The combination of increased regulatory pressure and additional investor demand for higher yield has seen numerous banks gradually displaced by private debt funds in the corporate lending sector (particularly for mid-market and SME borrowers). However, many banks, alongside an increasing pool of alternative lenders (collectively, "ABL Providers"), are comfortable lending to these private credit funds through so-called “credit portfolio finance” or “ABL facilities.”
Whilst there is nothing new about lending to private credit managers, the continued growth of the direct lending market has been accompanied by the increased use of back leverage at fund level through these facilities.
In this article, we look at some of the key issues for ABL Providers under these transactions in the European market.
A record breaking 850 financial industry leaders and professionals from around the country participated in Cadwalader's eighth annual Finance Forum in Charlotte this week!
It was great to meet all together for a day of networking and insightful discussions on the latest market trends and opportunities across various sectors, including commercial real estate, fund finance, leveraged finance, middle market lending, private credit, securitization and structured finance.
We are grateful to our speakers, clients and all attendees who took the time to participate in the event's many dynamic discussions and networking.
Next week's FFF will include more coverage of the Finance Forum. In the meantime, please enjoy these photos!
Women in Fund Finance is a sub-committee of the Fund Finance Association focusing on increasing the engagement, recognition and promotion of women leaders in the alternative investment fund finance industry. In this ‘Macro Economic Round-Up’, the European WFF Committee has reached out to market leaders to share their views on certain current affairs which are bound to have an impact on the macro-economic in the near future, and by way of default, which will also shape the fund finance market as we head into the fourth quarter of 2024.
The market for financing pools of interests in private equity funds and private credit funds continues to sizzle, with new lenders joining the market and competition on pricing leading to a tightening of spreads for the most sought after deals. We are regularly having conversations with business principals, risk officers and internal lawyers at new and existing lenders looking to better understand this market. How to underwrite secondaries is a particular focus for new lenders, and is a topic we covered at yesterday’s Fund Finance Association University 2.0.
The purpose of this article is to unpack the basic building blocks of what constitutes a NAV Loan to make sure that market participants have a basic understanding of what is in a NAV Loan and their key negotiated issues. As noted in prior articles, and as discussed in various panels at Fund Finance industry events, what constitutes a NAV financing transaction often means different things to different people. A fairly broad description that we have used previously is that a NAV financing transaction is primarily a loan to a private equity ("PE") fund where the value of the investment assets of the PE fund provide support for the borrower’s loan obligations. While even this broad description doesn’t capture everything that bankers and lawyers in the industry think of when they hear NAV Loan, it’s sufficiently broad for purposes of this article.