Confidential – For Investment Committee Review: The FG Capital NAV Credit Facility (the “Facility”) is offered only to qualified, accredited investors and regulated lenders. This note is not a public offer.
NAV Lending in Private Equity: No-Nonsense Field Guide
NAV lending lets a fund borrow against the equity value it already owns. Typical lines reach 20 – 30 % of latest third-party NAV; cash can hit the trust account inside a month once valuations land. Use the proceeds to prop up a bruised winner, smooth distributions, or snap up a bolt-on before a rival wakes up.
Why Now?
• Secondaries clocked roughly $160 bn
in 2024, luring fresh lenders into fund-finance and widening terms.
• Many loans now clear above 30 % LTV; lenders stretch once they trust the collateral basket.
• Market counsel expect NAV facilities to appear from mid-life funds to tail-end continuation vehicles.
• Even at SOFR + 450 – 600 bps, the line often beats the IRR drag of an emergency capital call—especially when exits keep slipping.
Risk-Control Toolkit
| Control Layer | Purpose | How We Do It |
|---|---|---|
| Borrowing-Base Haircut | Shelter the lender if valuations dip | Quarterly refresh; undrawn headroom tracks marks |
| LTV & Liquidity Triggers | Flag stress early | Hard stop at 35 % LTV; cure period then kicks in |
| Cash-Trap | Lock in proceeds for agreed uses | Distributions over a threshold swept into a pledged account until ratios recover |
| Cross-Collateral Pledge | Give the lender a senior bite of partnership interests | English-law share charge or UCC Article 8 control, jurisdiction-dependent |
| Divestiture Rights | Last-resort exit if things get messy | Step-in rights at continuing default; orderly sale mandated |
Core Terms You’ll Actually See
• Advance:
20 – 30 % of audited NAV
• Tenor:
3-year bullet with two one-year extensions (lender call)
• Spread:
SOFR + 450 – 600 bps; 100 bps on undrawn
• Security:
Pledge over partnership interests and distribution accounts
• Availability:
Revolver, redraw quarterly, mandatory clean-down every 12 months
• Concentration Guardrail:
Single asset < 25 % of borrowing base
Cost–Benefit Snapshot
| Use-Case | Payoff | Watch-Out |
|---|---|---|
| Follow-on for wobbly asset | Avoid a down-round or painful co-invest slug | Could be a money pit if the fix-up stalls |
| Distribution smoothing | Keep DPI moving, calm LP nerves | Pulling cash forward raises the final hurdle |
| Bolt-on acquisition | Grab multiple arbitrage while exits stall | Leverage on leverage—handle with care |
Quick-Fire FAQ
Who’s actually lending?
Specialist credit funds, a few European banks still in the game, plus insurers chasing floating-rate paper.
Will my LPA block it?
Most partnership agreements permit fund-level leverage under 30 % NAV and within term. Check counsel and give LPAC a heads-up.
How long does diligence drag on?
Two to six weeks. Third-party valuations, not legal drafting, usually set the pace.
What if exits are still frozen at maturity?
Options: ask for an extension, use on-hand cash to amortise, or roll collateral into a continuation vehicle—lender consent needed, of course.
Ready for the Deep Dive?
Investment Committee members can pull the full term sheet, covenant redlines and sensitivity workbook via the secure FG Capital portal.
This document is for informational purposes only and does not constitute an offer to sell or a solicitation to purchase securities or loan participations. Any offer will be made solely through definitive documentation. Borrowing to invest magnifies losses as well as gains. Past performance is not a guide to future returns.
