Assets' Availability Five Times Greater Than Anticipated by Secured Lender
Client: Fertilizer Manufacturer and Distributor
Challenge: Appraise Machinery and Equipment to Secure $45 Million Loan
One of the largest producers and distributors of nitrate and phosphate fertilizer serving the U.S. farm belt engaged AccuVal to appraise the value of machinery in one of its manufacturing plants. The company wanted to pledge its tangible fixed assets to secure a $45 million asset-based loan to help finance its operations. As the basis for the appraisal, the lender recommended AccuVal use a removal concept, which determines the value of the machinery if sold and moved to another location.
AccuVal Approach
With extensive knowledge of the chemical processing and fertilizer industries and experience in machinery appraisals, AccuVal convinced the company that they could qualify for a substantially larger credit facility if another valuation approach were used. Given the nature of the assets, their location and the plant's competitive advantages – namely its location, access to raw materials and its distribution network – AccuVal recommended using an in-place concept to value the assets. The firm was confident the assets' value depended in part on the projected cash flow they would generate over time. Once AccuVal defined the issues and reasons for this approach, the lender agreed to allow it to be used as the basis for a loan. Complicating the valuation, however, was the fact that the company consolidated the financial records for all its plants. To segregate the specific plant's financial records from the aggregate, AccuVal worked with company management. When the plant's competitive advantages were considered using the revised valuation method, the appraised value increased substantially.
Bottom Line: Company Qualifies for Up to $250 Million Credit Facility
By using the enterprise concept to determine the value of the machinery and equipment, AccuVal found that the company qualified for a credit facility of as much as $250 million – five times the amount it had been seeking. Moreover, AccuVal determined that, had the original approach to the valuation been applied, the company would not have qualified for the $45 million term loan it originally sought.
The AccuVal AdVantage™
Years of chemical processing experience. Understanding of the different types of loans considered by lending institutions. Intimate knowledge of machinery used to produce fertilizer products. Ability to recognize the salability of businesses unique in their market segment. Foresight to communicate a better way to address clients' needs. That's The AccuVal AdVantage™ at work.
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