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Solara Digital Infrastructure LP — Cross-Border Fund-Platform Reorganization
Presentation to the LP Advisory Committee
Prepared by Calderwood & Harkness LLP
CONFIDENTIAL — Attorney-Client Privileged
Date: For LPAC Review — July 15, 2025
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Agenda
I. Executive Summary & Business Rationale
II. Current Fund Platform Structure
III. Proposed Post-Reorganization Structure
IV. Five-Step Transaction Overview
V. Tax Treatment — Summary of Rulings Requested
VI. Key Financial Data
VII. Impact by Investor Category
VIII. Third-Party Consents & Coordination
IX. Timeline & Key Milestones
X. LP Consent Requirements & Next Steps
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I. Executive Summary
Solara Digital Infrastructure LP ($14.7 billion AUM as of March 31, 2025) proposes to consolidate its cross-border fund platform
Four offshore parallel fund vehicles (two Cayman, two Luxembourg) to be reorganized into a single Delaware-domiciled master fund structure with Cayman feeder vehicles
Transaction designed to qualify as tax-free under IRC §§ 721 and 731
Private letter ruling request to be submitted to IRS Office of the Associate Chief Counsel (International) — target August 15, 2025
Target effective date: December 1, 2025
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Business Rationale for the Reorganization
Operational Cost Reduction: Elimination of approximately $3.8 million in annual duplicative offshore administration, audit, and regulatory fees
OECD Pillar Two GloBE Rules: Forthcoming Pillar Two rules effective for Luxembourg entities from FY 2025 diminish the benefits of the Luxembourg SCSp structures
FATCA/CRS Compliance Simplification: Consolidated reporting reduces complexity and compliance risk across multiple jurisdictions
Governance Simplification: LP-requested streamlining of parallel fund governance, voting, and reporting across multiple vehicles
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II. Current Fund Platform Structure
Fund IV Family (Vintage 2021; 72% deployed):
— Solara Digital Partners Fund IV LP (Delaware) — $4.2B — U.S. taxable investors
— Fund IV-A (Cayman) LP — $1.85B — Non-U.S. and U.S. tax-exempt investors
— Fund IV-B (Luxembourg) SCSp — €1.15B ($1.24B) — Non-U.S. investors (treaty access)
Fund V Family (Vintage 2023; 38% deployed):
— Solara Digital Partners Fund V LP (Delaware) — $5.6B — U.S. taxable investors
— Fund V-A (Cayman) LP — $2.45B — Non-U.S. and U.S. tax-exempt investors
— Fund V-B (Luxembourg) SCSp — €1.38B ($1.49B) — Non-U.S. investors (treaty access)
Three GP entities: Solara Digital Infrastructure GP LLC (DE), Solara Offshore GP Ltd. (Cayman), Solara Luxembourg Management S.à r.l. (Luxembourg)
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Representative Investor Base
U.S. Tax-Exempt: Pinnacle State Employees' Retirement System ($275M Fund IV / $340M Fund V); Grandview University Endowment ($120M Fund IV / $185M Fund V)
Non-U.S. Sovereign: Nordhaven Sovereign Wealth Fund ($380M Fund IV-A Cayman / $500M Fund V-A Cayman)
Non-U.S. Insurance: Kestrel Pacific Insurance Group (€200M Fund IV-B Lux / €275M Fund V-B Lux)
U.S. Taxable: Argyle Family Office Holdings LLC ($95M Fund IV / $130M Fund V)
Each category has distinct tax sensitivities driving post-reorganization feeder/direct investment channel
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III. Proposed Post-Reorganization Structure
Solara Consolidated Master Fund LP (Delaware) — new master fund consolidating all offshore vehicle assets
— GP: Solara Consolidated Master Fund GP LLC (Delaware)
Solara International Feeder (Cayman) LP — feeder for non-U.S. investors investing into the Master Fund
Solara Tax-Exempt Feeder (Cayman) LP — feeder for U.S. tax-exempt investors (pensions, endowments) to mitigate UBTI concerns
Fund IV LP and Fund V LP (Delaware) — remain as-is; U.S. taxable investors continue to invest directly alongside the Master Fund
All new entities to elect partnership classification via IRS Form 8832 (check-the-box)
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IV. Five-Step Transaction Overview
