Loan Sales Advisory

DebtX’s Loan Sales Advisory Group provides loan sale services and enables active portfolio management. We facilitate the entire loan sale process for performing, sub-performing and non-performing loans, including, portfolio analysis and pricing, deal preparation, marketing, trade execution and closing.

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Our Client-focused Loan Sales Strategy and Management Approach

Review Loan Sales Case Studies

We are focused on our clients’ primary goals in the loan sales process:

  • Maximize recoveries
  • Increase certainty of execution
  • Close deals within pre-determined timelines
  • Leverage smooth and efficient process
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Loan Sales Case Studies

  • Regional Bank: $51.2 Million Non-Performing Hospital Operator Loan Relationship

    SELLER GOALS AND CONCERNS:

    A regional bank sought advice on how best to exit a large and complicated multi-loan relationship with a hospital. The bank had provided construction financing to a hospital operator to construct and operate multiple complimentary businesses including skilled nursing, assisted living, memory care, and health and wellness and rehabilitation facility. Construction was completed but the complexity of running multiple businesses, combined with aggressive assumptions around business ramp-up rapidly overwhelmed the sponsor and they fell significantly behind original operating projections. Several business consultants were engaged but it became clear that both working capital and time were needed to stabilize operations. The original sponsor lacked the wherewithal to provide more capital and the bank deemed additional funding far too risky given their lack of confidence in the existing operator.

    The bank was very experienced with simple CRE secured workouts and foreclosures but recognized the operationally intensive nature of critical care operating businesses. They correctly recognized that a foreclosure and closing the business would result in a catastrophic loss of both franchise and real estate value and agreed that a loan sale would likely result in the highest value recovery for the bank.

    SOLUTIONS AND OUTCOMES:

    DebtX analyzed and presented the complicated financials of the interrelated businesses, stressing the opportunity for an experienced and well capitalized operator. Also highlighted was the new construction nature of the underlying assets, along with new FF&E, which would accrue to the benefit of a new operator in a takeover scenario and/or debt for equity swap.

    Recognizing the unique yet complicated structure, industry, and asset base, DebtX tapped its extensive investor database and conducted a nationwide marketing campaign covering sector specialists, operators, private equity groups and large family offices known to partner with and fund smaller experienced operators.

    DebtX’s extensive investor outreach and marketing campaign resulted in 161 qualified investors groups executing a confidentiality agreement to access due diligence materials and evaluate the subject opportunity. Multiple competitive bids were submitted following the four-week marketing and due diligence period. DebtX and the bank chose the high bidder, an experienced operator with whom DebtX has closed multiple transactions over its 20-year history and the loan sale transaction closed the next week with no further due diligence, no financing contingency and no changes to the bid.

  • Local Bank: $3.1 Million Non-performing Railroad Contractor Relationship

    SELLER GOALS AND CONCERNS:

    This small Alabama bank had extended a loan to a local owner of a contracting business. The relationship was paid as agreed until the primary operating guarantor passed away unexpectedly.

    Family members took over the business, but it was quickly determined that their lack of specific industry expertise was negatively impacting business operations and ultimately, loan performance. After a series of loan modifications, the borrowers became unresponsive and further loss mitigation actions were required by the bank.

    The bank was experienced with simple CRE foreclosures but recognized a lack of expertise in locating, monitoring, and monetizing collateral primarily consisting of railroad equipment. The bank also recognized that a lawsuit against remaining guarantors would likely result in a protracted confrontation with significant legal expenses and an uncertain outcome. Passage of time with a hostile counterparty might also result in continuing diminution of collateral value and or inability to locate mobile collateral (trucks, trailers, cranes, etc.).

    With DebtX’s guidance, the bank performed a comprehensive collateral inventory to determine exactly what collateral existed, where it was located and whether it was secure. This allowed both the bank and DebtX to accurately gauge value and the appropriate expected value to be generated from a loan sale. Upon analysis, the bank agreed that a loan sale would likely result in the highest value recovery for the bank.

