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How $100M+ private credit portfolios can use fund sales, loan portfolio sales, continuation vehicles and structured liquidity solutions.
Private credit was historically built around a simple assumption: originate a loan, collect interest and hold the position until repayment or maturity.
That assumption is changing.
Managers, institutional LPs, insurance investors and other holders of private credit are increasingly using secondary transactions to generate liquidity, rebalance portfolios, manage fund duration and transfer concentrated exposures without waiting for every underlying borrower to repay.
For a $100 million, $500 million or multi-billion-dollar credit portfolio, however, creating liquidity is not as simple as selling a publicly traded bond.
Quick Answer: Private credit secondaries let investors or managers monetize existing private-credit exposure before the underlying loans mature. A $100M+ transaction can involve selling a fund interest, transferring a loan portfolio, creating a credit continuation vehicle or using structured/NAV financing. The right structure depends on borrower quality, transferability, portfolio concentration, valuation, unfunded commitments and the seller's need for liquidity versus continued exposure.
A private credit secondary is a transaction in which an existing private-credit exposure changes hands or is restructured after the original investment has been made.
The underlying exposure may be:
That distinction matters.
Selling an LP interest in a private-credit fund is not the same transaction as assigning 25 individual first-lien loans to a new institutional buyer.
In an LP-interest sale, the buyer is underwriting the fund, GP, remaining portfolio and unfunded obligations.
In a direct portfolio transaction, the buyer can re-underwrite each underlying borrower, individual credit agreement, collateral package, maturity and payment history.
Private-credit managers looking at the underlying lending market can start with Mehmi's Private Credit in Canada guide, which explains senior, unitranche, asset-backed and special-situations structures from the borrower side.
The simple answer is scale.
The Federal Reserve estimated that U.S. private credit loans had reached approximately USD $1.4 trillion in the second half of 2025, equal to about 10% of total debt of U.S. nonfinancial corporations.
As the primary market becomes larger and older, more assets naturally reach the point where their owners want liquidity before maturity.
Credit secondaries are beginning to provide that mechanism.
McKinsey reported that private-credit secondary transaction volume nearly doubled to approximately $20 billion in 2025, including roughly $12 billion of GP-led transactions. It attributed growth partly to the maturation of earlier private-credit vintages, liquidity needs and the emergence of dedicated secondary capital.
This remains a much smaller market than primary private credit, but it is increasingly relevant for portfolios large enough to require active liquidity management.
Both LPs and credit managers can be sellers.
An institutional LP may sell an interest because it wants to reduce exposure to a manager, rebalance asset allocation, release cash for new commitments or simplify an older portfolio.
A private-credit GP may use a secondary transaction when an existing vehicle is nearing the end of its contractual life but still owns attractive loans that have not matured.
An evergreen or semi-liquid credit vehicle may seek asset liquidity when investor redemption demand exceeds the cash it wants to hold.
A bank, insurer, credit fund or other institutional investor may also sell a direct portfolio to reduce concentration, free capital or rotate from one credit strategy into another.
The motivation therefore matters almost as much as the assets being sold.
A buyer will want to know whether the seller is conducting ordinary portfolio management or attempting to move deteriorating credits off its balance sheet.
An LP-led transaction occurs when an investor sells its existing interest in a private-credit fund.
Suppose a pension plan committed $150 million to a direct-lending fund several years ago. Most of the commitment has been invested, but the investor now wants liquidity rather than waiting for every portfolio company to refinance or repay.
It may sell its fund interest to a secondary buyer.
The buyer effectively steps into the seller's economic position, subject to the fund documents and required transfer approvals.
The buyer will examine more than the latest reported NAV.
Due diligence can include:
For the seller, the attraction is relatively clear: liquidity can be generated without waiting for the underlying loans to mature individually.
The cost is the difference between what the investor believes the position is worth and what a secondary buyer is willing to pay today.
