Performance Monitoring and Workout Services for Banks

Despite the change in sentiment, the economic crisis is in full force and will increasingly manifest itself in the real economy: pressure on businesses (tenants), and increasing levels of bankruptcies.


In many property markets (especially retail) there has been an explosive over-supply of properties. Often, these were developed by inexperienced developers, resulting to raft of mis-specified assets cannibalising the market.


Many banks today consider Loan-to-Value breaches as benign, resorting to restructuring, loan-to-value holidays etc, choosing to take drastic action only in the case of an interest covenant breach or debt service arrears. However, this may not be enough:
  • A ‘negative equity’ situation is not exactly motivation for the equity holder to work the asset out
  • The bank is one step closer to the line of fire—or the first loss position
  • To use a medical analogy, the loan restructuring is treating the symptom, assuming the causes of the ailment will abate by themselves. There is no guarantee though.
If problems are not identified early enough, an LTV breach may be followed in no time by a breach in debt servicing and a long-term diminution of the value of your collateral. The problem is more pronounced in the case of retail assets




8GCP can help you tackle the problem in its entirety:

PREEMPTIVE PERFORMANCE MONITORING

We will delve into an asset and carry out a full examination, testing, among others:
  • Its cash-generating ability
  • Service charge efficiency
  • Management
  • Tenant service and relations
We will act as your ‘eyes and ears’ and warn you at the earliest sign of trouble. We work in conjunction with your in-house team and we act as a liaison between various teams of a lending syndicate.

ASSET WORKOUT

The pre-emptive performance monitoring we carry out gives out warning signs. Or, you realise that an LTV breach is quickly turning into a IRC breach or worse, the loan is non-performing. Selling the loan at a discount would result to immediate loss. Foreclosing would again entangle you in legal proceedings, it will be costly and it would be time consuming—resulting to a potentially irreversible diminution in value.

Your best alternative is to effect a work-out. Instead we can help you work out the asset. Our team of property experts combine strong analytical, financial and property skills, honed over the last two property downturns.

Act as advisors & work with your team to effect the following:

Property:
  • Set strict ground rules & procedures for the management
  • Ensure alignment of the design & tenant mix with investment objectives
  • Engineer capex programmes (refurbishments, redevelopment) when required, for maximum performance
  • Identify new sources of income
  • Eliminate inefficiencies in the service charge budget and collection mechanism
  • Improve income quality (lease length, covenant, lease terms etc)
  • Streamline marketing, property management, tenant relations
Loan & Capital Structure:

Based on the revised business plan:
  • Guide you on suspending / resetting LTVs and ICR covenants for an agreed time
  • If part of a syndicate, communicate and co-ordinate actions with other lenders
  • Build reserves to assist in meeting senior loan interest payments / non-recoverables / capex through period of further stress
  • Assist in equity injections and recapitalisations through our access to global capital markets, investors and developers .
Why choose us

Workouts are rarely one-dimensional problems. You would need someone who:
  • thinks as an investor
  • has been there and has done it before—in similar conditions
  • has access to capital markets and can help with the capital structure
 
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