Navigating NAV financing with 17Capital

Mergermarket’s funds editor Harriet Matthews speaks to
Pierre-Antoine de Selancy, managing partner and co-founder of net
asset value (NAV) lender 17Capital, about the evolution of NAV
financing and its use cases in the current market, as well as
wider industry reservations about the use of this type of
leverage.


The use of and interest in NAV financing has been growing in
recent years. In times of restricted liquidity and a tough
fundraising market, GPs can use this tool for situations
including refinancing a group of portfolio companies to take
advantage of M&A opportunities.


De Selancy addresses some of the questions that LPs have around
NAV financing, arguing that using leverage is a core skill of
private equity professionals in creating value for investors, and
the use of NAV financing is part of this process. “If limited
partners are worried about GPs putting in place debt, they should
not be investing in private equity,” he said.


90% of the money used in NAV financing goes into portfolio
companies, whereas 10% is used to make distributions, he said,
playing down concerns around “fake DPI”. “It’s not a competitive
world – it’s an ultra-competitive world,” he said, noting that
LPs now have more choice than ever and are applying increasing
scrutiny to how GPs are creating value and balancing this with
risk. It is important that GPs “do the right thing” for their
LPs, he said, emphasizing the importance of communication.


Lastly, de Selancy discusses the future of NAV financing as a
“new niche” and “the fastest growing market in private credit”,
features which are likely to drive the growth of 17Capital
itself.


0:39 – Introduction


2:54 – Interview with Pierre-Antoine de Selancy


3:26 – 17Capital’s strategy

4:49 – Current use cases for NAV financing

7:13 – NAV financing versus continuation funds

11:27 – Cost of capital dynamics

14:42 – NAV financing and LP sentiment

25:49 – What’s next for the NAV lending industry?

28:20 – 17Capital’s future growth



You can listen to the podcast on your favourite podcasting
platforms, including Spotify and Apple Podcasts.


If you would like to hear more podcasts produced by ION
Analytics, you can access the ION Analytics channel on Apple
Podcasts.


Theme music: 2012 Kick Up The Fire