Please use the links on the right to select items.
These assignments do not represent a complete list of the
experience, but rather provide a sample of SA LLC's previous
engagements. Current projects are not listed.
Trust Company of the West / Milbank Tweed:
Sperlinga Advisory was asked by TCW [a large, Los Angeles-based money
manager], to perform due diligence and a valuation on a portfolio of
timeshare loans. The project involved the following steps:
i. Analysis of background data of the loans, so that we could derive
appropriate assumptions to use in our projections going forward;
ii. Choice of a sample of the loan portfolio upon which to perform
physical due diligence;
iii. On site due diligence, where we collected additional information
regarding the loans. The Firm sub-contracted with a firm for 3
Spanish-speaking underwriters who traveled to Mexico City in order to
perform the physical due diligence. Virtually all of the physical due
diligence material was in Spanish.
iv. Preliminary analysis of the loans comparing the loan portfolio
offered to TCW by Raintree with the portfolios Raintree offered other
lenders. We determined if TCW had been adversely selected with respect
to the loans Raintree proposed to provide.
v. Valuation of the loan portfolio Raintree had offered to post as
collateral. Sperlinga Advisory performed sensitivity analysis using
a computer cash flow model to show how the collateral would perform
over different interest rate, exchange rate and credit environments.
Dynex Bondholder's Committee / Arnold & Porter:
Sperlinga Advisory was retained by Arnold & Porter, attorneys
the Dynex Bondholder’s Committee. The Committee was proposing
offer to the management of Dynex, a REIT based in Glen Allen,
Virginia. The exchange offer would take the
debt and exchange it for debt with different characteristics.
Generally, the Committee was made up of large, institutional bond
Arnold & Porter in Washington retained Sperlinga Advisory to
perform due diligence on Dynex, analyze their portfolio and give its
opinion as to whether the Dynex portfolio could payoff the bonds after
the exchange offer. The major assets of Dynex were manufactured housing
residuals, where Sperlinga performed a comparison of the Dynex
collateral across different issuers, to derive reasonable default and
loss severity assumptions. Dynex also had a wide range of
residual assets from transactions backed by sub-prime auto loans,
non-performing mortgages, and poorly performing commercial mortgages
securitizations. In all, the Dynex
portfolio was one of the most complex and illiquid collections of
securities we had ever studied.
The Committee put Sperlinga under time pressure to complete its
assignment to allow the exchange offer to go through. Our conclusions
were that while there was sufficient value in Dynex to pay the new
bonds, that value would not be realized to assure timely payment of
interest and principal, under the assumptions we were given.
ACE Ltd. / The Clayton Group:
Sperlinga Advisory assisted The Clayton Group and ACE Ltd. [a
Bermuda-based insurer] in risk analysis during ACE’s
acquisition of CapRE [a US-based re-insurer]. CapRE had
re-insured the risk of monoline bond insurance companies [e.g. MBIA,
FSA] assumed in their insuring mortgage and asset-backed
securitizations. ACE was interested in our understanding and
valuing those risks.
Bond insurers assume portions of the default risk of securitizations of
many types of loans [including student loans]. Often, the
bond insurers find it prudent to re-insure that risk with re-insurers
like CapRE. CapRE was active in the mortgage and asset-backed
bond re-insurance market, so that the key to understanding that company
was understanding the value of those risks.
The main issue we analyzed was whether CapRE had sufficiently reserved
against these mortgage and asset-backed exposures. We worked
with a team of actuarials who were expert in the area of insurance
regulation and the appropriate levels of reserves for given risks.
Because this was in connection with a merger, our team was under a
significant time pressure. Our objective was to deliver
recommendations and answer questions directly from the ACE Board of
Directors. We focused upon CapRE list of closely monitored
credits. This list would be similar to a rating agency watch
list of issues they re-insured, but where the performance of the
collateral or other events [e.g. bankruptcy of the issuer / servicer],
might trigger a claim to be paid. With those credits, we
evaluated whether the amount reserved by CapRE was sufficient to pay
claims against expected losses.
