Hi, In Q6, the paper asks how to fairly value a "Defaulted loans made to and secured on infrastructure assets". I am confused what this type of asset entails, could anyone provide some insight please? Thanks!
Hi o.menary11 Defaulted loans are loans that should have been paid back before now but haven't been. The fact that they are secured on the infrastructure assets means that they have value equal to what can be recovered by selling the infrastructure assets (or the amount of the loan if less) as a minimum even if no further (re)payment will be made by the borrower (as suggested by the 'defaulted' wording). Hopefully this helps.
Hi James, Thank you! So, a investor is buying this defaulted loan from another investor in hope that they will either be repaid the loan or receive the secured asset?
Hi o.menary11 No problem at all, and your understanding is correct; although the investor will only be entitled to the maximum of the outstanding loan from the secured asset if it's more valuable than that, but I'm sure you realise this.
