NAV loans

“Capitalizing businesses fund by fund, instead of deal by deal, resembles a holding company in which the sponsor can efficiently acquire and allocate financing.”

“The dividend recap of a private equity portfolio seems like a gimmick to juice distributions and IRR so the GP can ask for a commitment to its next fund. In fact, NAV lenders are pitching this concept to GPs as part of the value proposition for accepting a loa…”

“In many ways, NAV loans resembled the AAA tranches of subprime CDOs 15 years ago.”

“I've already seen presentations from lenders offering NAV loans for up to 50% of a private equity portfolio value.”

“Private credit managers see nav loans as a gold mine. Private equity managers are testing the waters, and LPs whose capital is at risk are on the lookout for trouble.”

“Carlyle, HG Capital, and SoftBank reportedly used NAV loans to distribute capital this year.”

“NAV loans strike me as a canary in the coal mine signaling the end of the private equity boom.”

“GPs out of dry powder can buy time for the fundraising environment to improve by taking a NAV loan and using the proceeds to add a deal or two to its existing fund.”

“A portfolio of options is more valuable than an option on a portfolio. One of the attractive features of private equity is the absence of cross-collateralization of debt across portfolio companies. Nav loans take away that benefit.”

“Accustomed to providing leverage to individual companies, lenders can now issue 12 to 14% senior paper at 10 to 20% LTV backed by a diversified portfolio of companies.”

“No matter how you look at it, NAV loans are a late-cycle response to the higher cost of debt and slowing fund flows that will bring uncompensated risk to LPs.”

“For every VISTA Nav loan, there are probably 10 used to cure the woes of a GP.”

“Borrowing to do more deals is the ultimate misalignment of interest. If a GP is out of dry powder and unable to raise money, the market has told that GP that it's not supportive of their future deal-making ability. Their response of using more debt to reload i…”

“Between portfolio company debt, NAV loans, and credit facilities, potentially three layers of leverage sit above private equity assets.”

“Nav loans raised to support portfolio companies are often much more acceptable to LPs, particularly in a situation where the fund has no more unfunded capital, but the GP needs to grow their portfolio or they need to defend their portfolio.”

“NAV loans that are raised against a portfolio to send capital back to LPs, very unpopular. Very high priced. Many LPs don't like them. They can raise capital cheaper themselves. So those are not popular.”

“I had an aha moment recently where I think these are going to become more and more parts of the universe going forward. They're not going away.”