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NAV Lending


term "NAV lending" has become quite the buzzword in the finance press of late. I should know -- I've done some of the buzzing myself.

So let me start here from the beginning. What the heck is NAV lending?

NAV stands for "net asset value." This is, roughly, a synonym for the balance sheet value: the value of an enterprise once its liabilities have been subtracted from its assets. There are lots of other ways in which the value of an entity may be measured. For example, one may look to the income statement rather than the balance sheet. But NAV sticks to the balance sheet. 

More specifically, NAV lending is, as one practitioner of the craft has said, "senior ranking debt which is secured against a diversified portfolio of private equity assets and therefore benefits from multiple cashflows to ensure repayment."

But what it is NOT is asset backed lending. It is not a mortgage, or a car loan with repo rights. The security is the balance sheet, not a particular item of property. 

That is our vocabulary lesson for the day.   

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