# MFN Cascade

An **MFN cascade** is the process triggered when a new LP's [side letter](/side-letters-and-mfn/side-letter.md) contains provisions that activate [MFN rights](/side-letters-and-mfn/mfn.md) held by existing LPs. The GP must systematically identify which existing LPs are eligible to elect into the new terms, notify them, and record any elections made.

## Why It's Complex

A fund may have 30–80 LPs at final close, each with their own side letter and MFN rights. Every new LP admission at a subsequent close potentially triggers a cascade analysis across all existing LPs. The complexity compounds when:

* Different LPs have different MFN tiers (not all are eligible for all new terms).
* The new LP's side letter contains multiple provisions, each potentially triggering a different subset of existing LPs.
* LPs have a time-limited window to elect, requiring the GP to track election deadlines across multiple cascades.
* Elections by one LP may trigger *further* obligations (e.g., an elected fee waiver must be applied immediately at the next fee call).

## The Cascade Process

### Step 1 — New Side Letter Review

When a new LP's side letter is executed, the GP reviews each provision and tags it as:

* **Electible by MFN** (a favorable term that others may want)
* **Not electible** (regulatory, mandate-specific, or otherwise non-transferable)

### Step 2 — Eligibility Analysis

For each electible provision, Gildi determines which existing LPs qualify:

```
Eligible LP = (LP holds MFN rights) AND (LP commitment ≤ new LP's commitment)
              AND (provision is in the LP's electible categories)
```

### Step 3 — Notification

Gildi generates a notification for each eligible LP listing:

* The new provision(s) they may elect
* The election deadline (election window from the LPA)
* Instructions for submitting their election

### Step 4 — Recording Elections

Each LP's election or declination is recorded in Gildi. For elections:

* The elected term is added to the LP's side letter record.
* If the term is a fee override, the fee schedule is updated immediately.
* If the term is an operational right (co-invest, enhanced reporting), it is flagged for manual GP follow-through.

### Step 5 — Deadline Lapse

For LPs who do not respond within the election window, the declination is recorded automatically. The window is not extended.

## Cascade History

Gildi maintains a full cascade history per fund: each cascade event, which LPs were notified, what each LP elected or declined, and when. This record is available for LP audit requests and regulatory review.

## Current Automation Level in Gildi

Gildi automates:

* Eligibility analysis (Step 2)
* Notification generation (Step 3)
* Election recording and deadline tracking (Step 4–5)
* Automatic application of elected fee overrides

Manual GP action is required for:

* Tagging new side-letter provisions as electible / non-electible (Step 1)
* Fulfilling operational elections (co-invest rights, enhanced reporting delivery)


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