We need to talk
19.07.2024 – Articles
There’s been a fair bit of heat on NAV facilities and how they’re being used. In short, with both GPs and LPs hunting for liquidity, there’s been a lot of talk and understandable concern when it comes to using these loans for distributions.
It’s impossible to know the extent of NAV facilities being used in this way, but broad consensus is probably not much.
Either way, ILPA is working on best practice guidelines and LPs are increasingly nervous about the facilities.
Against this backdrop, GPs are facing a dilemma:
For Jean-Paul Peters, founder of Kombit Consulting, a specialist finance and banking adviser, it’s worth stepping back a little to understand how we got here.
“Before Covid, managers identified the need for a solution and would have had a fairly high level discussion with their LPs to ensure everyone was on the same page. From there, the deal would progress with all parties communicating (the borrower, the lender and lawyers on both sides). Everyone would come together because NAV facilities were less common.