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| Lender Services |
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| The current market dislocation has put tremendous stress on lender balance sheets. With little liquidity and regulatory pressures to remove problem loans, lenders often resort to selling assets into a declining market at large markdowns. Additionally, due to lenders general unwillingness to foreclose on assets, time is often wasted pursuing a “delay and pray” strategy. However, with depleting interest reserves, looming term defaults and interest rates expected to rise in the near future it is imperative that Lenders get ahead of this coming wave of defaults and/or deal with the ones currently on hand. Prodigious Capital offers several value-added services to commercial real estate lenders to address these and other balance sheet problems; Alternative liquidity options via agency services; A and/or B note participation sales Non-rated A/B pooled transactions
Liquidity options via principal execution; Loan acquisition via Life Settlement policies swap Junior participation capital infusion Discounted whole loan purchase Loan acquisition via trade credit barter
A-note/B-note participation sales Rather then keeping a non-performing loan on the balance sheet it may be possible to bifurcate that loan into a performing A-note and non-performing B-note. The structure allows the lender to workout the transactions via the B note without burdening its balance sheet with the full amount of the whole loan. Alternatively the A-Note can be sold of to create liquidity while the lender pursues a workout via the retained junior position.
Non-rated A/B pooled transactions Similar to traunching a single loan this structure allows the Lender to sell of some portion of the risk associated with a pool of loans. Alternatively, by selling the A-piece via a private placement the Lender can create liquidity and leverage its returns on the retained subordinate portion.
A lender motivated by the need to diversify risk, create liquidity or enhance current returns with leverage may do so by splicing a loan and selling various traunches. However, borrowing against a loan receivable may be a smarter alternative. Most loans, even performing ones, usually (unless there is an interest rate arbitrage) sell at a discount to par value. Therefore, it may be more advantages to pledge the current loan as collateral to borrow from a third party rather then realizing a loss by selling. The Lender also gets the benefits of maintaining servicing rights/income along and the borrower relationship.
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