Container fleet valuation for asset-based lender

Background

• Container lessors often need to determine the value of their portfolio which evolves in a volatile market, particularly for dry containers.

• Drewry was asked to provide a market commentary on a portfolio of containers (1,600 dry 40’ containers and 950 dry 20’ containers) that had been purchased for container leasing operations.

Client Objectives

• SRAC requested Drewry to prepare a container fleet portfolio valuation using the DCF method and to provide commentary on the container shipping and container equipment markets. They client also wanted to understand the risk of default of each of their customer. 

• Drewry reviewed lessee payment performance and considered associated risks.

• SRAC provided details of the portfolio including date of manufacture, lessor, date of pick up, lease tenor and PDR

Drewry Approach

• Drewry leveraged its knowledge of the volumes of newbuild containers, second hand sold containers, and scrapping. Our extensive databases include information such newbuild prices, second-hand prices, interest rate returns, and per diem lease rates. We also are able to forecast these metrics.

• When looking at a lease contract renewal, we determine what should be the new lease rate, the repairs, storage and relocating costs. We proceed as such for each major step during a container life cycle: contracts renewals, second-hand market sale.

Results Achieved

• Our forecast of lease revenues and opex and valuation allowed the client to determine loan to value ratio and assess the cash flow of the portfolio and consider risks of lending with the portfolio as collateral.