Thoughts on 17Capital / NAV finance?
Hi monkeys,
Has anyone had recent experiences with NAV / fund finance firms (lending to funds, management companies or LPs). For example 17Capital? Strategy, performance, WLB, pay? Thanks for any opinions!
All of them are hiring it seems
I feel like there's a bell curve of people who do NAV financings with the geniuses robbing LPs of their money on one end and the idiots who genuinely believe in this product on the other end.
Thanks man. Can you elaborate a bit on more on the ‘idiots who believe this product’ side?
I’d define NAV lending as a true last resort product.
Imagine you are a PE fund you have 5-10 portcos. You are unable to raise capital from any of them (divi recap, sale) so you take a loan against them, to provide LPs with better IRR (and clearly yourself so you might have a tiny hope of fundraising the next vintage). The LP has no say in this process and might get pissed but you don’t care because it’s your only chance. Those LP proceeds are recallable.
Imagine you are a lender. Rather than doing a pref to every single portco in the PE portfolio with proper DD, you package them all up and with a fraction of the effort lend against them in aggregate. You feel good at 20-25% LTV and got low-teen IRRs, but you are kidding yourself. You have no control over the PE strategy on those companies, you sit so junior in the waterfall that you are option value. Congrats.
unpacking the above
"you are unable to raise capital from any of them" - may actually be cheaper for the GP to do a NAV financing vs individual opco financing as the lender is financing a basket of 5-10 companies vs a single company
"so you take a loan against them" - not always, i work in the space and majority is used for M&A at the portco level ( again being a cheaper financing solution). also many lenders are not stupid - use of proceeds is a common q and they may not even extend loans if the use case is to give back to LPs when the underlying portfolio is struggling
2nd paragraph is more or less correct. but again, if you are lending to a fund, you're relying on sale of a few companies to get repaid. dont need to see 100% realisations across the portfolio
Ok your first point, it’s absolutely cheaper because it’s completely mispriced risk to the benefit of the borrower. The LTV should be calculated for each portco by allocating the NAV loan to portcos: this will make you find out that 20-25% is an illusion.
If GP needs capital for M&A they are able to do it at portco level with lender doing proper DD. The main objective of the product is LP distribution, not M&A.
NAV loans are naturally adversely selecting the worst GPs vs the more aggressive or naive lenders. Bad combo.
From my experience working in this field, you can expect to clear 200-300s as an Associate and 400+ as a VP (this includes sellside but the compensation bandwidth can be pretty wide depending on the bank.
Qui velit aliquid omnis veritatis quas. Sed qui odit repellat quis. Et debitis placeat harum tempora corrupti.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...