Case Study

Appraisal of debtors, inventory and production machinery for an asset based lender

Brief

A UK asset based lender was asked to provide additional working capital to a UK PLC domestic goods importer, manufacturer, distributor and retailer.

The proposed facility provided funding secured against the whole balance sheet requiring a detailed appraisal of each asset category.

Work

The assets categories included debtors, inventory (raw materials, WIP and finished goods), production machinery and real estate at 2 UK locations.

The machinery and equipment and property assets were valued based of comparable market evidence.
The debtory audit considered issues such as debtor concentrations, debtor days, good in transit etc.
The approach to value the inventory requires significant analysis of retention of title issues, trade finance and goods in transit, test counts, gross margin testing to create a cascade of value from cost to liquidation value. Consideration is then given to the liquidation discount, regulatory deductions and trade out costs before concluding a net value.

Outcome

A detailed valuation enabled the asset based lender to provide a term loan against properties and production machinery and revolving inventory and receivable facilities.

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