Two things can be true at the same time. It is true that the valuations of PE portfolios are coming under increasing scrutiny. It is also true there are a growing number of loans that use these increasingly scrutinised valuations as security.
So how do lenders of NAV facilities get comfortable lending against portfolios whose valuations are being questioned so much?
The risk for lenders is increased further by virtue of their reluctance to take over the underlying assets if the loan defaults.
“We are good at finance and the GPs we work with are good at managing assets, creating value and exiting assets,” says Stephen Quinn, managing director at 17Capital, a credit fund that supplies NAV facilities.