(to continue, click
ACE Ltd. / The Clayton Group: (Continued)
Because of the time pressure, we were unable to model each of these
credits individually. Using data CapRE had collected as to
insurance exposure, transaction structure, current delinquencies,
historical defaults and associated losses, we estimated whether CapRE
would face a claim and what the magnitude of that claim would
be. There was one case where a series of issues were placed
on the list of closely monitored credits, but where we did not agree
the situation justified them being there (in other words, the credits
were better than CapRE had thought).
We also reviewed credits which were not on the list of closely
monitored credits. In some cases, the situation at an issuer
warranted a particular set of issues to be on the list of closely
monitored credits. In those cases, we recommended to ACE that
those credits be added to the list of closely monitored
credits. In one example, a troubled issuer / servicer was in
the process of being acquired by a larger, well capitalized financial
institution. We recommended the issues serviced by the
troubled issuer / servicer go on to the list of closely monitored
credits until the merger transaction closed. After we made
this recommendation, the merger transaction failed, increasing
CapRE’s exposure. We presented our findings to the Board of
Directors meeting in Toronto, Canada. Our recommendations
were accepted and the ACE / CapRE merger eventually proceeded.
Chanin Capital Partners / Comdisco:
Sperlinga Advisory analyzed a portfolio of leases on behalf of the
Comdisco Equity Committee and their advisor, Chanin Capital Partners.
Comdisco is an equipment leasing company which entered bankruptcy in
2001. Chanin Capital Partners was retained to protect the
interest of the stockholders of the Company. Specifically,
Sperlinga Advisory’s role was to analyze and value the
equipment lease assets, to assure the disposition or retention
alternatives being considered by the Company’s management were fair
to the equity holders.
SA LLC analyzed three main equipment leasing portfolios, covering
everything from personal computers to silicon chip fabrication
equipment. This assignment had some characteristics which were
typical of many of our valuation assignments:
i) Both performing and non-performing assets were present in the
ii) Evaluation of the portfolios as a function of alternative uses
[in this case, sale or re-starting of the business]; and
iii) A sub-set of the assets had unusual characteristics, posing
another risk [in this case, currency risk in the leases not originated
in North America].
The results of our valuation were used by Chanin Capital Partners to
make recommendations in the bankruptcy proceeding as to how these lease
portfolios should be treated.
Myerberg & Co. / US Small Business Administration:
Sperlinga Advisory analyzed, and assisted in both the valuation and
sale of a pair of US Small Business Administration’s loan portfolios.
SA LLC worked for Myerberg & Co., a woman-owned broker-dealer,
who acted as the transaction financial advisor for a pair of these
SBA asset sales (Sale #4 and Sale #8).
Together, these portfolios contained tens of thousands of loans,
representing close to $2.0 B of face amount. Sperlinga Advisory’s role
began with analysis of the tape information provided by the due diligence
contractor throughout the sale process. Updated analysis SA LLC provided
was re-distributed to the bidders on the loan portfolio as
updates were received. In this way, the team kept the bidders
apprised of changes in the portfolio.
The portfolios provided challenges in terms of diversity.
Included in the SBA sales are unsecured loans, commercial and
residential loans. The amount and quality of the data from loan group
to loan group varied widely.
There was also a requirement for the loan portfolio to be valued at
certain points prior to the sale. Sperlinga Advisory’s role was
to handle the valuation of the non-performing assets. We
created a model which would value residential, commercial and unsecured
non-performing assets. These valuations were presented to the
SBA and to the Office of Budget and Management.
Sandler O'Neill / Avondale Federal:
Sperlinga Advisory was retained by Sandler O’Neill Mortgage
L.P. to assist in valuing certain residual interests in connection with
a bank merger. Avondale Federal [IL] had a significant
on their balance sheet in the form of a portfolio of four residuals off
of HELOC securitizations. Valuation of these assets was
in completing the merger.
