PUBLICATION: Rede Partners NAV Financing Market Report 2022/23

We are delighted to publish the Rede Partners NAV Financing Market Report, our latest white paper based on Rede’s proprietary research and market insights. The report draws on data from our 2023 Lender Survey, shedding light on an inherently opaque market that is growing in significance. It provides a snapshot of the current state of the private equity fund financing market, examining key trends, challenges, and future opportunities.

Key Findings:

1. NAV financing remains resilient in face of dramatic fall in broader leveraged loan market
   While the estimated total value of successfully completed NAV financing transactions declined slightly in 2022 compared to the previous year, the total number of completed deals has risen. Overall, the market has remained resilient when compared to the broader leveraged finance market 

2. Lenders are seeing more NAV opportunities than ever before 
   83% of lenders reported an increase in the number of NAV transaction opportunities over the last year. We estimate that, on average, lenders saw 21 deals in 2022, up from an average of 16 deals the previous year 

3. Margins have risen, but not as steeply as feared
   Given the macroeconomic turbulence of the last year, margin increases over the last 12 months have been modest, allowing sponsors to capture market arbitrage. Over 75% of lenders raised pricing by less than 200bps in 2022 – while 6% of lenders actually lowered their margins  

4. Sponsor/lender existing relationships: Important but not vital
   GPs considering a NAV financing can confidently look beyond their roster of existing lender relationships. While an existing relationship between GP and lender is helpful, 61% of lenders have worked with sponsors where there was no pre-existing client relationship  

5. Are step-in rights and challenge rights stepping up?
   Borrowers have been reconsidering the level of security provided for NAV facilities. Over 77% of lenders saw a drop or flattening in unsecured deals in 2022 (i.e. deals without step-in rights). At the same time,  valuation challenge rights remain a hot topic when negotiating NAV facilities