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Structuring NAV Financing for Private Funds: LTV Covenants, Multitier Transactions, Intercreditor Issues

Recording of a 90-minute premium CLE video webinar with Q&A

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Conducted on Thursday, February 3, 2022

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This CLE webinar will examine the structuring and documentation of NAV financing for private funds. The panel will discuss LTV calculation and default triggers, first/second lien structures, UCC perfection, and intercreditor arrangements with multiple lenders.


NAV loans are loans supported by the value of interests a private equity fund holds in its portfolio companies or other funds. The critical risk metric is the LTV ratio; for NAV loans to remain out of default, LTV ratios need to remain below certain pre-agreed thresholds. Breaching the LTV threshold can trigger remedies, including mandatory prepayment of the facility or even foreclosure. Determination of asset values and adjustments to values over time are thus critical aspects of NAV loan underwriting and documentation.

The NAV borrower structure can result in different approaches to perfection of the lender's security interest in the loan collateral. If an SPV holding company is formed, UCC financing statements will be filed against the holding company and borrowing entities. Deposit or securities accounts will be subject to control agreements in favor of the lender. If the borrower is a limited partnership, lenders will require that its general partner pledge its interest.

Lenders have become more comfortable with second liens on loan collateral, and in some cases, lenders may have senior or subordinate positions in different assets of the borrower. They should enter into an intercreditor agreement that provides who may declare defaults and exercise rights in the shared collateral, amend loan documents, or grant waivers, as well as provide for the distribution of payments and proceeds of collateral.

Other variations on standard NAV facilities have emerged. Hybrid fund finance facilities combine financing of the investors' uncalled capital commitments with financing the fund's underlying assets.

Listen as our authoritative panel discusses the nuances of NAV financing, including first/second lien and other structural variations and intercreditor issues to consider.



  1. NAV vs. subscription facilities: when each is most useful in the fund lifecycle
  2. LTV: central to NAV defaults and remedies
    1. Determining value for portfolio assets as opposed to "fund of funds" investments
    2. Adjustments to value during the loan term
    3. LTV default triggers and remedies
  3. Borrowing entity structures and UCC perfection in NAV collateral
  4. Senior-subordinate lien structures
  5. Intercreditor agreements in multiple lender transactions: key provisions


The panel will review these and other questions:

  • How do valuation methodologies vary between a fund that invests directly in portfolio companies and one that invests in other funds?
  • What is the standard borrowing entity structure for a NAV loan?
  • How should the lender perfect its security interest in the NAV loan collateral?
  • What are a NAV lender's remedies after an LTV default? How about a second lien lender?
  • When is an intercreditor agreement necessary, and what are the issues to address?


Chen, LeAnn
LeAnn L. Chen

Haynes and Boone

Ms. Chen represents banks, multinational corporations, hedge funds, mutual funds, private equity funds, and...  |  Read More

Summers, Adam
Adam D. Summers

Fried Frank Harris Shriver & Jacobson

Mr. Summers focuses his practice on credit and capital markets transactions. He has extensive experience advising...  |  Read More

Unterberg, Craig
Craig S. Unterberg

Haynes and Boone

Mr. Unterberg concentrates his practice in the areas of representing borrowers and lenders in secured and...  |  Read More

Zell, Ariel
Ariel Zell

Fried Frank Harris Shriver & Jacobson

Mr. Zell represents financial institutions, private equity sponsors and public and private clients in a wide variety of...  |  Read More

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