Working in connection with Sandler O’Neill professionals,
Sperlinga Advisory valued the residuals and provided analysis to be
used in connection with the merger. We also maintained
surveillance of the residual portfolio between the initial merger
agreement and the closing of the transaction. The merger
would be adjusted, depending upon the performance of the residual
portfolio, as measured across several parameters. Sperlinga
Advisory evaluated the parameters and revalued the transaction at
points between agreement and closing.
At closing, we produced final valuation analysis, which
governed the price paid for that portfolio of the Bank.
CS First Boston:
Sperlinga Advisory was retained by the High Yield Group of CS First
Boston. CSFB was attempting to value
certain mezzanine bonds of
United Companies Financial Corporation (“UCFC”), a
Rouge, Louisiana mortgage banker. UCFC was in Bankruptcy at
time, and had four assets which backed the debt holders bonds: i) loans
that the company had difficulty selling; ii) servicing rights and
advances; iii) a residual portfolio; and iv) other balance sheet
items. CS First Boston wanted to understand quickly the value
UCFC’s assets, to develop a trading strategy for their
bonds. As such, the assignment was completed under
We analyzed the residuals and servicing rights first, as those were the
largest assets of the Company. We performed sensitivity
around our base case assumptions, allowing us to provide ranges between
which we thought the company was worth. We located an
who had been the interim CFO of the Company to assist CS First Boston
in understanding the other balance sheet items.
In all, we were able to provide a picture of enterprise value to our
client and perspective a to what their bonds were worth. As a
coda to the assignment, CSFB retained another advisor after
our assignment was
complete, to verify our work. The other adviser reached conclusions
very similar to ours.
Couzens Lansky / MCA Creditors:
MCA was a Michigan-based mortgage banker which had gone bankrupt in the
late 1990's. Couzens Lansky (a Michigan-based law firm) represented a
pension fund (hereafter, the “Plan”) who was a MCA
creditor. The Plan’s credit accommodations were
collateralized with mortgage residuals.
Sperlinga Advisory performed residual portfolio valuation, in
connection with the bankruptcy proceeding. The valuation included a
detailed report containing SA’s results, methods,
assumptions, etc. The valuation was not challenged by the other MCA
creditors, even though our valuation was a small fraction of the
previously accepted value.
Nikko Securities International:
Sperlinga Advisory acted as a residual sale advisor for Nikko
Securities International (“NSI”). NSI was a Japanese-owned
broker-dealer based in New York. They had taken back a portfolio
of residuals from one of their customers, who had borrowed from
NSI, using the residuals as collateral. As the borrower was
unable to repay NSI, they retained Sperlinga Advisory to market
and sell the residuals.
We accumulated primary source descriptive material on each of the 3
residuals involved in the sale [e.g. offering documents, pooling
& servicing agreements, etc.], so that prospective bidders could perform
independent analysis on the securities. Summary descriptive
material on the residuals offered was prepared and, along with the
primary source material noted in the previous sentence, was distributed
to likely interested parties.
These residuals were backed by poorly performing, sub-prime loans,
where there had been previous evidence of fraud. As such, the
residuals were among the most illiquid instruments we had ever
seen. Furthermore, the residuals were generating tax liabilities
for NSI at a time when the parent company in Japan wished to radically
scale down their presence in the United States.
After the sale packages were distributed, Sperlinga Advisory answered
bidder's questions and verified certain of their analysis through our
own models of the residuals. We were able to obtain a bid acceptable
to NSI, reliving them of the residuals and the ongoing tax liability.
Cendant Mortgage / WM Daugherty:
Sperlinga Advisory was retained to structure a series of bonds backed
by so called “scratch and dent” loans. These loans
were not necessarily made to poor credit borrowers, but had some
characteristic which made them unacceptable to GNMA, FNMA or FHLMC.
Document deficiencies were often the reason for their unacceptability.
