PL/NPL Portfolio Evaluations
Based on current market conditions, commercial loan professionals are expecting a significant increase in the sale of Performing Loan (PL) and Non-Performing Loan (NPL) portfolios in the coming months as lenders look to free up capital. AEI has a developed a tailored and client specific approach to PL/NPL portfolio screening and has extensive experience in this area. The most recent evaluation included a 15,000 mixed asset pool of PL/NPL in four countries.
A portfolio-wide summary report itemizes the risk for each loan based on available information, such as prior due diligence reports and current desktop data research, and outlines the risk ranking and the estimated environmental and/or building maintenance costs. Reporting also may also include cost estimates for the concerns identified.
Other considerations can be added to the portfolio analysis, including climate risk factors, such as inland flooding, typhoons/hurricanes, coastal flooding/sea level rise, extreme heat, and fire risk, as well as seismic risk. This analysis can be useful in avoiding unintended risk exposure to climate-related considerations.
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CASE STUDY: Environmental Risk Ranking and Cost Estimation for NPL/PL Portfolio
Project Type: 15,000 Mixed Asset NPL/PL Portfolio
Client: Confidential
Assignment: Environmental Risk Ranking and Cost Estimation
AEI provided Environmental Due Diligence consultancy services to a Fortune 50 Bank for assessment of a 15,000 mixed asset NPL / PL Portfolio, across 4 countries. The screening analysis was tailored for the portfolio and incorporated client specific sensitivities across the typical range of environmental issues, leveraging the limited information available within a short time frame.
The basic screen utilized asset construction and renovation dates to rank suspected risk for:
- Deleterious materials such as asbestos, lead-based paint and PCBs, based on country specific dates of abandonment of use;
- Risk ranking of assets, into High, High-Medium, Medium and Low risk categories, based on cumulative risk factors, asset type and ranking logic; and
- Cost estimation, using three scenarios for each asset for High, Reasonable and Low cost estimates.
In addition to the basic screen, by integrating an ArcGIS mapping system, AEI included review of the following risk factors for the portfolio:
- Seismic zone
- Flood zone
- Radon zone
The final report included a detailed analysis that fully explained the risk ranking logic, asset categorisation and priority assets for carve out or additional research, asset mapping by asset class, seismic, flood and radon maps.