    SOLUTIONS AND OUTCOMES:

    While the bank had never sold a loan and was surprised that a market would exist for a small credit secured by predominantly business assets in rural Alabama. DebtX assured the bank that this type of C&I loan sale transaction was very familiar, and the market for small balance C&I is surprisingly robust, yet largely unknown to the general public.

    The Trading Desk tapped an extensive small balance C&I database resulting in over 120 qualified investors executing a confidentiality agreement to review supporting due diligence materials. The four-week marketing and due diligence period concluded with multiple bids in excess of the bank’s expectations and below their loss budget. The loan sale transaction closed as agreed the following week.

  • Finance Company: $19 Million Sub-performing Franchise Finance Relationship (Part of a programmatic sale and 12-month wind down of a $335 million franchise finance portfolio)

    SELLER GOALS AND CONCERNS:

    This global financial services company sold their performing portfolio through a strategic sale to another bank and was desirous to exit their sub and non-performing portfolio of franchise (restaurant and C/G), aircraft (JDC portfolio) and similar franchise loans secured by real estate and/or UCC filings. DebtX was retained to strategize the sale effort, force-rank and execute on a large and diverse portfolio of loans in multiple pools and individual offerings with the goal of driving highest and best proceeds within a defined timeframe.

    The loan relationship denoted above was a relationship secured by 30 Taco Bell Franchises (leased and owned) located in the Western US. The loan had been performing however, the borrower was over-leveraged, and the cash-flow was significantly strained by the growth in units. Though financial results were provided it was likely the borrower would need to conduct sale-leasebacks to generate additional cash to support unit growth. The borrower was not in compliance with EBITDA and leverage covenants and was in need of securing additional capital.

    SOLUTIONS AND OUTCOMES:

    DebtX was highly confident that the right investor for this loan would be a counterparty that could energize the sponsors’ business and provide the right capital structure to enable them to execute their growth strategy.

    Given the industry and the limited number of investors who regularly participate in the franchise space, DebtX was able to find crossover investors who could understand the “story”. We tapped our extensive investor database and conducted a nationwide marketing campaign covering sector specialists, operators, regional and entrepreneurial banks.

    DebtX’s extensive investor outreach and marketing campaign resulted in 76 qualified investors groups executing a confidentiality agreement to access due diligence materials and evaluate the subject opportunity. Multiple competitive bids were submitted following the four-week marketing and due diligence period. DebtX and the finance company chose the high bidder, an experienced operator who was familiar with the concept and had other loans to operators in other regions. This buyer was new to DebtX, and the loan sale transaction closed the next week with no further due diligence, no financing contingency and no changes to the bid.

  • Regional Bank: $18.8 Million Non-Performing CRE and C&I Loans

    Seller Goals and Concerns:

    A regional bank sought to dispose of a pool of non-performing loans in order to free up account officers to start originating loans again. The pool included a large, suddenly re-performing C&I loan.

    A complicated credit with uncertain cash flow, the current value of the C&I asset was now above book value. However, the potential existed for the value to collapse. In order to avoid the risk of future default and loss, the bank wanted to take advantage of the current asset cash flow and sell the loan above book value, taking the gain.

    Solutions and Outcomes:

    DebtX analyzed and presented the complicated financials of the C&I asset as a compelling investment opportunity. Using the company’s extensive buyer data base, the DebtX trading team attracted niche investors interested in this unique asset as well as the rest of the non-performing pool.

    Because of its flexible loan sale process, DebtX had the resources to structure this offering and sale to fit the unusual characteristics of the transaction. DebtX’s deep buyer pool along with the talents of the trading team meant the seller was able to sell the entire pool of loans and realize the gain it desired on the unique C&I asset.

  • Community Bank: $8 Million Non-Performing Residential and CRE Loans

    SELLER GOALS AND CONCERNS:

    This community bank was under pressure from investors, regulators and, in particular, bank analysts to reduce its CRE exposure by year end. To address the issue, the bank had previously negotiated a deal to sell a portfolio to a direct buyer. A letter of intent was signed. However, shortly before year end, the investor lowered the price and removed assets from the sale.