These loans were aggregated by Cendant Mortgage, a large New Jersey
based mortgage banker. W.M. Daugherty who was assigned to
create the securitization, retained Sperlinga Advisory for the actual
structuring of the bonds. We were provided with collateral
tapes of what Cendant wanted to securitize. We performed analysis
to be used in the rating agency process. As one might imagine, the
Cendant portfolio included loans with a wide array of mortgage
characteristics [e.g. fixed and floating, Federal and state insured,
balloon and relocation, etc.].
Sperlinga Advisory produced yield tables for the marketing of the bonds,
as well as the decrement tables used in the legal offering documents. We
also provided Cendant analysis of the residual, first-loss and
mezzanine securities they retained.
Sperlinga Advisory serves as the advisor for Sperlinga Capital Inc., an
investment vehicle which purchased residential mortgage residual
interests [and associated liabilities] from RYMAC Mortgage, a Real
Estate Investment Trust.
RYMAC was exiting the mortgage business and needed small items removed
from the balance sheet. Using partner capital from Sperlinga
Advisory, Sperlinga Capital purchased the residuals subject to the
liabilities in 1996. Periodic payments needed to be made to
NVR, Inc., a Virginia-based home developer, on three residuals where the
liabilities were owed. Sperlinga Capital made all of the
payments in full and on time.
Sperlinga Advisory also executed the underlying call rights associated
with three of the residuals. Working with the Trustee and a
broker-dealer, Sperlinga Capital arranged for the sale of the underling
FNMA pass-throughs at a premium and paid off the bond holders in full.
The Sperlinga Capital Inc. / RYMAC transaction is an example of how
Sperlinga Advisory applied capital to achieve a client’s
goals, and at the same time, generated good value for our Firm.
Sperlinga Advisory assisted a US Government Sponsored Enterprise ("GSE") bank
by providing an independent valuation of certain mortgage securities which
had been considered "Level 3" assets under the Financial Accounting Standards
Board's Statement No. 157. The valuations occurred over a 3.5 year period.
These securities were backed in certain cases with second lien residential
loans and were insured in certain cases by distressed bond insurers.
AEGON USA Investment Management: (Continued)
iv) We obtained a sample portfolio of
sub-prime ARM loans available for purchase. We evaluated this
purchase portfolio using the final estimates for defaults, losses and
voluntary prepayments. We incorporated hedges to take into
account the fact that Aegon’s liabilities to fund the loans
were entirely LIBOR-based and the sub-prime ARM loans were fixed for
the first two years of their life.
v) We determined the risk-adjusted return
for various prices at which we could purchase the sample
portfolio. These returns (adjusted for the hedging costs)
were compared to Aegon’s hurdle rates of return to determine
whether the sub-prime ARM loans represented a suitable transaction.
Given that the offered price of the portfolio did not meet
Aegon’s hurdle returns, we determined where price would need
to move in order for the transaction to be suitable for Aegon.
US Department of Labor - Office of the Solicitor:
Throughout the mid-1990’s [with our most recent assignment
ending in 1999], Sperlinga Advisory has been involved with the
US Department of Labor – Office of the Solicitor with what was
called the Derivatives Project.
In the cases upon which SA LLC worked, the US DOL was involved in the
prosecution of cases under ERISA (generally, involving pension
plans) and the Taft-Hartley Act (generally, union funds).
Sperlinga Advisory served the DOL through several investigations,
in which mortgage-backed securities were involved. The firm
acted in the capacity of an investigative expert. Such an expert
works with both investigators and DOL attorneys to assist them
prior to charges being filed, and included:
i) Performing forensic financial analysis to determine the
prudence of a particular money managers past actions;
ii) Performing similar forensic analysis to determine suitability
of certain securities;
iii) Sitting in depositions to assist DOL attorneys with witnesses
who may have provided technical answers;
iv) Provided advice to DOL attorneys as to possible defenses of
money manager actions they might face; and
v) Authored reports that summarized findings with respect to
all the above mentioned points.
Because investigations involved participants who had not been
charged with any crime, Sperlinga Advisory operated in an environment
of strict confidence. As such, we cannot provide any details
as to the assignments upon which we worked.