NAV loans draw scrutiny as LPs ask who sits behind the fund-level facility

BOSTON — The NAV loan was sold as plumbing: a way to avoid a fire sale or an untimely capital call. It is still plumbing. It is also leverage on a portfolio that already has leverage underneath it, and LPs have started to ask for the diagram.

GPs said the better facilities are modest, well-disclosed, and used as a bridge. The worse ones look like a way to manufacture distributions. Those will not survive a credit event and a committee meeting in the same quarter.

The industry can keep the tool. It cannot keep the shrug.