TSL Feature Articles

Some turnaround and M&A leaders are predicting the second quarter of 2022 could be when the “default boom” hits. Asset-based lenders, factors, and other secured lenders will need to be at the ready to handle turnaround deals.

Nneoma Maduike of Otterbourg P.C. discusses the impact a diverse team can have on a company’s performance.

The European Union’s recent passage of its Sustainability Financial Disclosure Regulation marks yet another milestone in the progression of environmental, social and governance matters. This article will review this regulation and related ESG disclosure requirements, together with other notable ESG developments, and discuss their impact on middle-market lenders.

As we emerge from the social distancing constraints of the pandemic into the evolving definitions of a “workplace,” the term “hybrid workplace” has become a ubiquitous part of our “return to work” conversations. As I have been researching the different dynamics of “hybrid workplaces” and speaking with leaders of various types of organizations on what the term means to them, I have discovered a few insights that can help leaders navigate their new realities and guide their workforces in smoothly transitioning to new ways of thinking, connecting and working.

Brooke Iley counsels and defends domestic and foreign corporations in all areas of employment and labor law compliance and litigation, including wrongful termination, discrimination, harassment, wage and hour class and collective actions, trade secret disputes and data protection, and alleged fiduciary breaches. She represents clients in negotiations, litigations, and arbitrations nationally in these areas.

The last 18 months have brought challenges unlike no other. Stewart Hayes, chair of the SFNet 2021 40 Under 40 Awards and managing director, Wells Fargo Capital Finance, sat down with four former SFNet 40 Under 40 Award winners who led their company or group practice during 2020-2021 to dive into how they addressed challenges, what helped prepare them to weather the COVID crisis, and advice on handling the next curveball.

Bobbi Acord Noland is a partner at Parker Hudson Rainer & Dobbs LLP in Atlanta, Georgia. As head of the Commercial Finance practice, Bobbi guides global banks, regional banks and finance companies through domestic and cross-border transactions ranging from $5 million to more than $1 billion. She has handled practically every aspect of commercial lending, from single-lender deals to syndicated facilities involving multiple lenders, borrowers, creditors and multi-tiered debt tranches. In addition, Bobbi frequently advises her clients on workouts and restructurings.

In February, Otterbourg P.C. announced that Valerie S. Mason and Nneoma A. Maduike had been named co-chairs of the firm’s Lender Finance Practice Group. Otterbourg’s experienced Lender Finance team advises and represents the largest U.S. and global institutional lenders and regional banks, as lenders and mature lenders, sponsors supported companies, and strategics, ranging from startups to mature traditional lenders and funds, merchant cash advance companies, asset-based lenders, factors and fintech lenders, as borrowers, in “lender to lender” secured revolving credit and term loan facilities.

Mac Fowle is the global head of Asset-Based Lending (ABL) for J.P. Morgan Commercial Banking. He is responsible for the end-to-end strategic leadership of the ABL group in supporting the financing needs for clients across Commercial Banking and the Corporate & Investment Bank (CIB).

Armstrong Teasdale partners provide lenders with up-to-date information on the complexities of lending to the legalized marijuana industry.

Perhaps the most frequently asked question by growth-oriented lenders is “How and when can we lend into the rapidly growing and already major industry of legalized marijuana?”

The answer is: “It is not so simple.”

The Federal Paycheck Protection Program loan funds did buy many struggling businesses time to weather the proverbial economic storm. Plus, secured lenders, not surprisingly, found it much more advantageous to work with borrowers and extend liquidity than deal with a bankrupt business. The idea was simply that the pandemic couldn’t last forever and that the economy, as it is now, does appear to be on the mend.

Asset-based lenders were aware of the problems going into the pandemic. Not surprisingly, brick and mortar retailers, already facing significant financial stress before the shutdown, did take the brunt of the pandemic and many were forced to shutter stores, says Dan Karas, executive vice president of Allied Affiliated Funding, a division of Axiom Bank, N.A. Many large retailer liquidations dominated 2020, including J.C. Penney and Pier 1. The silver lining for lenders, as it turns out, is that liquidations were generally not the order of the day for most businesses, he adds. According to data from Epiq, commercial Chapter 11 filings grew year-over-year, up 29% in 2020 compared to 2019.

The Q3 2020 Asset-Based Lending Index reflects improving confidence for lenders, fears of a double-dip downturn subsiding, and exhibits the continuing impact of PPP funds distributed in April. The U.S. economy rebounded during Q3 as lockdowns subsided, leading to a GDP surge of 33%.

This growth had a clear impact on portfolio health with non-accruals, special mention, and write-offs reducing quarter over quarter.

Greg Eck and Bill Stapel are the new leaders of the ABL Group at Fifth Third Bank, N.A., one of the nation’s largest asset-based lenders, with $8.1 MM in commitments and serving customers in 38 states, Canada and Europe. They step into their roles following the retirement of Fifth Third Business Capital President Mike Sharkey, who was also past president and chairman of Secured Finance Network.

