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| Machinery Market Article - March 2007 |
SHM Smith Hodgkinson - a leading auctioneer, appraiser and valuer of business assets - is now offering leasing companies and asset-based lenders a new product called Put Option Agreement
which provides a guarantee of an asset's value in a time series or 'residual appraisal profile'.
this is of benefit to the lender as it gives them the commerical equivalent 'first loss' of 20% of the prevailing value of an asset in the event of a loan or lease fault. Currently, the lender has to carry that risk with no valuation guarantees.
With this new product, in the event of a default, SHM - as the re-marketing agent - will either purchase the assets or, if the asset disposal fails to reach the expected value, pay the 20% first loss to the lender.
Christian Humphreys, associate director at SHM in Manchester (which has trialled this service with leading asset-based lenders in the UK), says: "Feedback from lenders shows that they are delighted with the opportunities that the Put Option Agreement gives them, as they can now strengthen their loan securitisation and define a managed exit from the loan in the event of a default". |
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