Ayush Anand’s Post

Quick overview of NAV financing for private market funds What is NAV lending? Net Asset Value (NAV) lending is lending against a fund's portfolio companies as security. It is known as 'downwards-looking' financing (it looks down to the fund's assets), as opposed to 'upwards-looking' which uses the limited partners uncalled commitments as security. Who uses NAV funding? Private Equity (PE) Funds: Useful for releasing capital to return to investors when a full exit isn’t feasible. Later-stage funds: those with substantial deployed capital. Less suitable for early-stage funds: don't have enough assets to act as collateral. More likely to use uncalled LP commitments to borrow against. Secondary Funds: Helps meet return profiles by leveraging underlying investments. How Much Can You Borrow and what do you pay? Loan to Value (LTV) Ratio: Typically 10%-15% of the net asset value of the fund’s investments. Lenders might lend up to 25% to funds with a solid track record. Interest Rates: Generally around 7%-8% over LIBOR, but can go as low as LIBOR +4.5% to +5.5%. Key covenants & triggers Fund-Level LTV: based on the funds' NAV, with periodic tests and specific triggers for new loans, asset disposal or distributions. Individual investment LTV: Based on the acquisition cost of an asset Covenant breaches usually require facility repayment or additional collateral to be posted. Repayment triggers Asset sales: Proceeds typically have to be used to pay down the NAV credit facility. Change of Control: Security over holding company shares usually mandates prepayment if there is a change of control for one of the portfolio companies. Security & Seniority Lenders are typically secured against the bank accounts where distributions and sale proceeds are paid Often receive a pledge on the shares in the holding companies that own the portfolio companies. Fund-level lenders are subordinate to any PortCo debt. Since NAV lending relies on the underlying fund assets as collateral, lenders need to be able to analyse the financial stability of the portfolio companies: the levels and changes in revenues, EBITDA and debt. For that you need Accelex For more see: - https://lnkd.in/geRbre_Z #PrivateEquity #NAVLending #InvestmentStrategies #Finance #PrivateEquityFunding #SecondaryFunds #Leverage #InvestmentManagement

Asset-Backed Securities Asset-backed securities (ABS) are a unique category of fixed-income instruments that derive their value from underlying pools of assets. These assets can include a diverse range of financial instruments, such as mortgages, auto loans, credit card receivables, and student loans. The securitization process involves packaging these assets into a pool, and then issuing bonds or notes backed by the cash flows generated from the underlying assets. Key Characteristics of Asset-Backed Securities: 1. Securitization Process: Asset-backed securities are created through a process known as securitization. During securitization, financial institutions, such as banks or special-purpose vehicles, pool together a large number of similar assets, creating a diversified pool. This pool of assets serves as collateral for the issuance of new securities. 2. Cash Flows from Underlying Assets: The primary source of payment for asset-backed securities comes from the cash flows generated by the underlying assets. For example, in mortgage-backed securities (MBS), the monthly mortgage payments made by homeowners serve as the source of cash flows for investors holding MBS. 3. Tranches: Asset-backed securities are often divided into different tranches, each with varying levels of risk and return. Tranches are created to meet the different risk appetites of investors. Senior tranches typically have a higher credit quality and priority of payment, while junior tranches carry higher risk but may offer higher yields. 4. Credit Enhancements: To attract investors and improve the credit quality of ABS, issuers often include credit enhancements. These enhancements can be in the form of overcollateralization (adding more assets to the pool than the value of the securities issued) or reserve accounts to cover potential losses. 5. Prepayment and Extension Risks: In certain ABS, such as mortgage-backed securities, prepayment risk and extension risk are significant considerations. Prepayment risk arises when borrowers pay off their loans earlier than expected, affecting the cash flows to investors. Extension risk occurs when borrowers delay paying off their loans, resulting in longer maturities for the securities. #legaltips #legalmatters #law #strategy #fdi #investments #equity #equityinvestments #familyoffice - - - - - Extracted from my latest book «The Global Manual of Foreign Direct Investments», Volume 1, Chapter 2.37, Pag. 212 Author page: https://lnkd.in/eRnByQca

#Loan_against_securities allows individuals to borrow funds by pledging their financial assets, such as stocks, bonds, or mutual funds, as collateral. This type of loan offers quick access to capital without liquidating investments, often featuring lower interest rates and flexible repayment options, making it a strategic financing solution. Read More:- https://lnkd.in/gh7-vznY

