Introduction
Each portfolio company borrows under its own credit agreement, and that document marks the limit of a company-level answer. Some hold-period needs fall outside any single agreement: liquidity across a portfolio, support a fund can no longer supply, or distributions an aging fund owes. They are met at the level of the fund, by borrowing against or selling what it owns, usually through fund finance and private capital advisory (PCA) specialists rather than the financial sponsors group (FSG) covering the client. Banks build for the overlap: Piper Sandler, which calls private equity its largest client base, agreed in June 2024 to buy Aviditi Advisors as its PCA group, citing continuation vehicles among the solutions sponsors need.
Four Signals That a Request Has Moved Above the Company
A request becomes a fund question when the company route fails a test:
- A recap the company cannot carry: leverage is high or payment baskets are spent.
- Cash spread across a portfolio: no single company can pay what the fund needs.
- Support from an older fund: a company needs equity its fund has no uncalled capital to provide.
- Distributions an aging fund owes: limited partners (LPs) want cash, and the best asset is one the sponsor wants to keep.
Coverage usually sees the failed company route first, because FSG ran the portfolio review or sized the recap that would not fit.
The Fund-Level Toolkit in One Line Each
Fund-level tools draw on assets no company lender can reach: investors' uncalled commitments, the fund's portfolio of stakes, or companies sold into a new vehicle.
| Tool | Funded against | Need it meets | Usual lead |
|---|---|---|---|
| Subscription line | Uncalled commitments | Bridging capital calls | Fund finance |
| Net asset value (NAV) loan | The portfolio | Follow-ons, support, distributions | Fund finance |
| Fund-level preferred equity | Priority on distributions | Cash without a maturity | PCA |
| Continuation vehicle | New buyers' capital | Cash for LPs, asset kept | PCA |
The map of fund-level facilities shows why a subscription line rarely helps late in the hold: most commitments are called. A NAV loan is the usual borrowing answer, and its covenants and consent questions decide what it costs investors.
- Fund Finance (Banking Team)
The bank unit that lends to private funds and their managers rather than to portfolio companies, through subscription lines, NAV facilities and manager-level loans. It underwrites from fund documents and collateral, often apart from the leveraged finance team.
Preferred equity against a portfolio costs more but has no maturity to trip.
A continuation vehicle, one of the GP-led secondary structures a general partner (GP) initiates, keeps a company the fund would otherwise sell; coverage weighs it in the continuation vehicle as an exit option.
How Coverage Works With Fund Finance and PCA
Responsibilities vary by bank, but a working framework holds: FSG owns the client conversation, the specialist owns the product, and the hand-off is an introduction, not a transfer.
The Introduction and What FSG Keeps
Fund requests often come from the sponsor's chief financial officer (CFO) rather than a deal partner. The coverage banker sets up a joint meeting; the specialist tests what the fund documents allow, then runs the work. FSG keeps the relationship and the company-level view: which companies could refinance, which are near a sale.
Conflicts When the Bank Lends at Both Levels
A NAV lender sees valuations across the whole portfolio, information that stays in the lending role under the rules for lender information. Interests diverge: company lenders cap what each company pays upward, while the NAV lender is repaid from those payments and exits, and a falling loan-to-value ratio can force sales on the fund lender's timetable.
Supervisors have noticed. In a 2024 speech on its thematic review of private equity financing, the Prudential Regulation Authority (PRA) said many banks could not aggregate their exposures to the sector across divisions, and that a derivatives receivable from a portfolio company and NAV financing to its fund carry linked credit risks.
How the products compare on who receives the cash and who bears the cost is set out in the PCA guide's comparison of liquidity options.
The hand-off begins with a negative. FSG's analysis showing that a recap cannot be sized or an older fund cannot write the check is the first page of the fund-level mandate, because every lender and buyer will ask about the alternatives. A team that writes that page well keeps the conversation after the product moves desks.