A direct portfolio sale moves specific loans or economic interests in those loans to another investor.
This can be much more operationally complicated than selling one fund interest.
Each credit agreement can contain its own restrictions regarding assignment, participation, borrower consent, administrative-agent consent and eligible assignees.
A $500 million portfolio containing 35 loans can therefore involve 35 separate underlying credit files.
The secondary investor will want a loan tape that reconciles cleanly to legal documentation and servicing records.
Expect diligence around principal balances, accrued interest, base-rate floors, cash versus PIK interest, maturity, amortization, collateral, guarantors, borrowing entities, sponsor ownership, covenant compliance, amendments and historical payment performance.
Loans showing covenant pressure will generally receive more scrutiny than performing first-lien credits with substantial equity beneath them.
This is where the private-credit underwriting discipline described in Mehmi's asset-backed lending versus traditional business loans guide remains relevant: reported value alone does not determine recoverability.
A credit continuation vehicle allows a manager to transfer loans from an existing fund into a newly capitalized vehicle rather than forcing those investments to be sold simply because the original fund is reaching the end of its life.
Existing investors can potentially receive liquidity while new secondary investors purchase exposure to the portfolio.
The GP may continue managing the credits.
A continuation transaction can make sense when the portfolio remains attractive but the old fund's duration no longer fits the expected repayment timeline.
For example, a fund may own senior loans that are performing but have been extended or refinanced into longer maturities. Selling them solely because the fund is aging could sacrifice attractive future income.
A continuation vehicle can separate the question of asset quality from the question of fund duration.
The challenge is conflicts.
The GP is effectively transferring assets from one vehicle it manages into another structure it also expects to manage. Investors will therefore focus on valuation, process, allocation of expenses, GP economics and whether existing LPs have a meaningful liquidity choice.
Not every seller wants to dispose of an entire portfolio.
Structured solutions can transfer only part of the economics.
For example, an investor could sell a percentage interest in a portfolio while maintaining the rest.
Other transactions may use preferred capital, tranched exposure, deferred purchase-price structures or financing against a pool of investments.
The objective is often to generate cash without completely surrendering the future income from the portfolio.
This can be particularly useful when the seller believes the assets are high quality but needs liquidity for another reason.
The trade-off is complexity.
A partial liquidity transaction requires very clear documentation around which party receives interest, prepayments, amendment fees, default recoveries and other cash flows.
It also raises the question of who controls workouts when one underlying loan deteriorates.
The reported portfolio value is the starting point, not the answer.
Secondary buyers generally re-underwrite the portfolio.
A performing first-lien loan paying an attractive floating-rate spread and supported by a well-capitalized sponsor could attract very different pricing from a junior loan to a business that has repeatedly amended covenants.
Important valuation factors include:
The buyer will compare original underwriting assumptions with actual revenue, EBITDA, free cash flow and leverage.
A portfolio containing apparently performing loans can still carry significant embedded risk if borrowers have repeatedly missed forecasts.
First-lien, unitranche, second-lien and mezzanine loans have different expected recovery profiles.
Mehmi's mezzanine financing guide explains why subordinated capital commands different economics from senior secured debt.
PIK can increase the stated value of a loan while providing no current cash.
A buyer will want to understand whether PIK was part of the original structure or introduced because the borrower could no longer afford the entire coupon in cash.
A loan expected to refinance in nine months presents a different duration risk from one maturing in five years.
Where recoveries depend partly on receivables, inventory or equipment, asset quality needs to be examined separately from enterprise value.
For Canadian operating companies, Mehmi's guide to assets that qualify for ABL explains why receivables aging, concentration, inventory quality and security priority can materially change financeable value.
A $200 million portfolio containing 50 credits can behave very differently from a $200 million portfolio where four borrowers represent most of the NAV.
One credit problem should not automatically become a portfolio problem.
Consider a U.S. private-credit fund with USD $300 million of reference portfolio value.
