Bank of London and The Middle East (BLME), an independent British, wholesale Sharia’a compliant bank, selected IronPlanet as its sole used equipment remarketing partner in 2008. The partnership with IronPlanet was a strategic decision that has generated successful results.
Selecting the Best Way to Remarket Machinery
When selecting the best way to remarket its used machinery and equipment, there were a number of factors that BLME had to consider carefully. First and foremost, the bank needed to ensure that it always got back what it put into a machine. “Residual value, the outstanding amount of money that is still invested in the asset, is our primary concern when remarketing used equipment. Of course, we need to guarantee that when a machine is remarketed we cover this, and make a profit too,” said Mark Jarvis, Senior Leasing Manager at BLME.
“Our equipment leasing team operates in both the UK and the US, and we funded over £200 million worth of leasing deals in 2012 alone – it is a key part of our business,” said Jarvis. “At BLME, we fund a lot of hard assets, including heavy machinery such as mining equipment, as well as trucks, trailers and much more. Once we acquire equipment, we lease it to a client, typically for three to five years. When their lease is over, they return the equipment to us, and we then need to go through the process of remarketing it,” he expanded.
Furthermore, BLME needed to ensure that used machinery was remarketed fast. “Our used machinery typically takes six months to remarket,” continued Jarvis. “Therefore we wanted to know that we would be able to start the process in advance, as we don’t want to be storing any equipment – we are a bank after all, not a warehouse.”
The Need for an Online Auction
BLME were keen to pursue alternatives to land-based auctions when selling their used machinery. “Because of the size of some of the equipment, the cost of shipping assets to a land-based auction can cost £10,000 per item – and where we have 10 such machines, the figure can reach upwards of £100,000,” explained Jarvis. “We wanted a solution that would allow us to sell the equipment where it was located, meaning we would start with a zero-cost base. Therefore, an online auction was the obvious route to do this.” IronPlanet was the solution.
Achieving Real Results for BLME
When selling used machinery by auction, there are generally two options – a reserved or an unreserved auction. “Due to the amount we invest in our machines, we decided early on that we wanted to use reserved auctions so we could ensure we always recoup this initial investment,” stated Jarvis. “IronPlanet allows us to put a reserve price on our machines – a minimum price that we are willing to accept for an item. We are only obligated to sell the item once the bid amount meets or exceeds the reserve price.”
BLME’s partnership with IronPlanet has yielded tangible results for the bank. “Working with IronPlanet, I believe that we achieve a 20 to 30 percent uplift,” stated Jarvis. “I was able to do a direct comparison with similar equipment going through a land based auction – and the equipment fetched far less than ours did with IronPlanet. In addition, selling at this land based auction also meant huge additional costs for shipping. In terms of their service offering, expertise in asset management and price, IronPlanet they are truly well ahead of the competition.”
Partnering with IronPlanet was a natural choice for the bank, as Jarvis highlighted: “IronPlanet is a highly reputable company whose ethos of transparency and honesty reflects BLME’s own culture. Their knowledgeable and friendly team always understand our needs, and respond to these by providing us with a bespoke service. It was an incredibly easy choice to partner with them.”
Jarvis concludes that BLME’s experience with IronPlanet has been second to none. “We have had an excellent experience,” he said. “They did just what they said they would do, and were able to get us a price just ahead of where the market is. I have already been happy to put my name to recommending IronPlanet to other financial institutions and companies, and look forward to continuing to work with them going forward.”
About BLME
Bank of London and The Middle East (BLME) is an independent British, wholesale Sharia’a compliant bank based in London. Since receiving Financial Services Authority (FSA) authorisation in 2007, BLME has evolved to become the largest Islamic bank in Europe. Led by a management team who bring together experienced bankers and leading experts in Islamic finance, BLME ensures that their services are wholly Sharia’a compliant.
