A Cursory Look at How Credit Providers Calculate NAV

As a lawyer, Zac Barnett possesses years of experience in the fund finance space and is regarded as a pioneer in the space. Over the course of his career as an attorney, he has represented borrowers and lenders in hundreds of fund financings. Attorney Zac Barnett wrote about how CFOs can depend on NAV facilities to provide financing for their limited partnerships, principals, and asset management platforms.

NAV stands for net asset value. It refers to a private fund’s total assets after subtracting total liabilities. NAV facilities could work as an alternative to other sources of obtaining credit, such as subscription facilities. These facilities give credit to funds by considering an advance rate multiplied by the fund’s “eligible investments” or “eligible NAV.”

In calculating eligible NAV, investors usually exclude the fair market value attributed to write-downs, concentration, limits, and exclusion events. Also, calculating eligible NAV involves recalculating and shifting availability by considering financial statements sent to the lender. Lastly, credit providers can adjust NAV with any exclusion event or adverse credit in the fund’s portfolio.