How to use
Use this worksheet at fund-formation or facility-renewal stage to size both a subscription line (against unfunded LP commitments) and a NAV facility (against fund NAV). Each section gives the inputs, the borrowing-base / advance-rate formula, and a worked numeric example. Not legal advice, engage fund finance counsel on every facility.
Section 1. Inputs (collect before sizing)
Facility sizing requires the LP commitment table (sub line) or the asset-level NAV roll (NAV facility), plus the lender's quoted advance rates and covenants.
- Total fund commitments and unfunded balance per LP.
- LP credit-rating tier (top-tier institutional, mid-tier institutional, HNW / family office, included/excluded).
- Lender's eligibility criteria (excluded LPs, concentration caps, opt-out terms).
- Quoted advance rate per LP tier (sub line).
- Fund NAV by asset and aggregate (NAV facility).
- Lender's NAV-facility LTV cap and asset-level haircuts.
- Sub line and NAV facility pricing (SOFR + spread, unused fee, exit/term).
- Covenant headroom requirements (interest coverage, LTV trigger, concentration).
Section 2. Subscription line borrowing-base formula
Sub line borrowing base = sum across eligible LPs of (unfunded commitment × tier-specific advance rate). The lender quotes a maximum facility size as a multiple of borrowing base, typically 1.0x.
Apply LP concentration caps: usually no single LP > 25% of borrowing base; top 5 LPs ≤ 75%.
Typical sub line advance rates by LP tier
| LP tier | Advance rate | Notes |
|---|---|---|
| Top-tier institutional (rated A or better) | 90% - 95% | Public pensions, large insurers, sovereigns |
| Mid-tier institutional (BBB / unrated but creditworthy) | 75% - 85% | Mid-cap pensions, endowments |
| HNW / single-family office | 50% - 70% | Often grouped via aggregator vehicles |
| Multi-family office / RIA platform | 40% - 60% | Pass-through risk to underlying |
| Excluded LPs | 0% | Side-letter excluded; opt-outs; defaulting LPs |
Section 3. Subscription line worked example
Walk a $500M fund's borrowing base after first close.
- Inputs: total commitments $500M; unfunded $450M; tier mix, top-tier $250M unfunded @ 92%; mid-tier $125M @ 80%; HNW $75M @ 60%.
- Tier contributions: $250M × 0.92 = $230.0M; $125M × 0.80 = $100.0M; $75M × 0.60 = $45.0M.
- Gross borrowing base = $230 + $100 + $45 = $375.0M.
- Apply concentration cap (no LP > 25% of base) → assume no haircut here → borrowing base = $375.0M.
- Lender quoted facility size = 1.0x base = $375M; pricing SOFR + 175 bps + 30 bps unused fee.
- At $200M average balance: interest cost = $200M × (5.30% + 1.75%) = $14.10M/yr; unused fee on $175M average undrawn = $0.525M/yr; total $14.625M.
Section 4, NAV facility advance formula
NAV facility max = LTV cap × (sum of eligible-asset NAVs, after asset-level haircuts), subject to lender's facility ceiling.
Apply asset-level haircuts (e.g., 0% for stabilized core, 10%-25% for value-add or development) and concentration caps before applying LTV.
Section 5, NAV facility worked example
Walk a Year-5 CRE fund with $800M NAV across 12 assets.
- Inputs: $800M aggregate NAV; 8 stabilized assets totaling $600M NAV (0% haircut); 4 value-add assets $200M NAV (15% haircut); single-asset cap = 15% of base; LTV cap = 20%.
- Stabilized contribution = $600M × 1.0 = $600M; value-add = $200M × 0.85 = $170M; pre-cap base = $770M.
- No single-asset breach assumed → base = $770M.
- NAV facility max = 0.20 × $770M = $154.0M.
- Cost: $154M × (5.30% + 4.50%) = $15.09M/yr if fully drawn.
Section 6. Coordinated sub line + NAV stack and covenant headroom
Sub line + NAV facility together is increasingly common at large funds. Confirm the stack mechanics avoid cross-default and disclose to LPs.
- Confirm sub line is fully repaid from LP capital calls, with the NAV facility carrying any longer-duration liquidity need.
- Negotiate separate intercreditors so a NAV facility LTV breach does not trigger sub line acceleration.
- Stress-test covenant headroom: drop NAV by 15% and LP unfunded by 20% (early-cycle defaults); confirm LTV stays below cure level.
- Disclose stacked facility, advance rates, and covenants in LPAC reporting and the quarterly LP letter (ILPA guideline).