Madrid, 22nd September 2016
Technologies and innovative organizational models: new frontiers in credit collection
Fire S.p.A.
Consulting & Debt Management
NPL SCENARIO OVERVIEW
Bad debts as a share of total outstanding loans to non-financial corporations peaked to 17.9 per cent in December 2015.
Their rapid growth in the last few years has reflected the large increase in the new bad debt rate, defined as the ratio between
the flow of new bad debt and the total outstanding amount of loans net of bad debts.
That rate began to increase in the wake of the global financial crisis and rose sharply during the sovereign debt crisis.
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1: including banks and CDP
2: «Cassa depositi e prestiti» included
Source: Bank of Italy
«Three tricks to sell
distressed debts at a high price…»
Last August12th, “Il Sole24ore”, the
most important Italian daily business
newspaper, published an article
reading:
«Three tricks to sell distressed
debts at a high price».
The article stressed the importance of
3 main points:
•
Segmentation
•
Data quality
•
Creation of a secondary market
For the first two points, a valuable support can be provided by an adequate servicer
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SEGMENTATION & DATA
QUALITY
According to the US fund interviewed in the article, a correct segmentation could lead to an
increase in the price of «sofferenze» by 5 to 10 percentage points
If dishomogeneous packages of debts are sold indistinctively, the investors will tend to assign
zero value to the asset types to which they are not interested or they do not have experience in,
thus lowering the price they are willing to pay for the portfolio
Unlikely from Germany, Spain or UK, Italy does not have effective and efficient data bases to be
accessed, especially as far as collaterals are concerned.
Investing in data quality would allow selling «sofferenze» at a higher price
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BUSINESS INTELLIGENCE AND
TECHNOLOGIES SHAPE COLLECTION
Business intelligence
applied to collection:
scoring models,
segmentation,
clusterization
Technologies applied
to collection: predictive
dialers, event-driven
processes
Business intelligence and technologies shape
organizational models: phone, field and legal
collection combination
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ASSUMPTIONS
Insightful data analysis is a winning factor in NPL transactions
More efficient data analysis can result in value loss mitigation and bid-ask gap reduction
Both seller and buyer need a reliable partner capable of maximizing the use of available data to draw value
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SELLER SIDE
On the seller side, providing updated information and good quality data is a key element for the
success of the sale transactions as it reduces:
The risk perception
The application of prudential haircuts
The return expected by investors
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(Source: «Struttura e contenuti delle informazioni nelle operazioni straordinarie di cessione e cartolarizzazione su portafogli NPL»
(2016) – V. Ruscigno, PWC. Convegno «Italian Distressed Debt Market: il fascino discreto della trasparenza» Milano)
BUYER SIDE
On the buyer side, having well organized, transparent, complete information:
•
Boosts confidence in the investment
•
Allows a thorough analysis and prevents
conservative evaluations
•
Encourages taking into consideration rolling
sale processes
•
Facilitates the choice of the most adequate
servicer in relation to asset class
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BUSINESS INTELLIGENCE
PARTNER
An adequate partner to provide data analysis support in relation to NPL transactions can be
a reputed Credit Collection company, capable of providing:
•
Comparative macro analysis of the
portfolio by means of benchmarking with
similar ones
•
Segmentation, clusterization and scoring
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BUSINESS INTELLIGENCE
PARTNER
PRE-SALE SERVICES
Thanks to its expertise in the analysis of data coming from collection activities and in the
CREATION OF SCORING MODELS by its Business Intelligence Division
Fire is capable of supporting the seller in perimetering the packages of accounts to be sold
By means of the assignment of a RATING and of the SEGMENTATION OF THE PORTFOLIO IN CLUSTERS per different
recoverability rates
About 33.000.000 master data sets managed
in the last 10 years
in full compliance with Privacy regulations
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BUSINESS INTELLIGENCE
PARTNER
WHAT IS THE ADDED VALUE IF COMPARED TO
PURELY STATISTICAL DUE DILIGENCES:
FOR THE
-
Data enrichment before the sale process to avoid accounts to lose value
-
Data coming from the seller is integrated
with collection scoring models
SELLER
because of lack of contact details
-
-
Collection scoring takes into account
Perimeterization of homogeneous accounts to sell them as separate
indicators which are usually not taken into
clusters to avoid value loss due to mixed portfolios with different returns
consideration by advisors or the sellers
itself, integrating the knowledge of
and different level of appetite from investors
-
different markets
Results coming from the due diligence can be fed back into the seller
-
for a value-conscious disposal
system as valuable information
FOR THE
-
Drafting of a pre-sale information report
Outlining of payment curves embedding data coming the seller, with data
-
Data coming from the seller is integrated
with collection scoring models
BUYER
room results and internal data
-
-
Comparative analysis with similar portfolios for realistic benchmarking
-
Knowledge of pre-sale collection processes of the seller, allowing
Knowledge of different levels of expected
recoveries from different asset types
-
Collection-oriented perspective, realistic
forecasts in terms of collection costs
awareness in relation to «how squeezed» the cases are
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SALE PROCESS SUPPORT
Thanks to its role of reputed special servicer and to its network of relations built over the years, Fire is capable of supporting
the seller in various types of sale processes:
• Forward flow purchase transactions with pre-agreed purchase price
• Forward flow purchase transactions with specific due diligence of the accounts
For both solutions, Fire’s intermediation does not entail any conflict of interest as:
•
There is no infra-group relation with the buyers
•
Fire strategically places itself as a special servicer, success fee-remunerated and therefore aiming at the
achievement of the agreed targets, with no dual capacity issue
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SERVICING PARTNER:
TECHNOLOGY AS A STRONGHOLD
The analysis used in the due diligence phase is used as a base to define
collection policies and strategies.
The rating assigned in the due diligence phase is constantly updated
based on the processing events and information gathered during the
collection process.
Also time elapsed from a collection action to another is considered to
be an event.
A further, dynamic, clusterization is carried out according to the assigned
rating in order to shape collection actions and combine the best actions
possible (phone, field, legal collection, combination of the three) and
calibrate effort aiming at performance optimization and cost containing.
The use of automatic dialers whose decisional engine is fed in real time with information
coming from dynamic clusterization,
makes it possible to streamline collection and maximise results
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DATA REFRESH &
INFORMATION REPORT
By means of its company division specialized in business information and investigation activities, Fire is
capable of providing data quality services instrumental and supporting credit collection or portfolio sale.
DATA REFRESH
Personal data refresh, negative events survey (protests, insolvency procedures, other adverse events)
INFORMATION REPORT
• Employment enquiry (job type: pensioner, self-employed, employed, etc) and revenue cluster
• Real estate surveys
• Recoverability score
This dossier will allow an objective evaluation of the accounts in consideration of next actions to be undertaken or sale processes,
which will be standardized, repeatable and transparent.
In the framework of forward flow sale processes, the evaluation criteria can be shared among seller and buyer.
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CHOOSING THE SERVICING PLATFORM
The three areas an Investor should focus on when choosing a Servicer include:
SIZE
ORGANIZATION
QUALITY STANDARDS
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FIRE IN SHORT
Credit
collection
Due
Diligence
FIRE IS A
FULL
SERVICE
PROVIDER
Business
Intelligence
Business
Info &
Investigation
Sale process
support
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keep it in balance
Fire S.p.A.
Via A. Bonsignore 1
98124 Messina
+39 090 77821
[email protected]
www.firespa.it