In today’s environment of higher interest rates and longer hold periods, we’re seeing private equity fund managers and CFOs increasingly turn to net asset value (NAV) loans to generate liquidity. It’s easy to understand why. As we've discussed in depth, NAV loans use a fund’s investment assets as collateral, which often allows funds to secure financing at a lower rate than would be possible by incremental borrowing against one or more individual portfolio companies. The additional capital provided by a NAV loan has a variety of potential purposes. Most often, we see funds use it to support existing portfolio companies (e.g., through add-on acquisitions or to provide working capital) or to make a new platform investment.
Many private fund managers and CFOs find NAV loans especially beneficial in the later stages of a fund’s life cycle when they’re looking to capitalize on new opportunities and most of their limited partner (LP) capital has already been allocated. NAV loans allow general partners (GPs) to access cost effective, fund-level debt capital – providing a solution that is non-dilutive and allows LPs to retain upside.
Why First Citizens Fund Banking?
With 30+ years of fund banking experience we have thousands of client firms and a dedicated fund banking team . Our specialized NAV lending team helps private fund GPs and CFOs evaluate and optimize NAV-based financing. NAV loans often co-exist with First Citizens Bank-provided capital call line of credit (CCLOC) facilities, providing a one-stop offering that is unique in the market. This approach allows for the optimal financing mix of NAV and CCLOC debt without the need for complex restructuring.
Here’s what to expect when you work with us.
1. NAV loans expertly tailored to your needs
We’re not limited by specific security or strategy requirements when negotiating a NAV loan. We can accommodate multiple types of investments a fund may hold, as well as multiple types of fund structure. When you work with us, we avoid asking you to shift your fund investments to a new structure, which can be a time-consuming, expensive and challenging process.
Flexibility in fund investments…
- Direct investments in operating companies
- LP interests in co-mingled funds, co-investments, or continuation vehicles
… and fund structure
- Investments held directly by fund vehicle
- Investments held through subsidiaries
- Investments held through parallel investment funds or alternate investment funds
- Combination of the above
Moreover, NAV loans can operate in tandem with our capital call line – something not all NAV lenders are able to offer. Using a NAV loan and a capital call line together can meaningfully reduce the weighted average cost of your leverage.
2. A straightforward process
Partnering with us for a NAV loan is straightforward. We start with a conversation to determine whether we’re the right partner for you. From that conversation to the closing of the deal takes about six to ten weeks on average.
3. Competitive pricing
Every NAV loan we make is unique, customized to the specific situation and goals of the fund we’re working with. Each term sheet we create is reviewed by our credit department, ensuring a high degree of confidence that we will execute on the terms of the loan presented. And the cost of a NAV loan from us tends to be attractive relative to market rates.
4. A relationship that goes beyond a single transaction
Many funds that work with us to secure NAV loans already have a relationship with us. For others, securing a NAV loan is the beginning of our partnership. In either case, we consider NAV financing in light of a fund’s total financial picture. We offer holistic solutions—calling capital efficiently, managing cash flows globally, financing ownership buyouts and more—that can support you before, during, and after the lifespan of the loan.
What our partners say
We’re proud to have a long and growing list of funds that have worked with us to secure NAV loans. The following examples give a sense of the different ways we are helping CFOs find the capital they’re seeking.
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