Case Study: Financial Opinion Services

Fair Value of Debt - FAS 157

Our Client

A global financial institution with an interest in an intellectual property rights portfolio by having underwritten over $1 billion in senior-level and subordinated debt secured by the portfolio

Situation

The bank established a structured financing vehicle to facilitate the manufacturing, marketing and distribution of a portfolio of properties in partnership with a global production, marketing and distribution company. In light of the state of capital markets and other market dynamics impacting the company, the bank required an assessment of the potential impairment of the portfolio for internal planning, asset-retention and accounting purposes.

Key Issues/Services

Considering the effect of FAS Statements 142 and 157 in determining the fair value of an interest in the structured financing vehicle and certain underlying assets (collectively, the "SFV")
Assisting the company's management in developing a broad range of risk-adjusted forecasts pertaining to the performance of the portfolio in order to determine the fair value of the SFV
Assessing the implications of capital market illiquidity on the determination of fair value, with appropriate recognition of (i) the near-term versus longer-term implications of market dynamics, and (ii) the perspectives of potential acquirers of the portfolio
Developing fair value indications and establishing consensus with the company, the bank and their respective auditors

The Salter Group's Role & Outcome

We developed preliminary indications of fair value of the SFV.
We rendered an independent opinion of fair value of the SFV to be used by the bank for its internal planning and accounting purposes.

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