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Hilco Global's Tim Anderson Answers Questions in Bloomberg Briefs

Oct 7, 2019, 10:39 AM by Mike Ermitage

Bloomberg-briefsTim Anderson, senior vice president at Hilco Valuation Services, says between tariffs and the rise of e-commerce, assessing retail assets is less straightforward than it used to be.

His unit conducts inventory appraisals for lenders so they can estimate how much credit to extend. Anderson spoke with Lauren Coleman-Lochner about the challenges of valuing goods for an industry that is in transition.



What do lenders hire you to do?

We figure out what the bank would recoup if we had to go in and liquidate inventory. We do a big 200-page report, but at the end of the day it boils down basically to one number, and the bank will then use that number and set their borrowing base accordingly.

Are you seeing more caution from lenders?

Any time there’s uncertainty, typically what happens is the bank orders appraisals more frequently. They’ll say in the past maybe we’ve done one appraisal for a certain company a year, and now’s a good time to increase that to two, three or four times a year. They’re by and large being done at least twice a year now.

Are the shakeouts in retail slowing down?

There won’t be a time in the foreseeable future where we’re not busy. I think we’ve got at least a couple of years runway on the busy, busy cycle of that.

We’re almost in September right now. Obviously anything can happen, but the trend generally is that if the distressed retailer is still viable and hanging on at this point, they’re probably hanging their hat on having a good holiday season.

So when we get really, really busy on the valuation side for retail, on the appraisal side for retail, is January 1st. That’s when everybody wants to know, did the retailer have a good holiday, did they have a bad holiday?

How does the valuation process work?

There’s two sides to what we do. There’s the financial analysis process that we go through. We’re going to look at the performance of the inventory. How fast is that inventory turning? What gross margin does it throw off?

Then we’re going to say, Do they have what the customer actually wants? Or is it the stuff that didn’t sell three years ago that they never cleared out? And then there’s very much the art side of what we do, what we understand about the industry, what we understand about the company in general.

A big part of what we do is running around. You can see how well the stores are stocked, is it neat, is it orderly? How are they doing their discounts? Once we start seeing these folks, a lot of time they’re already into the cycle of more discounting than they’ve historically done. Understanding where they are in that cycle is key to putting the right value on the inventory.

Read the entire Bloomberg Briefs

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