Net asset value (NAV) facilities have become more appealing to sponsors in recent years as a way to leverage their existing portfolios. Although that access to affordable cash is appealing, it can mask some of the wrinkles and difficulties of putting a NAV facility in place. From navigating tripartite negotiations to the ongoing valuation requirements, it is important for each sponsor to have an accurate sense of what NAV facilities entail before putting one in place. The benefits and difficulties of NAV facilities were explored by an expert panel at the Practising Law Institute’s Fund Finance 2019 Program. Moderated by Dechert partner Matthew K. Kerfoot, the panel featured Thad Bzomowski, vice president and counsel at Société Générale; Jocelyn A. Hirsch, partner at Kirkland & Ellis; and Joel Kress, chief operating officer at Pomona Capital. This second article in a two-part series describes different issues that can arise when putting NAV facilities in place and how competition among lenders for those facilities has netted more favorable terms for sponsors. The first article
summarized how NAV facilities are being used by secondary funds, the collateral pledged in support of those loans and considerations with issuing those facilities to funds of hedge funds. For additional insights on NAV facilities from Hirsch, see “Characteristics and Benefits of NAV Facilities for Secondary Funds
” (Sep. 10, 2019). See also “Annual Walkers Fundamentals Seminar Explores PE Trends, Fees, Other Key Terms and Financing Facilities
” (Jan. 28, 2020).