Is it typically the case that the NAV loans of private equity firms have a higher priority (during repayment) than the portfolio company loans?
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No, that's not the case. NAV loans are typically provided at fund level. NAV loans rank above LPs in terms of distributions at fund level though. When a portfolio company is sold, the equity proceeds go to the fund, and the GP would pay down any fund level liabilities (e.g. NAV loans) before distributing it to LPs.
What I meant is if the portfolio companies at the private equity fund are going to default, will the secured creditors of the portfolio companies get paid first or will the fund-level NAV loan get paid first in the event of a liquidation for example?
What do you think the appropriate answer is, honestly?
NAV Loans are fund-level instruments so they are naturally subordinate in payout to portfolio company debt...
It will be the secured creditors. A private equity fund is the equity holder at portfolio company level and therefore subordinate to creditors of portfolio companies.
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