    The new terms proposed by the investor would have weakened the bank’s balance sheet, thereby defeating the purpose for the transaction. The bank feared it could not satisfy the requirements to reduce its concentration of non-performing CRE loans and preserve capital by year-end. With the time constraints it faced and the severity of the problem, the entire enterprise was at risk.

    SOLUTIONS AND OUTCOMES:

    Rather than accept the direct buyer’s renegotiated terms, the bank terminated the letter of intent and engaged DebtX to sell the portfolio. DebtX provided a swift and efficient loan sale to meet the narrow timeline of this seller. With an ability to both underwrite quickly and reach a broad buyer base, DebtX completed the sale and obtained premium pricing in just half the normal marketing period.

    With DebtX, the bank was able to sell more loans at a higher price and enter 2012 with an improved balance sheet and an enhanced reputation for delivering results above its required goals.

  • Large Financial Institution: $74.3 Million Performing and Non-performing CRE Loans

    SELLER GOALS AND CONCERNS

    This large financial institution was under pressure from bank analysts to reduce the level of NPAs in its portfolio. Previous attempts to sell the loans internally had frustrated the institution with few offers from unreliable buyers at low prices, resulting in criticism from analysts and regulators. These failed sales attempts were a poor use of their professional staff time. The seller sought an orderly, effective and transparent sale process that would obtain the highest possible price.

    The loans to be sold were both performing and non-performing loans secured primarily by various commercial property types, related business and equipment loans, land for development and some REO properties. Many were complex credits, requiring a large amount of due diligence and explanation.

    SOLUTIONS AND OUTCOMES:

    DebtX brought multiple binding bids at higher than expected prices on every single loan offered. This success, teamed with the quality level of underwriting and a highly transparent process, allowed the seller to meet the promised level of NPA reduction and satisfy the analyst expectations.

    DebtX’s thorough underwriting provided highly organized due diligence files. This allowed potential investors to better understand the loans offered. DebtX’s extensive buyer database and a marketing outreach program specifically designed for this offering were able to reach multiple qualified investors.

    With DebtX, the seller experienced greater predictability and better pricing. The seller engaged DebtX for continued programmatic selling of its troubled assets.

  • Public Employee Pension Fund: $32 Million Performing And Non-Performing CRE Loans

    SELLER GOALS AND CONCERNS:

    A public pension fund owned an “orphan” portfolio of CRE loans that no longer fit its strategic goals. This CRE portfolio consisted of twenty-six performing loans and one non-performing loan. The loans were secured by retail, office, industrial and multifamily properties. The fund was under pressure to sell all the loans, and could not risk holding just a handful of credits.

    The seller received a direct bid for the portfolio at a price below par, leaving the fund with a need for fairness guidance. More bids were required to validate the current offer and confirm the fund would be achieving a fair market price. It was important to the fund that they receive the highest possible price and that the transaction be demonstrably fair.

    SOLUTIONS AND OUTCOMES:

    DebtX’s review suggested the seller would obtain a significantly higher price through a comprehensive marketing effort. DebtX’s sales effort would also bring a high level of transparency and fairness to the transaction. This allowed the pension fund greater comfort in reporting to its board and its overseers.

    Buyer response and interest in the portfolio was overwhelming. Every single loan was sold and most sold at a premium. Ultimately, the seller got an auditable, independent transaction and delivered an extra $4.5 million in proceeds to its beneficiaries.

  • International Bank: $13.2 Million Non-Performing CRE Loan

    SELLER GOALS AND CONCERNS

    This collateral consisted of 70 condominium units located within a 297 unit luxury development. The condominiums were part of a development of nine four-story buildings on a 16 acre parcel. Project amenities included a resort style pool, a heated spa, clubhouse, fitness center, restaurant/bar area and a business center. The loan consisted of a single non-performing credit facility, advanced under three promissory notes.

