Background
We have been assigned to valuate a pipe laying barge which has become an NPA. The said barge was about 15 years old and lying unused for a long time.
This barge is used to lay pipes in under the sea. Most of the machinery on the barge were deteriorated and hull repairing was also to be carried out.
Challenges for Valuation
- Renewal of all statutory licenses and certifications to operate.
- Slump in general economy, in particular oil & gas exploration sector.
Problem leading to impairment in value
- Any bidder who purchases this barge has to deal with expired statutory approvals.
- Deteriorated equipment
- Cost of refurbishment.
Approach
Considering that this barge would not find ready buyers in the open market, a valuation approach had to be adopted to arrive at valuation which could be practically used to fetch maximum value for the lenders.
Also Read, Valuation of Steel Plant
Solution Offered
- Valuation under the consideration that this barge can be sold “as is where is” basis.
Alternatively, - Valuation of the barge on “piece meal” basis i.e equipment installed in the barge and hull are disposed separately.
This approach facilitated the lenders to take a decision to dispose this barge in the best possible manner to recover debts.