The portfolio is diversified and primarily performing, but the manager wants approximately $110 million of liquidity without selling the entire book.
Assume the fund sells a 40% economic slice, representing $120 million of reference value, to an institutional secondary investor.
For illustration only, assume:
The 5% purchase discount represents $6 million relative to the $120 million reference value.
The assumed transaction costs add another $1.14 million.
The seller therefore converts $120 million of stated portfolio exposure into approximately $112.86 million of immediate cash, an illustrative difference of $7.14 million before considering taxes or any future portfolio value changes.
There is no scheduled loan payment and no principal repayment because this example is a sale rather than new debt.
The cash-flow trade-off is different.
At an assumed 11% portfolio coupon, the $120 million sold exposure would generate approximately $13.2 million of gross annual contractual interest before defaults, repayments, fees, amendments or PIK treatment.
The seller gets liquidity now but gives up the future economics attached to the transferred exposure.
This example is not a Mehmi Financial Group transaction, indication of secondary pricing or representation of available market terms.
A secondary sale is not the only way to create liquidity from a credit portfolio.
A manager could potentially borrow against portfolio NAV instead.
NAV financing lets the fund retain ownership of its underlying investments while using the portfolio as repayment support.
That can preserve future upside and interest income.
But it replaces a liquidity problem with leverage.
ILPA notes that NAV facilities have been used in private credit and secondaries for years and emphasizes the importance of understanding their cost, structure, reporting and risk.
The practical choice is therefore:
Sell exposure and permanently monetize it, or retain exposure and add a repayment obligation.
A seller expecting substantial future portfolio performance may prefer financing.
A seller prioritizing permanent liquidity or risk reduction may prefer an outright secondary sale.
At the operating-company level, the same temporary-versus-permanent financing question appears in Mehmi's commercial bridge financing guide.
Sometimes the most efficient liquidity source is below the fund.
A portfolio company holding substantial receivables, inventory or machinery might be able to refinance itself rather than requiring the fund to sell credit assets or add fund-level leverage.
For example, an asset-heavy company could evaluate ABL rather than asking the sponsor for another capital injection. Mehmi's asset-backed lending comparison guide explains how asset-supported credit differs from ordinary cash-flow loans.
A business with significant equity in productive equipment may be able to refinance those assets. Mehmi's restructuring and equipment refinancing guide covers that approach.
Another option may be a sale-leaseback structure, which can turn owned equipment into liquidity while the company continues using the assets.
For U.S. operating-company assets, Mehmi's Cincinnati equipment financing and refinancing guide provides a U.S.-specific example of how equipment-backed financing can preserve operating cash.
These solutions are not substitutes for a genuine $100M+ credit-secondary transaction, but portfolio-company liquidity can reduce the capital the fund itself needs to raise.
Private credit assets are not publicly traded securities with automatic settlement mechanics.
The actual transfer documents matter.
When the position being sold is a private fund interest or another restricted security, U.S. securities laws can also affect the transaction.
The SEC explains that privately issued securities are frequently subject to resale limitations and identifies Rule 144 and Section 4(a)(7), among other provisions, as potential pathways for qualifying secondary transactions. The correct exemption depends on the facts.
Separately, the LPA, subscription agreement or underlying loan agreement may impose contractual transfer restrictions.
A direct loan assignment may require borrower or agent consent even when the broader securities-law analysis permits the transfer.
A $100M+ portfolio should therefore have legal counsel review securities-law status and contractual assignment mechanics rather than assuming all assets can be transferred together.
Canada uses its own securities framework.
National Instrument 45-102 governs resale restrictions for securities distributed under certain prospectus exemptions across Canadian securities jurisdictions. The CSA confirms NI 45-102 is in effect throughout Canada's participating provincial and territorial regulators.
That does not mean every commercial loan transfer is automatically governed the same way as a private fund security.
