As private credit continues to capture a greater share of markets once dominated by banks, fund finance has quickly risen to be one of the fastest growing areas for managers. A full breakdown of usage of NAV loans by asset class is unavailable, but according to Ed Saunders, Fund Finance partner at Goodwin, growth in their use by buyout funds over recent years has been noted. As fully secured NAV financing structures lent against diversified portfolios are typically priced more competitively, private lenders may be open to equity-like structures to achieve it. Saunders stated, “Some private lenders may be comfortable taking a position that is more akin to preferred equity than a typical lending position. It could well be back-levered preferred equity or pure preferred equity and those structures, allowing borrowers more flexibility (potentially via limited security and/or with looser financial covenants) to attract higher pricing than a conventional fully secured loan facility.”
Read the Private Debt Investor article for more.