Net asset value (NAV) lending has continued to play an important role in supporting the liquidity needs of the private equity (PE) industry amid higher-for-longer interest rates and a challenging PE exit environment over recent years. Between 2018 and 1H 2024, KBRA assigned ratings ranging from A to BBB- to 86 NAV loans, with issuance volume totaling $51 billion. Rated volume has grown considerably since December 2022 when we had assigned ratings to 54 NAV loans with issuance volume totaling $27.5 billion (see NAVigating the Resilience of NAV Loans).
This KBRA report reexamines our NAV loan portfolio with exposure to private equity or secondary funds, with a focus on the key inputs that drive rating outcomes. These include, but are not limited to, the loan-to-value (LTV) ratio, portfolio diversity, modeled cash flow outcomes, and underlying portfolio company…