Loan Portfolio Analysis, Valuation, Packaging, and Sale
Problem: A $2 billion Midwestern bank elected to go private. In order to avoid significant tax consequences, it had to exit the auto finance business to comply with an IRS private letter ruling. A sale of its loan portfolio would comply with the tax requirements, but it had to be completed before the privatization in three months.
Solution: BPA evaluated, packaged and sold the $75 million auto loan portfolio. We reviewed a sample of the 7,500 loans for compliance with published underwriting guidelines and current concerns of national investors. We compared original documents with computer records and cured many significant exceptions we found.
We stratified the loan pools according to legal, credit, and quality characteristics and grouped loans according to where they would provide the best execution for the Seller. We established reserve pricing guidelines for each pool and determined the best selling process from among several options: competitive bid, negotiated whole loan sale, or securitization.
BPA then prepared the offering package and marketed it to a targeted investor base that had expressed interest. We managed the offering, bidding, buyer selection, buyer due diligence, and purchase and sale agreement phases. We negotiated a settlement price well above both par and the reserve price, and closed the sale within the required time.
Note: Actual client names have been removed due to confidentiality issues.