    The seller had tried to dispose of this real estate and/or the first mortgage a number of times in the past without success. Each deal had ended with the buyer lowering their prices and/or failing to close. The bank had found another buyer and wanted to pressure him to complete the sale. The seller was concerned this buyer was also unreliable and wanted to end the waste of resources spent on unsuccessful sales. After so much frustration, the seller wanted to close as quickly as possible at the highest price possible.

    SOLUTIONS AND OUTCOMES:

    The seller turned to DebtX and through its extensive database, DebtX reached a large number of qualified local, regional and national buyers interested in the intrinsic value of the real estate. The large number of potential buyers propelled the price higher than the seller’s previous unsuccessful offers.

    The entire loan sale process was managed by DebtX in an efficient, transparent manner, requiring few bank resources. Bidding requirements, complete terms of sale and a standard closing procedure ensured that there was no re-trading. Both price and certainty of execution were high.

    The sale closed in one week, rather than one year and at a price reflecting the intrinsic value of the real estate.

  • Community Bank: $48 Million Non-performing CRE Loans

    SELLER GOALS AND CONCERNS:

    With aspirations of becoming a regional bank, a newly-formed, super-capitalized community bank embarked on a series of bank acquisitions. Following each acquisition, bank management sought to optimize the composition and profitability of the acquired loan portfolios.

    Bank management was concerned about pouring money into weakening portfolios of TDRs (Troubled Debt Restructure), long-term workouts, and other large, capital-intensive risky loans. Instead, the bank pursued a reduction in CRE loan concentrations. In particular, the bank focused on large loans that had been crippling the acquired institutions during the real estate downturn. Because these loans represented a significant portion of the bank’s capital, disposition had to occur without impairing it.

    SOLUTIONS AND OUTCOMES:

    The bank engaged DebtX for the sale of six of its largest and most complicated loans. Drawing from DebtX’s deep buyer base, years of secondary market experience, and the expertise of the DebtX sales and trading teams, the loans were sold at premiums to the bank’s book value. This allowed the bank to realize its goals of minimizing risk while preserving capital.

    The successful sale cleared the bank’s balance sheet and positioned the bank for profitable growth through traditional lending efforts and further bank and loan acquisitions. This seller continues to be an active buyer of banks. It pursues the sale of non-strategic loans to maximize profitability and increase both enterprise and shareholder value.

  • Top 25 Bank: $33.5 Million Non-Performing Residential/Mixed Use Loan

    SELLER GOALS AND CONCERNS

    This top 25 bank held a large, non-performing loan collateralized by a unique residential/mixed use property located in a major U.S. city. Forced to indefinitely classify the loan as a troubled debt restructure, the bank became frustrated by the extended work out period. The bank was also concerned about the property level liability associated with controlling such a large, urban multifamily project.

    The bank opted to pursue the sale of the loan in order to free up capital and relieve its lending professionals from tasks and concerns that were not profitable. Aware of the quality and potential of the property, the bank was determined to obtain the highest possible price.

    SOLUTIONS AND OUTCOMES

    DebtX began pursuit of the Seller’s goals through its commitment to high quality underwriting and its ability to provide specialized and comprehensive marketing.

    DebtX first acquired an in-depth understanding of the property, the neighborhood and the region’s real estate trends. Armed with detailed informational materials, DebtX then engaged in an intensive campaign aimed at commercial real estate owners and developers on a local, regional and national level via face to face meetings.

    Meanwhile, DebtX’s underwriting team prepared highly detailed due diligence files. This superior underwriting allowed prospective buyers to gain a clear understanding of the asset and the opportunity.

    Final bids were beyond the client’s expectation in both number and amount. The loan sale strategies employed by DebtX allowed the bank to move this large single asset off its books at a premium and return to more profitable lending activities.

  • Super Regional Bank: $75 Million Mixed Performance CRE, C&I And Agricultural Loans

    SELLER GOALS AND CONCERNS:

    This super regional bank needed to shed a large portfolio consisting of very diverse assets. The portfolio contained more than 100 small balance commercial loans of varying performance levels backed by multiple collateral types scattered throughout the United States. These assets had been stuck on the bank’s balance sheet for some time without any clear path to resolution.