5 Things To Know About Loans Against Mutual Funds🤔 Taking a loan against mutual funds can offer financial flexibility and liquidity, leveraging one’s investments for immediate needs. However, borrowers must consider several crucial parameters and risks before opting for this option. Understanding the loan details, loan tenure, Loan to value (LTV), costs involved, repayment flexibility, approved mutual funds and the impact of market fluctuations is essential. Moreover, borrowers must be aware of the application process and other associated tasks. While secured against assets, risks include potential liquidation of securities by lenders and fluctuations in asset value affecting loan eligibility. Careful consideration of these factors is vital for informed decision-making in borrowing against mutual funds. https://lnkd.in/ghRzvUtt

DebFinanceFun: Need Money Urgently? Here's What to Consider #Scenario: - Need money urgently (not an emergency). - No spare cash in savings or FD. - Have mutual funds (MFs). #YourOptions: 1.Unsecured Personal Loan: - High-interest rate. 2.Liquidate Mutual Funds: - Immediate cash. 3.Loan Against Mutual Funds: - Smart alternative. #What is a Loan Against MFs? -Collateral: - Use equity and debt funds. -Loan Amount: - Debt funds: 70-80% of value. - Equity funds: 50% of value. #Why Consider It? -Keep Investments: -MFs stay invested, earning returns. -Avoid Capital Gains Tax: - No tax from selling. -Lower Interest Rates: - Cheaper than personal loans or credit cards. -Interest on Usage: - With overdraft, pay interest only on used amount. #Risks to Watch: -Market Falls: - Value of pledged funds can drop. -Example: - Loan of Rs 2 lakh against Rs 4 lakh in equity MFs. - Market drops 20%, value falls to Rs 3.2 lakh. - Margin call: Provide extra security or repay part of loan. #riskmanagement: -Borrow Wisely: - Only what you can repay if needed. -Conservative Investor: - May prefer to liquidate MFs. -Risk Taker: - Quick, short-term funds, repay in a few months. - Check LTV options in your portfolio. #CautionaryNote: -Borrow Responsibly: - Only for genuine needs. - Avoid Speculation: - Don’t borrow to reinvest in bull markets. - Markets can fall sharply. #PersonalFinance #MutualFunds #Loans #InvestmentTips #FinancialPlanning #DebtManagement #DebFinanceFun #EmergencyFund #LoanAgainstMFs #CapitalGainsTax #MarketReturns #LowerInterestRates #InvestSmart #FinancialAdvice #MarketRisks

Looks like there’s some good news ahead for private credit investors! 🙌 PIMCO believes the next few years will offer excellent opportunities. With traditional banks being cautious about lending, private credit investors can step in and potentially get better deals. PIMCO sees promising chances, especially in areas like home loans and equipment financing. It looks like a positive time ahead for private credit investors! Read the full article here: https://lnkd.in/dSsVntiK

Too Much Money in Private Credit? Five Key Takeaways on Credit Markets: 1) there are two types of lending supporting the market for riskier corporate borrowers, private-credit deals, a single nonbank lender, directly arranges a loan with a borrower. In broadly syndicated loan market, the loans are arranged by investment banks and parceled out to investors. 2) Investors are now coming back to the syndicated market, drawn in by high yields and a solid economic backdrop. Through April, more than $13 billion of direct lender loans have been refinanced. Last year, that trend was reversed, with about $20 billion of syndicated loans being taken out by direct loan 3) This surge in lender money supply has meant improved pricing for borrowers. In the first quarter, average spreads, on broadly syndicated new loans from issuers rated single-B were roughly 1.5 percentage points narrower than they were at the same time last year. 4) Better terms for borrowers in the broadly syndicated loan market, spreads on larger private-credit deals in the first quarter were about 0.25 to 0.50 percentage point tighter than in the fourth quarter. 5) some observers remain on high alert. Moody’s Ratings warned of “competitive escalations” between direct lenders and the broadly syndicated loan market