Step 1 — Formation of New Entities (Sept. 15, 2025): Form Master Fund GP LLC, Master Fund LP, International Feeder, Tax-Exempt Feeder; file Form 8832 elections
Step 2 — Contribution of Fund IV-A Cayman Assets (Oct. 1, 2025): All portfolio assets (FMV $2.31B; basis $1.62B; BIG $690M) contributed to Master Fund LP
Step 3 — Contribution of Fund IV-B Luxembourg Assets (Oct. 15, 2025): All portfolio assets (FMV $1.16B; basis $844.6M; BIG $311M) contributed to Master Fund LP
Step 4 — Contribution of Fund V Offshore Assets (Nov. 1, 2025): Fund V-A Cayman (FMV $2.89B; BIG $550M) and Fund V-B Lux (FMV $1.39B; BIG $162M) contributed to Master Fund LP
Step 5 — Dissolution & LP Migration (Dec. 1, 2025): Legacy vehicles dissolve; Master Fund LP interests distributed to LPs; non-U.S. LPs roll into International Feeder; U.S. tax-exempt LPs roll into Tax-Exempt Feeder
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Aggregate Financial Summary of the Reorganization
Total FMV of assets transferred to Consolidated Master Fund: $7.75 billion
Total adjusted tax basis: $6.03 billion
Total aggregate built-in gain: $1.72 billion
Aggregate liabilities assumed by Master Fund: $1.34 billion (subject to § 752 analysis)
Total portfolio companies across all funds: 23 (11 in Fund IV vehicles; 12 in Fund V vehicles)
EUR/USD exchange rate applied uniformly: 1.08
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V. Tax Treatment — Overview of Rulings Requested
Ruling 1 (§ 721): Tax-free contributions of portfolio assets to Master Fund LP — no gain/loss recognized
Ruling 2 (§ 721(b)): Master Fund LP does not constitute an 'investment company' (operating company portfolio)
Ruling 3 (§ 367): §§ 367(a)/(b) do not apply — provisions apply only to transfers to/from corporations, not partnerships
Ruling 4 (§ 731): Tax-free distributions of Master Fund LP interests to LPs upon dissolution of legacy vehicles
Ruling 5 (§ 752): Liability shifts do not trigger gain recognition under § 731 after netting analysis
Ruling 6 (§ 704(c)): Built-in gain/loss accounts carry over; remedial allocation method continues
Ruling 7 (§ 1446): No withholding required on contributions or distributions (nonrecognition transactions)
Ruling 8 (Entity Classification): All new entities properly classified as partnerships under Treas. Reg. § 301.7701-3
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Ruling 1: IRC § 721(a) — Tax-Free Contributions
Each offshore vehicle contributes its entire portfolio to Solara Consolidated Master Fund LP in exchange for a limited partnership interest
Under IRC § 721(a), no gain or loss is recognized by the contributing partnerships or their partners on the contribution of property to a partnership
Carryover basis under IRC § 723 — Master Fund takes the same tax basis as the contributing vehicle
Holding period of contributed assets tacks under IRC § 1223(2)
No cash boot or other consideration beyond partnership interests
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Ruling 2: IRC § 721(b) — Not an Investment Company
IRC § 721(b) denies tax-free treatment if the contribution results in 'diversification' and the partnership is an 'investment company'
Treas. Reg. § 1.351-1(c)(1)(ii) defines 'investment company' by reference to holdings of 'stocks, securities, or other investment assets'
Solara's portfolio consists entirely of operating company interests — digital infrastructure and enterprise SaaS platforms
All 23 portfolio companies are active operating businesses, not passive investment assets
Conclusion: § 721(b) exception does not apply; contributions remain tax-free
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Rulings 3–4: § 367 Inapplicability & § 731 Distributions
Ruling 3 (§ 367): IRC §§ 367(a) and 367(b) by their terms apply only to transfers to or from corporations — the Master Fund LP is a partnership; § 367 does not apply
Ruling 4 (§ 731): Distributions by legacy vehicles of Master Fund LP interests to LPs in Step 5 are tax-free under § 731(a) — no gain recognized because LPs receive only partnership interests, not money
IRC § 731(c) marketable securities exception does not apply — Master Fund LP interests are not 'marketable securities' as they are not actively traded or readily tradable on a secondary market