Andy McGhee is vice chairman of White Oak Commercial Finance (White Oak), an affiliate of White Oak Global Advisors, LLC, and leads the firm’s lender finance business. He has over 30 years of experience in the lending business, most recently managing a multi-billion-dollar loan portfolio as the CEO of AloStar Capital Finance. In 2011, McGhee co-founded AloStar Capital Finance by acquiring a failed bank in Birmingham, AL.

At the time of its sale in 2017, AloStar had committed more than $3 billion to middle-market companies. McGhee has also served in various leadership roles covering asset-based lending (ABL) at SunTrust, Citicorp, Bank South and Bank of America. McGhee sits on the board of directors for Piedmont Hospital in Atlanta and is an Elder at Peachtree Presbyterian Church. He holds a B.A. in economics from the University of Georgia.

The rate of default and workouts for loans with IP assets as collateral has reached a crescendo. We examine the near-term implications for workouts and liquidations where IP assets are expected to provide a meaningful source of lender recovery, and the longer- term implications for commercial lending to retail and consumer brand companies.

Jeffrey Goldrich, SFNet’s 2021 president, has been in the asset-based lending and factoring business for over 40 years. He founded North Mill Capital, as its president and CEO, with its management group in 2010. In 1995 he co-founded, as a shareholder and COO, Business Alliance Capital Corp (BACC), a national commercial finance company based in Princeton, New Jersey. Goldrich and his partner sold BACC to Sovereign Bank (now Santander) in 2005.

Prior to that, he was a senior vice president and manager of the asset-based lending department of First Fidelity Bank in Newark, New Jersey.

John DePledge, head of Asset Based Lending at Bank Leumi USA, discusses his tenure as SFNet president and COVID’s impact on plans.

PNC Bank, National Association, announced the closing of a $90 million senior secured credit facility for Iconex LLC (Iconex), a portfolio company of Greenwich, CT-based Atlas Holdings. PNC’s facility was provided in conjunction with a $67.5 million term loan and a $30 million delayed draw term loan provided by Cerberus Business Finance.

In this installment of our series of executive interviews, Charlie Perer sits with Andrea Petro to talk about her new role as Board Member at Ready Capital, and to share her advice to ABL managers about consolidation, competition and the current state of the market.

Some turnaround and M&A leaders are predicting the second quarter of 2022 could be when the “default boom” hits. Asset-based lenders, factors, and other secured lenders will need to be at the ready to handle turnaround deals.

Ever since the early days of blockchain with the 2009 introduction of Bitcoin, cryptocurrencies have been prone to periods of high and low valuation. After going through another “crypto-winter,” or period of low prices, lasting three years, cryptocurrencies have once again caught the attention of a broader investor community.

Since the second half of 2020, the sheer number of new cryptocurrency offerings and the price volatility have been breathtaking. For example, Ethereum—the number two cryptocurrency and blockchain platform by market cap—grew by 800 percent from October 2020-October 2021. As new investment vehicles for Bitcoin are introduced in the United States, the hype is at an all-time high.

On August 3 and 4, YoPro members from across the country gathered to attend the SFNet's YoPro Leadership Summit 2021 in Chicago. The conference provided in-person networking opportunities and insightful panels featuring industry leaders.

The leadership summit would not have been possible without the support of our sponsors – Event Co-Sponsor Hilco Global and Winston & Strawn LLP, Reception Sponsor, Wells Fargo, and our Supporting Sponsors, Gerber Finance and Gordon Brothers.

When documenting an ABL facility alongside a separate term loan, borrowers and financial sponsors increasingly request that the ABL credit agreement be drafted to essentially match material terms of the term loan agreement. This understandable desire for conformity often overshadows fundamental differences between ABL and term loan facilities and can create significant issues for ABL lenders. The goal from the ABL lender’s perspective should be to understand the tradeoffs involved and provide a level of functional conformity in principal terms, while maintaining customary availability-based metrics and liquidity protections of ABL loan documentation which are often absent or inadequately covered in term loan documentation.

In this installment of our series of executive interviews, Charlie Perer sits with Tim Stute to understand his views on the ABL industry, consolidation, new trends including specialization and state of the M&A market, among other things.

Meredith Coffey of LSTA provides readers with an update on the LIBOR transition.

1. When is LIBOR ending?

   The UK’s Financial Conduct Authority (“FCA”) – the regulator of the ICE Benchmark Administration, the administrator of LIBOR – has said that all sterling, Swiss franc, euro and Japanese yen LIBOR settings will cease or no longer be representative after year-end 2021. The FCA also said that the settings for one-week and two-month USD LIBOR will also cease or will be non-representative after year-end 2021. The remaining USD LIBOR tenors will cease or be non-representative after June 30, 2023. Importantly, while USD LIBOR will continue to exist after the end of 2021, this is only for pre-existing “legacy” contracts. The U.S. banking regulators have said that banks should not originate new LIBOR contracts after the end of 2021.