All about Asset backed securities👇 Asset-backed securities (ABS) are financial instruments that represent a claim on the cash flows from a pool of underlying assets. These assets can include a diverse range of financial assets such as mortgages, auto loans, credit card receivables, and more. Here's a breakdown: 1. Structure: - Securitization Process: Originators (like banks) pool together a group of similar financial assets. - Special Purpose Vehicle (SPV): The pooled assets are transferred to an SPV, a separate legal entity that issues the ABS. - Tranches: ABS are often divided into tranches with different levels of risk and return. Senior tranches are paid first from the cash flows, while subordinate tranches bear higher risk but may offer higher returns. 2. Types of Asset-backed Securities: - Mortgage-backed Securities (MBS): Backed by a pool of mortgages. - Collateralized Debt Obligations (CDO):Backed by a mix of debt instruments. - Auto Loan ABS, Credit Card ABS, etc.:Tailored to specific types of assets. 3. Credit Enhancement: - Subordination: Lower tranches are subordinated to higher ones, absorbing losses first. - Overcollateralization: The value of assets exceeds the value of the ABS issued. -Guarantees and Insurance: Some ABS may be insured or guaranteed, reducing credit risk. 4. Cash Flow Mechanism: - Principal and Interest Payments: ABS investors receive periodic payments, consisting of both principal and interest, from the underlying assets. -Prepayment Risk: In the case of mortgages, borrowers may repay their loans early, affecting cash flow. 5. Risks Associated: - Credit Risk: Default risk of the underlying assets. -Interest Rate Risk: Fluctuations in interest rates can impact cash flows. - Liquidity Risk:Trading liquidity can be limited for certain ABS. 6. Regulation: - ABS markets are subject to regulatory frameworks to ensure transparency and investor protection. 7. Market Significance: - ABS markets facilitate liquidity and capital flow by transforming illiquid assets into tradable securities. - They play a crucial role in financing, especially for consumer loans. Understanding ABS involves grasping the specific characteristics of the underlying assets and the structure of the securitization process, making it a complex but essential aspect of modern financial markets. #Finance #ABS #financialmarkets #investments #financialinstruments

Funding and Self-Financing: How to Obtain Capital "Funding is one of the most crucial aspects of real estate investment and requires careful planning to ensure the success of your investments. There are several options to obtain capital, including bank loans, partnerships, and self-financing. Bank Loans: Bank loans are a common funding option, allowing you to secure a large amount of money using the property as collateral. Before choosing this option, review the loan terms, interest rates, and repayment period. Bank loans provide immediate liquidity but come with long-term financial commitments. Partnerships: Partnerships enable you to collaborate with other investors to fund the project. This option reduces financial risks and allows you to leverage the expertise of your partners. When considering a partnership, it's crucial to clearly define terms and objectives to ensure successful collaboration. Self-Financing: Self-financing relies on your own capital without the need for borrowing. While this option minimizes financial risks associated with debt, it requires substantial liquidity on your part. Self-financing gives you full control over the investment but may limit your ability to capitalize on larger opportunities. Evaluation and Selection: Carefully evaluate the benefits and risks of each option. Determine the required amount of capital, expected costs, and potential revenues. Choose the most suitable option that aligns with your investment plan and achieves your financial goals without imposing unnecessary financial burdens. Final Advice: Regardless of the option you choose, ensure to conduct thorough feasibility studies and seek financial advisors when needed to make well-informed decisions." #RealEstateInvesting #RealEstateFunding #BankLoans #InvestmentPartnerships #SelfFinancing #InvestmentPlan #FinancialTips #RiskManagement #Capital #InvestmentSuccess

Private Credit Funds Get Moody’s Warning on Problem Loans 🚨 BlackRock, KKR FS, Oaktree BDCs given negative outlook 📉 Increase in non-accrual loans may eventually spur junk ratings 📉💰 Moody’s Ratings this week gave private credit investors greater reason for concern about credit quality in the flourishing $1.7 trillion industry. 🌐💼 The ratings company on Monday reduced its outlook for direct lending funds managed respectively by BlackRock Inc., KKR & Co. alongside FS Investments and Oaktree Capital Management, lowering them to negative from stable. 📊 "We’ve been expecting non-accruals to increase with the jump in interest rates," said James Morrow, founder and chief executive of Callodine Capital Management, an investor in public BDCs. 📈📉 Moody’s defines a negative outlook as meaning a company faces the chance of a ratings downgrade in the medium term, commonly seen by market participants as 18 to 24 months. 📊⏳ For FS KKR Capital Corp. and Oaktree Specialty Lending Corp., the dollar amount of non-accrual loans more than doubled in the fourth quarter, to 6.4% and 4.5% of the portfolio respectively, well outside Moody’s median of about 0.4% for BDC peers at the end of 2023. 📈💸 Moody’s outlook revisions are the latest warning on how some private credit borrowers, often highly leveraged ones owned by private equity firms, are struggling to make debt payments in a higher interest rate environment. 📉🔍 "The easier part of private credit is lending money, the harder part is getting it back," said Morrow. 🔄 #PrivateCredit #Finance #Investments #Moody'sWarning