valuation language tailored to listed or private equity securities without distinguishing performing loans from non-performing, distressed, or harder-to-value positions.
- Drafter omits tax-exempt investor protections relevant to fund-level leverage or other financing features that can create adverse tax consequences.
- Drafter uses generic governing-law or forum language instead of a precise limited-partnership forum clause.
- Drafter preserves side-letter, co-investment, or equity-style realization concepts that do not fit a lending strategy.
- Drafter fails to align the draft with the term sheet’s economic and operational priorities, causing internal inconsistency across definitions, waterfall, and investment restrictions.

## 3. Legal frameworks / domain conventions that apply

**Credit-fund cash flow architecture:** Define distributable cash to capture all recurring loan-related receipts that are economically available for distribution, including interest, fees, original issue discount or similar accretion, prepayments, repayment of principal, and other credit-instrument proceeds.

**Distribution mechanics:** Align distribution timing with the fund’s cash-generation pattern and specify how available cash is allocated, reserved, and distributed among partners. The drafting should reflect a credit strategy rather than an equity-realization waterfall.

**Loan valuation conventions:** Use a valuation framework that distinguishes performing from non-performing or distressed positions. The agreement should permit periodic review, escalation for harder-to-value assets, and outside input or independent valuation where market practice or counsel notes call for it.

**Tax-exempt investor protections:** Address potential unrelated business taxable income issues and related reporting concerns that can arise from leverage, debt financing, or other structural features. Include notice mechanics, mitigation procedures, and investor-election language only where supported by the source materials.

**Governing law and venue:** Make the partnership forum clause specific to the limited partnership structure and the chosen governing law, avoiding ambiguous generic venue language.

**Facility-provider mechanics:** If the source set ties the fund to a credit facility, include the provider’s identification and any approval mechanics affecting transfers, amendments, waivers, or related structural changes in the relevant operative provisions or schedules.

## 4. Analytical scaffolds

**Step 1 — Audit the precedent for equity-specific carryovers:** Review the agreement provision by provision and flag language that assumes capital appreciation, exit-driven realizations, equity valuation marks, or equity-style tax treatment.

**Step 2 — Rebuild the distribution architecture for a lending strategy:** Draft the distributable-cash definition and related waterfall so they track interest, fees, principal repayments, and prepayments, together with any reserves, priorities, or timing features required by the term sheet.

**Step 3 — Recast valuation language for loans and credit instruments:** Separate performing assets from non-performing, distressed, or otherwise impaired positions. State the review cadence, valuation inputs, escalation path, and any independent valuation process for difficult positions.

**Step 4 — Harden tax and leverage protections:** Incorporate partner-facing tax language that addresses fund leverage, financing-related tax reporting, and mitigation steps for tax-exempt investors, while staying within the source materials’ approved scope.

**Step 5 — Tighten the forum clause:** Replace generic venue language with a precise clause that names the governing law and the appropriate forum for partnership disputes.

**Step 6 — Preserve source-controlled facility mechanics:** Where the source materials identify a lender or facility relationship, carry that relationship through the relevant operative sections and confirm that amendments, transfers, and structural changes respect any required consent path.

**Step 7 — Validate the document as a complete operative draft:** Ensure the final file is the agreement itself, with all operative clauses and schedules needed to function as a standalone LPA draft, not a summary of changes or a partial excerpt.

## 5. Vertical / structural / temporal relationships

- Keep the capital-call, funding, investment, realization, and distribution provisions internally aligned so that timing assumptions do not conflict.
- Ensure valuation language flows from asset status over time: performing positions may follow a different cadence than impaired or distressed positions.
- Make tax language responsive to structural features that can change over the life of the fund, especially leverage, warehousing, or financing-related arrangements.
- Cross-check definitions against operative sections so that “distributable cash,” “investment,” “realized proceeds,” and similar terms do not import equity-fund assumptions by accident.
- If multiple counterparties, facilities, or approval holders appear in the source set, preserve the full chain of relationships consistently across the draft rather than in isolated clauses.

## 6. Output structure conventions

- Draft the full limited partnership agreement as the primary deliverable and write it to the named output file before anything else.
- Use conventional LPA architecture: introductory provisions, definitions, partnership terms, capital contributions, investments, allocations and distributions, valuation, reporting, tax, conflicts, transfers, dissolution, and miscellaneous provisions.
- Write in operative contract language, not notes, commentary, or a checklist of edits.
- Use the approved term sheet and counsel notes to resolve conflicts, and keep the final draft consistent across all sections.
- Preserve credit-fund economics in the distribution and valuation mechanics, and avoid reintroducing equity-fund realization concepts where they do not fit.
- Confirm the final document is non-empty and contains operative clauses and any required schedules or exhibits, rather than a descriptive summary.