Friday, February 25, 2011

On behalf of a syndicate of lenders...

On behalf of a syndicate of lenders GoIndustry DoveBid was recently asked to value a large fleet of construction equipment, located in the Middle East.        The scope of the valuation was to inspect a sample of the assets, collect detail on the condition of these units, to provide current market values for both a solvent and insolvent 12 month exit scenario and finally,  to provide future values over the next 4 years. 

We inspected the equipment at 5 different sites, and using a using a pre-defined inspection form to gather our evidence we scored factors such as tyre condition general condition of equipment and we collected information on hours and attachment.  During our time on site we observed over 27% of the total fleet.

The funded portion of the fleet was all from a single manufacturer and under 5 years old.  The majority of the market evidence available to us referred to equipment in the region of 10-15 years old, and any comparable ages of equipment did not correspond to a traditional depreciation profile based on the age alone.  Therefore, using adjusted logarithmic trend lines from the market evidence, we produced depreciation profiles based on unit hours rather than age

We also estimated the hours on none inspected units using the company’s latest recorded hours, then we increased these by the average observed difference per model type.  Future hours were calculated assuming a reducing hourly use per year.  The tyre condition of none inspected items was also estimated and based on observed models and factored into the values as either uplift or write down based on the variation from the mean tyre condition.  We also took account of tyre brand tier, fleet size, general condition and the local market.  Depreciation profiles were produced for each model, and market evidence profiles were provided for the major models in the fleet.

The in depth analysis provided detailed information of the fleet both for the current values and based on realistic future conditions that took into account the relevant variables to value the none observed portion of the fleet.

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