_Understanding your loan portfolio’s risk – proactive risk mitigation
Understanding your loan portfolio’s risk – proactive risk mitigation
Intelligence
In today’s turbulent and unprecedented real estate market, when assessing and understanding risk to your real estate loan portfolio it is important to understand the possible exit and recovery strategies that are available and how these can be implemented if required
The Knight Frank Restructuring and Recovery team are able to provide Lenders with the market knowledge and experience they need to assess the risk to their portfolio and provide bespoke and appropriate recovery strategies.
Strategies to reduce default risk
In the majority of cases, the team are able to assist Lenders by reviewing the underlying real estate asset and providing a strategic overview of the current asset management initiatives and possible exit strategies. The Lender can then utilise this information to discuss with their customer ways to reduce the default risk or help progress a consensual route to exiting the loan.
There are some scenarios where a consensual agreement with the customer is not possible. The Knight Frank team are available to advise on the steps required to ensure that both the interests of the Lender and the customer are protected.
Managing loans in default
Once the loan is in default there are a few remedies that the Lender has at their disposal including appointing an administrator, a liquidator and fixed charge receivers. In most cases, the appointment of fixed charge receivers is often the quickest, most cost-effective and efficient method to ensure that the value of the underlying real estate asset and any income derived is protected.
Benefits for the customer
The appointment can also be beneficial for the customer as it removes their responsibilities of managing the asset and can provide more time for them to arrange alternative means to refinance the debt. A critical point to remember is that the customer can refinance the debt at any point during the appointment at which point the fixed charge receivers will simply fall away and the customer regains control of the asset.
Benefits for the lender
From the Lender’s perspective, the process ensures that a professional and trusted advisor is in place to ensure that their interest is protected and the best price possible is obtained for the asset. The appointment also enables the sale proceeds and any income from the asset to be solely directed at settled their debt rather than any other creditors that may have a claim. This will result in a more cost-efficient and simple method of recovering the outstanding debt.
To help lenders further understand the process of appointing a fixed charge receiver, a further explanation of their powers and what takes place during and after the receivers’ appointing the team have produced a potted guide to the process.
Please do not hesitate to get in touch to discuss further how the Knight Frank Restructuring and Recovery team can help.
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