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Rulings 5–6: Liability Shifts (§ 752) & Built-In Gain Carryover (§ 704(c))
Ruling 5 (§ 752): $1.34B in aggregate liabilities shift from legacy vehicles to Master Fund LP — §§ 752(a)/(b) create deemed contributions and distributions as partner shares change
Netting under Treas. Reg. § 1.752-1(f) and tiered partnership rules applied to demonstrate no net gain recognition under § 731
Ruling 6 (§ 704(c)): $1.72B in built-in gain accounts carry over from legacy vehicles to Master Fund LP
Master Fund LP will continue to use the remedial allocation method under Treas. Reg. § 1.704-3(d) for each contributed property
Ensures historic investors continue to bear their appropriate share of built-in gain on eventual disposition
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Rulings 7–8: Withholding (§ 1446) & Entity Classification
Ruling 7 (§ 1446): No withholding on Steps 2–4 contributions or Step 5 distributions — nonrecognition events generate no effectively connected taxable income
Particularly relevant for non-U.S. investors (Nordhaven Sovereign Wealth Fund, Kestrel Pacific Insurance Group)
Ruling 8 (Entity Classification): Master Fund LP, International Feeder, and Tax-Exempt Feeder each properly classified as partnerships under Treas. Reg. § 301.7701-3 via check-the-box elections
Form 8832 elections to be filed for each new entity with effective dates coordinated to precede the first contribution step
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VI. Key Financial Data — Portfolio Company Highlights
NovaBright Data Systems Inc. (DE corp) — Data center operator — FMV $890M / Basis $520M / BIG $370M — Fund IV-A Cayman 60%, Fund IV LP 40%
Veridian Edge Computing Corp. (DE corp) — Edge computing infra — FMV $1.12B / Basis $780M / BIG $340M — Fund V-A Cayman 55%, Fund V LP 45%
Thorngate Fiber Networks LP (DE LP) — Fiber-optic networks — FMV $670M / Basis $490M / BIG $180M — Fund IV-A Cayman 100%
Crestline Cloud Solutions LLC (DE LLC, disregarded) — SaaS platform — FMV €340M ($367M) / Basis €195M ($211M) / BIG $156M — Fund IV-B Lux 100%
Helix SaaS Holdings Ltd. (Cayman exempted co.) — SaaS holding — FMV $445M / Basis $310M / BIG $135M — Fund V-A Cayman 100%
Plus 18 additional portfolio companies across Fund IV and Fund V vehicles
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VII. Impact by Investor Category
U.S. Taxable Investors (e.g., Argyle Family Office): No change — remain directly in Fund IV LP and Fund V LP; co-invest alongside Master Fund
U.S. Tax-Exempt Investors (e.g., Pinnacle SERS, Grandview Endowment): Migrate from Cayman parallel vehicles to Tax-Exempt Feeder (Cayman) LP → Master Fund; UBTI blocker benefits preserved
Non-U.S. Investors — Cayman (e.g., Nordhaven SWF): Migrate from Fund IV-A/V-A Cayman to International Feeder (Cayman) LP → Master Fund; no U.S. withholding on reorganization steps
Non-U.S. Investors — Luxembourg (e.g., Kestrel Pacific): Migrate from Fund IV-B/V-B Lux to International Feeder (Cayman) LP → Master Fund; Luxembourg SCSps dissolved; no Luxembourg capital gains tax expected
All categories: No gain recognition anticipated; built-in gain accounts carry over; tax attributes preserved
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VIII. Third-Party Consents & Coordination
Lender Consents: Ashford National Bank, N.A. — Fund IV subscription facility ($1.1B) and Fund V subscription facility ($1.5B); Sentinel Capital Markets LLC — co-lender/administrative agent on Fund V facility
Insurance: Hawkstone Specialty Insurance Co. — endorsement of $50M D&O/E&O policies to cover new entities
Fund Administrator: Clarendon Fund Services Ltd. — transition of NAV calculation and investor reporting to Master Fund structure
Cayman Counsel: Meridian Offshore Legal (Fiona McAllister) — formation of new Cayman feeders; CIMA deregistration of Fund IV-A (MF-72491) and Fund V-A (MF-89103)
Luxembourg Counsel: Veldhuis & Gérard S.à r.l. (Marc Gérard) — dissolution of Fund IV-B SCSp (RCS B 248193) and Fund V-B SCSp (RCS B 271056); CSSF notification
Accounting: Caldwell Pierce & Co. LLP — financial data and tax compliance support for PLR submission
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IX. Timeline & Key Milestones