    The bank aimed to reduce its overall level of NPAs in order to free up capital and concentrate on new, more profitable lending. With this goal in mind, the bank was under pressure to sell the entire portfolio at the highest possible price.

    SOLUTIONS AND OUTCOMES:

    The pooling strategy typically recommended by DebtX for portfolios of this size and diversity is to create small, homogeneous pools that will appeal to specific relevant buyers willing to pay a premium. However, in order to take advantage of unusual market conditions, DebtX counseled the bank to sell this portfolio in a single pool. DebtX’s deep relationships with the top loan and investment funds allowed the trading team to create a uniquely competitive environment for this group of assets.

    DebtX employed a transparent, indicative pricing strategy that forced this group of well-qualified buyers to complete full due diligence prior to the final bid. DebtX’s underwriting team presented complete, comprehensive and detailed asset level information, which prompted multiple buyers to remain actively engaged in the sale and drive up prices.

    DebtX generated over a dozen final bids, driving every bidder higher than indicative levels. Five of the final bids substantially exceeded the seller’s expectation. The sale brought a considerable premium for the bank and every asset was sold. The entire transaction closed within 10 days, having surpassed every goal set by the seller.

  • Regional Bank: $285 Million Performing And Non-Performing Residential Loans

    SELLER GOALS AND CONCERNS:

    This regional bank was involved in an arrangement with a government agency. Due to the nature of the partnership and government regulation, the sales required particularly high levels of transparency, security and privacy. The sale process would be highly scrutinized and the seller wanted significant levels of support in all phases of the sale to ensure compliance.

    It was imperative that multiple bids be obtained at the highest possible prices and that all bids carry absolute certainty of execution. The sale consisted of four residential loan pools with an average loan balance of $345M. The majority of the loans were HAMP modified.

    SOLUTIONS AND OUTCOMES:

    DebtX provided the client with complete confidence regarding security and privacy. DebtX has passed security audits by many of the world’s most sophisticated financial institutions and maintains high standards of security and privacy at all times. Buyers registered with DebtX must be either accredited investors or qualified institutional buyers who have made substantial representations, warranties, certifications and disclosures prior to having access to any offering.

    The DebtX team supplied “on the ground” support from the initial gathering of documents through marketing, bidding and post-closing servicing and transfer. After closing, DebtX provided an auditable transaction summary.

    DebtX’s extensive buyer database and patented trading desk allowed traders to reach out to a large number of highly relevant and qualified buyers capable of fully-executable bids. A broad marketing campaign resulted in scores of bids by qualified buyers in the desired price range.

    This seller engaged DebtX in a multi-year loan sale relationship to effect an orderly reduction in non-strategic assets.

  • Loan Servicer: $40.4 Million Non-Performing CRE And Multifamily Loans

    SELLER GOALS AND CONCERNS:

    The portfolio consisted of dozens of different loans but this was not a typical bulk sale. The seller was a major special servicer and the servicer did not own the loans, rather they were owned by multiple trusts. Each trust had technical and pricing requirements for the sale of their individual loans in the pool. Every loan needed to bring in the best possible price; an overall average price for the portfolio would not be acceptable. A poor price or an execution issue on any loan would risk the success of this entire sale.

    SOLUTIONS AND OUTCOMES:

    For this sale, DebtX had to balance a broad marketing campaign with focused efforts to attract buyers to the individual loans. This strategy was possible due to DebtX’s deep buyer base and patented trading desk. With the extensive information available to them, DebtX traders were able to immediately and aggressively pursue buyers known to have previously bid on like property types in similar geographies.

    DebtX succeeded and found multiple investors willing to pay a premium for this large variety of loans. DebtX’s clear bidding requirements, complete terms of sale and standard closing procedure ensured all loans were sold and closed within the desired period. DebtX met the seller’s need to sell a large diverse portfolio while delivering loan by loan pricing and execution that satisfied the many individual trusts.

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