NAV: Following my feature detailing the NAV-lending landscape, I’m posting this piece by Dave Philipp of Crestline Investors – one of the lenders quoted in my article – on some of the uses of NAV loans (with a few case studies) and things to take into consideration when thinking about taking out a NAV loan. As Philipp says: “This financing comes at a cost… and should be used prudently.”
If you haven’t read it, my article also takes a look at some of the terms of active NAV lenders, and at some of the things funds are looking to do with the money outside of shoring up existing assets (for example, these firms will make loans for the purpose of buying portfolio company debt – with the debt markets trading where they are, investing in the debt of portfolio companies you have a deep understanding of and conviction on could be one substantially accretive strategy).
Some of the CFOs I’ve spoken to have expressed a lot of interest in this relatively new market, but balk at the expense. “If people could take advantage of it they would,” one buyout firm CFO told me last week. “I’m not sure lenders are making it easy for firms to take advantage of.”
A lot like in the early days of the secondaries market, the use of concentrated NAV loans have been seen by some as a sign of weakness. Nonetheless, these lenders are seeing soaring dealflow, and of course they’re hoping this is the moment the asset class comes into its own and starts seeing bigger, well-known names take a closer look. Further developments in this growing market are almost certain to come; it should be interesting to see how it evolves.
Podcast: Another installment of our highly popular cross-asset class podcast, featuring senior PEI editors taking a look at the big issues in private markets across the globe. In this episode, they talk about some of the bright spots for investing in private markets right now.
Email prepared by Graham Bippart