Construction & Development

Case: Troubled Assets of a Bank

Circumstances

The Client

The bank ranked among top-50 Russian commercial banks has issued a credit line to the Object.

The Object

A Tatarstan construction company has attracted debt financing for construction of townhouses and related infrastructure.
The Object fails to comply with repayment conditions and delays repayments.

Our Role

We have assessed its ability to complete the project and repay the debt:

  • Construction in progress
  • Net debt
  • Subcontractors

Given the key risks in the area of construction and development, we have paid attention to the following:

  • Capitalization of expenses
  • Actual condition of the construction objects
  • Project documents
  • Identification of spending areas
  • Related-party transactions
  • Settlements with subcontractors

We have performed an in-depth analysis and identified the key risk areas:

  • Excessive capitalization of expenses
  • Termination of works
  • Unauthorized use of the credit (e.g. payment of interest, financing of affiliates)
  • Funnelling funds via affiliates
  • Material overdue accounts payable to other suppliers
  • The client has timely obtained all the information required for handling the troubled asset.

The result: 60% utilization of the credit line.