March 14, 2025 — GP board approval of reorganization exploration
April 22, 2025 — LPAC meeting; preliminary consent obtained (78% in interest)
May 12, 2025 — Calderwood & Harkness engagement letter executed
June 16, 2025 — Initial tax analysis memorandum completed
July 1, 2025 — Draft PLR request circulated to Solara
July 15, 2025 — LPAC review of final PLR request
July 22, 2025 — Pre-submission conference with IRS CC:INTL Branch 1
August 15, 2025 — PLR request submitted to IRS
September 15, 2025 — Formation of new entities; Form 8832 elections filed
October 1, 2025 — Step 2: Fund IV-A Cayman contribution to Master Fund
October 15, 2025 — Step 3: Fund IV-B Luxembourg contribution to Master Fund
November 1, 2025 — Step 4: Fund V-A Cayman and Fund V-B Luxembourg contributions
December 1, 2025 — Step 5: Dissolution of legacy vehicles; LP migration (target effective date)
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X. LP Consent Requirements & Next Steps
Formal LP consent required under LPA amendment provisions for Fund IV and Fund V (and all parallel vehicles)
Preliminary consent of 78% in interest obtained at April 22, 2025 LPAC meeting — formal solicitation to follow
LP Consent Solicitation Letter and Form of LP Consent to be distributed to all LPs
Draft Amendments to Fund IV LPA and Fund V LPA to authorize asset contributions and formation of new entities
LP Tax Impact Summary Letter to be provided to all LPs — each LP encouraged to consult its own tax advisors
LPAC counsel (Whitfield, Carruthers & Doyle LLP) reviewing PLR Draft v3.0 — comments due July 15, 2025
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Key Advisors & Contacts
U.S. Tax Counsel: Calderwood & Harkness LLP — Leonard Cross (Responsible Partner), Sylvia Hartwell (Billing Partner), Robert Jansen (Lead Associate), Garrett Simmons (Working Associate)
LPAC Counsel: Whitfield, Carruthers & Doyle LLP — Diana Carruthers (Partner)
Nordhaven SWF Independent Tax Counsel: Bramhall & Quelwick LLP — Jason Tremaine (Partner)
Cayman Counsel: Meridian Offshore Legal — Fiona McAllister (Partner)
Luxembourg Counsel: Veldhuis & Gérard S.à r.l. — Marc Gérard (Managing Partner)
Accounting/Tax Compliance: Caldwell Pierce & Co. LLP — Helen Okamoto (Partner)
Valuation Advisor: Redstone Advisory Group LLC — Marco DeLuca (Managing Director)
Fund Administrator: Clarendon Fund Services Ltd. — Rachel Okonkwo (Client Relationship Director)
Lender: Ashford National Bank, N.A. — Thomas Greenleaf (MD); Sentinel Capital Markets LLC — Laura Pak (VP)
Solara Contacts: Viktor Raines (Managing Partner), Priya Narasimhan (GC), Stefan Dalmqvist (Head of Tax), Douglas Wexford (CFO), Meredith Tsao (COO)
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Appendix: Key Tax Code Provisions Referenced
IRC § 721(a), (b) — Contribution of property to a partnership; investment company exception
IRC § 723 — Basis of property contributed to a partnership
IRC § 731(a), (c) — Distribution of property by a partnership; marketable securities
IRC § 704(c) — Allocations with respect to contributed property (built-in gain/loss)
IRC § 752 — Treatment of certain liabilities (deemed contributions/distributions)
IRC § 367(a), (b) — Transfers to/from foreign corporations (inapplicability to partnerships)
IRC § 1446 — Withholding on effectively connected taxable income
IRC § 897 / FIRPTA — Disposition of U.S. real property interests
Treas. Reg. § 301.7701-3 — Entity classification (check-the-box)
Treas. Reg. § 1.704-3(d) — Remedial allocation method
Treas. Reg. § 1.752-1(f) — Netting of liability shifts
Rev. Proc. 2025-1 — Procedures for PLR requests
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Disclaimer
This presentation is prepared by Calderwood & Harkness LLP solely for the use of the LP Advisory Committee and its counsel in connection with the proposed Solara fund-platform reorganization
CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGED — ATTORNEY WORK PRODUCT
This presentation does not constitute tax advice to any individual limited partner
Each LP is encouraged to consult its own tax, legal, and financial advisors
No representation or warranty is made regarding the outcome of the IRS PLR process