Learn why an appraisal/valuation is required for the going concern for lending purposes and identify the effect of going concern appraisals on lending.
2020 started off as a promising year with stock markets performing well and economy expected to be stable. However, within a span of just a few weeks, the COVID-19 pandemic swept the investment world off its feet and resulted in unprecedented market volatility and uncertainty.
It is a challenging time for companies with mid to high level of debt on their balance sheets. For example, given the high leveraged nature of private equity backed businesses, a downward business valuation would potentially be catastrophic for some of the businesses. In the last couple of months, the pandemic has hammered some private equity owned companies ill-equipped to handle an economic downturn because of heavy debt obligations. Travel and retails businesses have been especially vulnerable, such as J. Crew, Niemen Marcus, and Hertz, which filed for bankruptcy protection last month. Private equity business were hit hard in May, when 16 companies backed by private equity filed for bankruptcy. The higher debt obligation significantly reduces the equity valuations during economic downturn and must be monitored closely. Given the significant changes in going concern valuations, terms of new lending or existing loans would potentially be renegotiated.
Agenda
Faculty
Ajay Mishra
Citrin Cooperman & Company, LLP
- Director in the Citrin Cooperman & Company, LLP’s Valuation and Forensic Services Practice with over 14 years of experience
- Specializes in advising a wide range of alternative asset managers including hedge funds, private equity funds, private lenders, real estate investment trusts (REITs), and business development companies (BDCs)
- Has advised them on valuing their positions in equities and debt securities, such as common stocks, straight and participating preferred equity, carried interests, limited partnership interests, corporate loans, senior secured debt, putable and callable convertible debt, junior/unsecured subordinated debt, mezzanine debt, etc.
- Experience also includes valuation analyses for financial reporting and tax reporting related to acquisitions, divestitures, reorganizations, impairment testing, employee compensation plans, and tax restructuring purposes
- Was a director at Duff & Phelps’s Portfolio Valuation practice and was a manager at Ernst & Young, LLP, a Big 4 accounting firm
- M.B.A. degree in finance and marketing, Fordham University; has completed four levels of American Society of Appraisers (ASA) designation curriculum and completed exams for The Certified in Entity and Intangible Valuations (CEIV); and a Chartered Financial Analyst (CFA) level III candidate
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