Radioactive Challenge Produces $100 Million One-of-a-Kind Solution
Client: Privatized Uranium Processing Plant
Challenge: Valuation of Enriched Uranium, a Highly Controlled and Hazardous Material
Appraisers often confront difficult engagements, but rarely do they encounter one with no precedents because it truly is one of a kind. Such was the case when the government decided to privatize three plants in the central United States it had used to make nuclear warheads during the Cold War. In the 1960s, some operations were converted to produce and sell enriched uranium fuel for commercial nuclear power plants. When the government decided to turn over the business to a private operator, the property included $350 million in uranium inventories. The company required a $100 million financing package for cash working capital needs. To secure the financing, the company needed an appraisal firm that could analyze this unique inventory and document its value to support a liquidation. The lenders asked AccuVal to tackle the task.
AccuVal Approach
Because the company is the only uranium enrichment facility in the United States, there were no standards or benchmarks that could be used as an appraisal method. AccuVal did, however, have experience in solving unusual engagement obstacles and a toolkit of innovative skills. To determine the market for refined uranium, AccuVal analyzed the company's financial systems and contacted uranium brokers to help define the size of the marketplace and demand for the material. The investigation included detailed consideration of relevant exit strategies that would result in lenders recovering the loan amount in the event the uranium had to be liquidated to preapproved buyers.
Bottom Line: Inventory Valued at $250 Million; Lenders Agree to $100 Million Deal
AccuVal created an appraisal report that valued the inventory and operations at $250 million. The firm provided ample supporting documentation to a syndicate of lenders with the assurance that the loan was well-secured, along with a step-by-step exit strategy. The lenders agreed and approved the $100 million debt-financing transaction. The company's stock now trades on the New York Stock Exchange.
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