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Liquidity solutions are a topic du jour in fund finance. With bank balance sheets somewhat restricted by macroeconomic concerns and risk-weighted asset regulations, fund finance borrowers and lenders have sought creative ways to put capital to work. One construct that may open up this optionality is the tranche B facility, a subordinated line of credit that sits within the same transaction as a senior revolver or term loan. This article explores the basic tenets and nuances that may be negotiated for constructing a tranche B facility in your deals.
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The purpose of this article is to unpack the basic building blocks of what constitutes a NAV Loan to make sure that market participants have a basic understanding of what is in a NAV Loan and their key negotiated issues. As noted in prior articles, and as discussed in various panels at Fund Finance industry events, what constitutes a NAV financing transaction often means different things to different people. A fairly broad description that we have used previously is that a NAV financing transaction is primarily a loan to a private equity ("PE") fund where the value of the investment assets of the PE fund provide support for the borrower’s loan obligations. While even this broad description doesn’t capture everything that bankers and lawyers in the industry think of when they hear NAV Loan, it’s sufficiently broad for purposes of this article.
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The countdown to the 2024 Cadwalader Finance Forum is on and we are excited to welcome David Golub, President of Golub Capital, as our keynote speaker!
Join Women in Fund Finance for the second event in Los Angeles! They are thrilled to welcome Polina and Filipp Chebotareva, Managing Partners from Cambridge Company SPG, as guest speakers.
Cadwalader's Wesley Misson and Brian Foster will be presenting at the FFA University 2.0, along with other industry leaders in New York on October 17, 2024.
As most Fund Finance Friday readers probably already know, over the summer, the Institutional Limited Partners Association issued guidance for Limited Partners and General Partners around the use of Net Asset Value based financing facilities by private equity funds. ILPA issued the Guidance to identify potential issues relevant to LPs regarding the use of NAV facilities, including (i) transparency around their use, (ii) the level of engagement by GPs with LPs to solicit LP feedback and/or consent, and (iii) how the impact of NAV-based facilities is reported. Fund Finance Friday previously summarized the Guidance when it first came out here. However, now that there has been ample time to digest, we wanted to take the opportunity to recap some of the events leading up to the Guidance, to provide insight as to the market’s reaction to it, and to highlight some practical considerations for market participants to consider in implementing its recommendations.
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Please join us in welcoming John Donnelly to the UK Fund Finance team as a Senior Attorney.
Join the Fund Finance Association for an intensive full-day training session in-person in New York on October 17, 2024. Cadwalader's Wesley Misson and Brian Foster will be presenting at the FFA University 2.0, along with other industry leaders.