Breakthrough Residual Analysis Opens New Market for Secured Lenders
Client: World's Largest Intercity Bus Company
Challenge: Prove Intercity Buses are Excellent Collateral for Multi-Year Leases
A national transportation company was seeking financing from leasing companies and commercial lenders. However, lenders lacked the confidence to secure some of the company's assets over the course of a long-term lease.
AccuVal was retained to provide an evaluation of transportation equipment serving passengers throughout the United States and Canada, conduct a residual analysis of all makes and models of intercity buses used in this region and study the company's preventative maintenance practices. The decision to engage AccuVal was based on the firm's international reputation, capacity to complete projects of unique scope and significant size and history of providing evaluations that resulted in the largest syndicated asset-based lending transactions in the world.
AccuVal Approach
AccuVal set forth to document the sale of all makes and models of intercity buses sold in North America during the preceding ten years. Working closely with OEM's, dealers of transportation equipment and transportation companies operating similar buses, AccuVal confirmed hundreds of transactions. Sales were statistically analyzed with the final report including extensive documentation, graphic presentation of value trends and clear recommendations relative to the value and risk profile of lending against assets of this type. AccuVal then communicated its findings to an international syndicate of leasing companies. The residual study was universally accepted, which resulted in leasors enthusiastically accepting buses as collateral in long-term leases. Lessons learned from this groundbreaking analysis still form the basis for secured lending of intercity buses around the world.
Bottom Line: Residual Analysis Increases Availability and Creates Flexibility in Company's Capital Structure
The innovative study and evaluation provided the company entree to a much broader source of financing. This enabled the firm to gain greater access to working capital and increased the lendable value of the company's fixed assets.
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