Using the Prep Phase to Minimize Data Issues in an NPL Sale
18 April 2017
The foundation of any successful non-performing loan (NPL) sale is accurate and detailed preparation of sale documents. Preparedness shows the commitment of the seller, as well as giving investors a clear understanding of the asset and opportunity. However, in the European markets, banks are increasingly overworked and undercapitalized; preparing for investor due diligence can be burdensome, especially under duress from data-related issues that arise from (source: Alvarez & Marsal):
- Incomplete/missing system data and/or documents
- Discrepancies between loan documents and data tapes
- Issues with collateral data, valuation methodology and definitions
- Non-compliance with regulatory requirements
Here are some best practices, based on our experience, that will help resolve data-related issues and streamline the prep phase:
Virtual data room – We advise against using manual methods of collecting and organizing sensitive information related to the asset. Gathering and organizing data in a central, online location is more efficient, requiring fewer bank resources. You can seamlessly transfer documents to a virtual data room when you’re ready to invite buyers to view information.
Collaboration – Team members from legal, finance and other departments all work together to organize sale documents, while senior managers oversee the process. Collaboration can occur more easily when document versions are always up to date, and any missing gaps in data can be easily identified, providing greater transparency for all team members.
Buyer perspective – Sale information should be organized by how it will be viewed by potential buyers (not based on ease of data collection). Key considerations include: What can each buyer see? How do I want each to see it? Which file-naming convention is most intuitive for the buyer? Time spent honing in on the buyer perspective minimizes time spent on Q&A during due diligence.
Control – It is important to determine which reports should be run to generate the most oversight for your process. User-activity reports can show you which investors are viewing which documents, providing you with key intel during due diligence. Additionally, you can provide reports to your compliance officers to demonstrate alignment with regulatory requirements.
For more information, you can download a more detailed booklet of best practices for setting up your data room.
Kylie Horner is an Associate in Strategy and Product Marketing at Intralinks. She is part of the team responsible for determining go-to-market strategies for the debt capital markets and alternative investment businesses. Prior to joining Intralinks, Kylie worked in marketing and communications at ACTIV Financial, a financial information technology firm. She graduated from the University of Colorado at Boulder with a degree in Journalism, and a specialization in global media.