FVC is pleased to announce the full launch of its Debtval valuation service today. The Debtval service will initially focus on the valuation of private debt loans, bonds and other contracts for clients needing regular independent valuations on this important asset class for regulatory or auditing reasons.
Growth of private debt market
The Private debt market has seen a big increase in size in the last five years as investors look for interesting yield opportunities as an alternative to government debt and corporate bonds. The whole private capital arena offers a fundamentally different proposition to securitised and public markets which many are finding attractive.
Governance and valuations
However good governance including a strong valuation process is very important which is why we have launched our Debtval service after strong demand and interest from our clients. We expect to grow our service into other illiquid market areas as the sector continues to gain traction.
Private debt is a type of illiquid instrument and defined as "Level 3" under accounting definitions, meaning that they have significant subjective inputs due to lack of available data. We have developed a robust methodology for valuing private debt drawing on our "Level 2" valuation expertise to provide an innovative service proposition.
Our innovative approach and methodology
Our methodology has three main components: an assessment of credit-worthiness, evaluation of the loan's liquidity and taking into account any covenant conditions. We have created models which combine these elements to extend existing approaches. We also use anchoring and calibration techniques in our valuation processes. Each valuation gives our assessment of the value of the loan and we provide data input values and calculation breakdowns to give further insight for our clients.
In addition to our valuation services we are able to provide consultancy and due diligence for investors or funds looking for an independent viewpoint prior to investment into any private debt instrument. Many of our client contacts are new to private debt and appreciate the insight and process we bring.