Purchasers - inconsistent questions, consistent answers

The search to meet new requirements in debt sale

My previous article outlined the thoughts of creditors with respect to the latest challenges within the US debt sale market, namely regulatory requirements relating to the depth of audit activity. TDX Group’s intermediary position within the market also affords us detailed insight into the views of debt buyers around the growing requirements being placed upon them by sellers who are looking to satisfy regulators.

The primary theme from our conversations with US debt buyers over the past month is that inconsistency in the sellers’ response to current challenges is being translated into an inconsistent set of requirements being put upon upon buyers. This may well be driven by the current uncertainty around how current guidelines will form detailed regulations, but there is a concern that a continued divergence in requirements may place significant overhead on buyers looking to meet the needs of all of creditors. Any example of requirements converging - right down to the detailed level of what and how information is supplied - is welcomed by the market.

There is a consistent theme that on-going market stability remains the core focus for buyers and that they are willing to provide the information required to ensure that the market remains buoyant. There is, however, some concern around the level of visibility required by sellers and exactly how this data and information will be utilised, one buyer stating, “We will, of course, provide any data required to support audit activity but would be reluctant to share anything that gives away our IP or compromises our position”.

Our view is that greater transparency and visibility will provide wider benefits to buyers; this will not only ensure the continuation of current activity but will also re-open other opportunities such as the secondary sale market. With improved account monitoring and tracking there is no reason that this market cannot return, albeit within tighter guidelines linked directly to the levels of visibility of account treatment. We are also anticipating that new regulations will result in an extension of audit requirements from the current focus on policy and process towards account level monitoring; once again increased transparency will provide wider benefits of reducing the resource required to manage these new requests.

As with the creditor market, a number of buyers are starting to take a proactive approach and look for tools that can help them better engage with sellers post-sale. This approach enables the immediate demonstration of their ability to support creditors in meeting post-sale monitoring requirements whilst positioning the buyer as market leaders in interpreting and responding to regulation.

By Chris Smith, TDX North America