ISTAT Jetrader - Autumn 2020 - 47

reduce the bargaining leverage of the
seller and give prospective buyers
a significant advantage that can
translate into heavily discounted actual
trading prices.
Depending on the nature of the
assignment, Appraisers may be asked
to qualify their opinions in terms of
disposition within a specified time
period, for example 60 days, 90 days
or six months as the need may be.
Apart from the fact that the seller is
uncommonly motivated, the parties
to the transaction are otherwise
assumed to be willing, able, prudent
and knowledgeable, and negotiating
at arm's length, normally under the
market conditions that are perceived
to exist at the time, not an idealized
balanced market.
The DV is called upon when certain
conditions of CMV cannot be met:
*	 Unusually "motivated"
seller - this is quite typically
found when the asset is
unintentionally acquired by an
"unwilling" owner. A case of
default when a bank or another
non-aviation lender takes
possession of an aircraft is a
common scenario.
*	 Limited remarketing period -
while CMV typically assumes
12 months as a remarketing
period, some sales are required
to take place within a shorter
period, which naturally limits
full exposure to the market.
*	 Restricted presale access to the
asset - sale by auction is often
conducted without allowing
prospective sellers a full audit
of the records and inspection of
the asset. This can significantly
limit the number of interested
parties as "back-to-birth"
traceability is paramount in
part-out consideration. The
limited remarketing period
typically associated with
auctions may also play a role.
If any of the above conditions are
present, DV must apply. After deciding,

on the correct applicable value type, the
Appraiser has to set about establishing
the value. The starting point can be
CMV or Salvage Value, depending on
the "highest and best use" of the asset.
Having decided on the starting point,

compounded by an asset competing
with similar ones offered through
conventional sale.
There is no set and fast rule
on establishing such discounts.
Determining the discount given the

If the limiting conditions of the Distress Value
are not present and the transaction conforms to the
Current Market Value definition, then the value is the
CMV, no matter how low it could be.
the Appraiser then must identify how to
adjust for the specific circumstances of
the sale.
Any of the conditions listed
above will lead to the seller being
disadvantaged in the negotiations,
resulting in a discount to the value
that would have been achieved under a
CMV or Salvage Value scenarios. This
discount may be deeper as many, if
not all, negative aspects of the asset
such as pending maintenance or
uncommon configuration would have an
exaggerated value impact, and positive
aspects are likely to be diminished. The
discount can increase further if more
than one of the listed conditions are
present. For example, for a part-out
specialist who is happy dealing with the
non-aviation seller, a lack of access to
the records would become an additional
risk, which would most likely be priced
into the offer.
The circumstances of a sale will
influence the size of the discount
with a 30-day remarketing period
being more restrictive than a 180-day
one. However, the biggest factor in
considering the discount is the market
conditions for the subject asset type.
Popular assets typically see a smaller
discount than less in-demand assets
and even more so in a weak market.
A weak market discount can be

precise circumstances of the sale and
establishing the DV is dependent upon
the experience of the Appraiser. Like
in many other cases, comparison with
past events is key. For example, if an
Appraiser is aware of the sale price
achieved in an auction of a similar
aircraft in the past, they can compare
the market conditions, length of
remarketing period, perception of the
aircraft's condition, and other factors
to arrive at the applicable discount and
the DV.
In conclusion, Oriel would like
to caution against using the DV to
describe any sale conducted in a
"distressed" market. If the limiting
conditions of the DV are not present
and the transaction conforms to the
CMV definition, then the value is the
CMV, no matter how low it could be.
Indeed, more distressed sales may
occur in "distressed" markets due to
increased failures and defaults, but
this does not automatically make any
particular sale "distressed" per the
ISTAT definition. A seller who sees no
upside to their asset even if the market
were to improve is not "unusually"
motivated. An acceptance of a lower
price in a "distressed" market is an
acceptance of a new normal arrived to
by sellers and buyers.
Jetrader

* AUTUMN 2020 * 4 7



ISTAT Jetrader - Autumn 2020

Table of Contents for the Digital Edition of ISTAT Jetrader - Autumn 2020

ISTAT Jetrader - Autumn 2020 - Intro
ISTAT Jetrader - Autumn 2020 - Cover1
ISTAT Jetrader - Autumn 2020 - Cover2
ISTAT Jetrader - Autumn 2020 - 1
ISTAT Jetrader - Autumn 2020 - 2
ISTAT Jetrader - Autumn 2020 - 3
ISTAT Jetrader - Autumn 2020 - 4
ISTAT Jetrader - Autumn 2020 - 5
ISTAT Jetrader - Autumn 2020 - 6
ISTAT Jetrader - Autumn 2020 - 7
ISTAT Jetrader - Autumn 2020 - 8
ISTAT Jetrader - Autumn 2020 - 9
ISTAT Jetrader - Autumn 2020 - 10
ISTAT Jetrader - Autumn 2020 - 11
ISTAT Jetrader - Autumn 2020 - 12
ISTAT Jetrader - Autumn 2020 - 13
ISTAT Jetrader - Autumn 2020 - 14
ISTAT Jetrader - Autumn 2020 - 15
ISTAT Jetrader - Autumn 2020 - 16
ISTAT Jetrader - Autumn 2020 - 17
ISTAT Jetrader - Autumn 2020 - 18
ISTAT Jetrader - Autumn 2020 - 19
ISTAT Jetrader - Autumn 2020 - 20
ISTAT Jetrader - Autumn 2020 - 21
ISTAT Jetrader - Autumn 2020 - 22
ISTAT Jetrader - Autumn 2020 - 23
ISTAT Jetrader - Autumn 2020 - 24
ISTAT Jetrader - Autumn 2020 - 25
ISTAT Jetrader - Autumn 2020 - 26
ISTAT Jetrader - Autumn 2020 - 27
ISTAT Jetrader - Autumn 2020 - 28
ISTAT Jetrader - Autumn 2020 - 29
ISTAT Jetrader - Autumn 2020 - 30
ISTAT Jetrader - Autumn 2020 - 31
ISTAT Jetrader - Autumn 2020 - 32
ISTAT Jetrader - Autumn 2020 - 33
ISTAT Jetrader - Autumn 2020 - 34
ISTAT Jetrader - Autumn 2020 - 35
ISTAT Jetrader - Autumn 2020 - 36
ISTAT Jetrader - Autumn 2020 - 37
ISTAT Jetrader - Autumn 2020 - 38
ISTAT Jetrader - Autumn 2020 - 39
ISTAT Jetrader - Autumn 2020 - 40
ISTAT Jetrader - Autumn 2020 - 41
ISTAT Jetrader - Autumn 2020 - 42
ISTAT Jetrader - Autumn 2020 - 43
ISTAT Jetrader - Autumn 2020 - 44
ISTAT Jetrader - Autumn 2020 - 45
ISTAT Jetrader - Autumn 2020 - 46
ISTAT Jetrader - Autumn 2020 - 47
ISTAT Jetrader - Autumn 2020 - 48
ISTAT Jetrader - Autumn 2020 - 49
ISTAT Jetrader - Autumn 2020 - 50
ISTAT Jetrader - Autumn 2020 - 51
ISTAT Jetrader - Autumn 2020 - 52
ISTAT Jetrader - Autumn 2020 - Cover3
ISTAT Jetrader - Autumn 2020 - Cover4
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