NAV-Based Credit Facility - Drawdown for LP Liquidity
Recording a drawdown on a NAV-based credit facility (secured against the fair value of the fund's portfolio rather than unfunded LP commitments) used to provide LP liquidity or fund follow-on investments in a mature fund.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Cash & Cash Equivalents | Asset (+) | 10,000,000.00 | - |
| NAV Credit Facility Payable - Senior Lender | Liability (+) | - | 10,000,000.00 |
💡 Accountant's Note
NAV facilities are used by mature PE funds (typically post-investment period) where unfunded LP commitments are exhausted. The facility is secured by the fund's portfolio investment fair values (typically lenders advance 15%–25% of portfolio NAV). These are more expensive than subscription lines and are used for follow-on investments, LP liquidity needs, or bridging to exits.
Practitioner & Systems Framework
💻 ERP Architecture
The NAV facility is a senior liability of the fund that takes priority over LP interests in a wind-down scenario. Ensure the facility is clearly disclosed in LP quarterly reports. The lender will require quarterly portfolio NAV certification and may include NAV-based maintenance covenants.
⚠️ Audit Flags
Auditors assess the fair value of the pledged portfolio assets supporting the facility. Covenant compliance certificates must be tested. The facility significantly changes the fund's risk profile and LP distributions waterfall.
📄 Required Documentation
NAV credit agreement, portfolio NAV certification letter, lender borrowing base calculation, LP advisory committee consent, quarterly covenant compliance certificate.
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