TDX Group

A New Asset Sale Market

Driven by the recession, changing portfolio performance and the disappearance of cheap credit, the asset sale bubble has burst – but asset sale continues to be a powerful tool.

Today’s market
Low transaction volume characterises the current market and three key realities are making deals harder to complete:

1. Fewer Purchasers
   With mainstream funders stepping back from the market, funding is hard to come by with investors demanding higher returns.  As a result, there are measurably fewer active purchasers in the market. We have monitored a 45% drop in purchaser participation in last 12 months.
   
2. Diverging Valuations
   With purchasers pricing reflecting continued performance reductions and creditors stuck with backward looking valuation models, the difference between their views of valuation has grown. As a result, year on year sale volumes are down 75% in the first half of 2009.
   
3. Lower Prices
   The paradigm shift in supply-demand dynamics caused by rising bank losses and dropping purchaser demand combined with the differences in value expectations has reduced market prices by over 50% in some segments.

Hitting bottom? The UK Debt Sale Market:

In spite of a challenging economic environment sale remains the best tool for crystallising returns, removing risk from the balance sheet, reducing operational costs and rapidly responding to changing debt volumes. However, without cheap funding, prices are unlikely to return to previous highs within the next two to three years and while the market may well be challenging, transactions are far from impossible.

A more stable and mature market is emerging and the best deals are no longer achieved if they are based purely on price. Bespoke designed approaches and packaging will ensure the right portfolio is sold at the right time to the right buyer through the right deal structure – delivering value for both seller and purchaser.

New products for new challenges