If a fund buys a portfolio of defaulted loans, say face value of £500m, at a 80% discount, so cash pay for the portfolio is £100m. This is an asset.
The fund expects total recoveries of £30m per year for 5 years (total expected recovery is thus £150m). This includes interest and principal already due.
How is the portfolio of receivables reflected on the balance sheet and how is it amortised?
At the end of year 1, what is the book value and where are the amortisations reflected?
Would appreciate the calculation here as just need to get my head around it.
Thanks,
The fund expects total recoveries of £30m per year for 5 years (total expected recovery is thus £150m). This includes interest and principal already due.
How is the portfolio of receivables reflected on the balance sheet and how is it amortised?
At the end of year 1, what is the book value and where are the amortisations reflected?
Would appreciate the calculation here as just need to get my head around it.
Thanks,