The legal analysis depends on what is actually being transferred.
A Canadian LP interest, fund security, direct corporate loan and participation interest can require different analysis, while fund and credit agreements may add contractual consent provisions on top of applicable securities legislation.
Cross-border portfolios require additional attention because one transaction can contain U.S. borrowers, Canadian borrowers, multiple fund entities and investors in both countries.
A buyer should not have to reconstruct the portfolio from unrelated spreadsheets.
For a $100M+ transaction, prepare a clean data room and a reconciled loan tape.
The package should generally identify each borrower's:
The aggregate package should also show concentration by borrower, sector, sponsor, vintage, maturity and credit quality.
A buyer should be able to move from portfolio-level NAV directly into the underlying credit supporting that NAV.
For acquisition-related credits, Mehmi's M&A financing guide provides additional background on why acquisition debt frequently involves multiple layers of capital and different repayment priorities.
Liquidity alone does not make a secondary sale attractive.
Selling may be less compelling when the portfolio is temporarily marked down but the manager has strong conviction that the loans will repay at or near par.
It can also be unattractive when the portfolio contains significant prepayment potential that the buyer captures through the purchase price, or when transfer restrictions make execution unusually expensive.
Conversely, refusing to sell simply because pricing is below reported NAV can also be a mistake.
If the fund urgently needs liquidity, maintaining an optimistic mark does not create cash.
The relevant comparison is the certainty of today's net secondary proceeds against the expected risk-adjusted cash flows from continuing to hold the portfolio.
No. Performing senior direct loans, mezzanine positions, stressed credits and distressed loans can all trade in secondary transactions. The existence of a secondary sale does not itself indicate that the underlying borrower is distressed.
Potentially. Partial transfers and structured transactions can be negotiated, subject to the fund documents, GP consent and the buyer's requirements.
Potentially. A continuation structure can provide liquidity to existing investors while moving loans into a new vehicle with additional duration. Valuation, conflicts, investor elections, expenses and the new vehicle's economics require careful structuring.
Selling a fund interest transfers exposure to the fund and its portfolio. Selling an individual loan or loan portfolio transfers specific underlying credit exposure, subject to the relevant credit agreements and assignment mechanics.
It can be an alternative when the fund wants liquidity but does not want to surrender ownership of the assets. The downside is that NAV financing introduces interest, covenants and a future repayment obligation.
A discount can compensate a buyer for illiquidity, underwriting uncertainty, portfolio concentration, duration, fees, adverse selection, transfer complexity or differences between the seller's valuation assumptions and the buyer's required return. There is no universal discount applicable to private-credit portfolios.
There is no responsible universal timeline. Execution depends on portfolio size, loan-level diligence, data quality, buyer financing, GP or borrower consents, transfer documents, legal structure and whether individual positions require separate assignment processes.
Mehmi Financial Group should be viewed as a financing brokerage/intermediary, not as the buyer of a private-credit portfolio or the party controlling institutional underwriting. For an institutional secondary requirement, Mehmi can review the financing objective and determine whether the opportunity fits available relationships or requires a specialist private-capital or secondary-market execution path.
The first question in a private-credit secondary is not simply, "What percentage of NAV will a buyer pay?"
It is what liquidity problem needs to be solved.
An LP seeking a complete exit, a GP managing fund duration and a credit manager trying to reduce one sector concentration should not automatically use the same structure.
For a serious review, prepare the portfolio reference value, desired liquidity amount, U.S. or Canada exposure, relevant states or provinces, underlying credit strategy, concentration profile, use of proceeds and target timing.
For direct loan portfolios, also include a current loan tape, maturity schedule, credit marks, non-accrual information and transfer restrictions.
Mehmi Financial Group operates as a financing brokerage/intermediary. Institutional transactions remain subject to the relevant buyers', lenders' and investors' diligence, documentation and approval.
Call 833-863-4644 or contact Mehmi Financial Group.
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