Top Ten TSL Express Stories of 2020

As we look forward to the year ahead and continuing to provide our readers with content to help you see around corners and manage the ongoing uncertainty, we wanted to highlight the most-read articles from 2020.

1. CARES Act Paycheck Protection Loan Program: From the Secured Lender Perspective
By David W. Morse, Esq.
On March 27, 2020, Congress approved the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”).  The CARES Act includes extensive provisions to address the current public health crisis, including provision for $349 billion of commitments for general business loans under Section 7(a) of the Small Business Act (15 U.S.C. 636(a)) through June 30, 2020. Title I of the CARES Act, titled “Keeping American Workers Paid and Employed Act,” sets out the terms for the “Paycheck Protection Program.”  The Paycheck Protection Program substantially expands the existing loan program of the Small Business Administration under Section 7(a) of the Small Business Act.

2. Don’t hate the player, hate the game! The ABL game has changed. 
By Charlie Perer
Yet the players remain the exact same.  There have been many changes to the middle-market ABL industry over the past decade, but none more seminal than the dramatic shift in underwriting methodology to include enterprise value. But what about the assets? Liquidating middle-market businesses with at least ABL net funds employed of $10+ million, and majority much higher, can be a difficult task. Specifically, when dealing with heavy-inventory situations as well as loans against non-working capital assets, such as M&E, RE and IP.  It constrains internal resources, has serious risk of not returning capital and is not the preferred path to go vs. running a sale process.  ABLs understand the risks and have had to adjust underwriting to factor in enterprise value as part of determining whether to get aggressive or even propose.  This is much more prevalent in today’s competitive market with ABLs being asked to take on more risk for lower rates.

3. Fifth Third Business Capital Announces Retirement of Michael D. Sharkey, President
By Fifth Third Business Capital

Congratulations, Mike!

Please join us in congratulating Fifth Third Business Capital President, Mike Sharkey, on his retirement.

When Mike began his career as a field examiner at GE Capital, he launched into a 40-year ride as a leading executive in the asset-based lending industry. Mike established and managed various successful ABL businesses, including StanChart Business Credit, LaSalle Business Credit, Cole Taylor Business Capital and MB Business Capital, often with many of the same people at his side. Mike devoted his career to building teams of talented asset-based financing professionals committed to managing risk, creative thinking, excellent customer service, and being a trusted partner to thousands of middle market businesses. Mike earned a reputation as a patient and steady hand who thrived in an environment where he developed strong long-term relationships with dealmakers and corporate executives. This approach helped shape his career and define his success as one of the most respected lenders in the market. A few of Mike’s noteworthy honors include being the recipient of the Lifetime Achievement Award from the Commercial Finance Association (SFNet) and a member in the Secured Finance Network Hall of Fame.

4. COVID-19 is popularizing asset-based lending. Here’s why.
By Ed Gately

A public health crisis is projecting a seemingly unlikely spotlight on an area of corporate finance that used to carry a negative association, yet is now the option of choice for many borrowers. I’m talking, of course, about asset-based lending (ABL).

According to what we’re seeing at MUFG, the financial hardship resulting from the COVID-19 pandemic is driving some companies to convert their revolving credit facilities from secured cash-flow-based to asset-based lines of credit, which are applicable to businesses in retail, wholesale (such as equipment-rental and food-and-beverage companies), and general distribution, where large quantities of inventory are more common.

5. Seth Benefield Named Head of Bank of America Business Capital
By Bank of America Business Capital

Bank of America is pleased to announce that Seth Benefield has been named head of Bank of America Business Capital (BABC) and Asset-Based Financing, succeeding Karen Sessions, who was named Head for the Pacific Southwest Region of Global Commercial Banking at Bank of America. 

Mr. Benefield will be responsible for managing an international team of asset-based lenders that deliver secured credit facilities and other complementary banking products and services to mid-size and large corporate companies. With nine primary offices serving the United States, Canada and Europe, BABC provides corporate borrowers with senior secured loans of $5 million or more, cash management, interest rate and foreign exchange risk management, and a broad array of capital markets products.

6. CARES Act Frequently Asked Questions
By David W. Morse, Esq.

On March 27, 2020, Congress approved the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”).  The CARES Act includes extensive provisions to address the current public health crisis, including, among other things, $349 billion of commitments for general business loans under Section 7(a) of the Small Business Act (15 U.S.C. 636(a)) through June 30, 2020 under Title I of the CARES Act, titled “Keeping American Workers Paid and Employed Act,” which sets out the terms for the “Paycheck Protection Program.”

The Paycheck Protection Program has been of particular interest to members of Secured Finance Network because it provides potential interim financing for small businesses that are typical borrowers from many member lenders.

7. Secured Finance Executives Discuss the Impact of Coronavirus
By Eileen Wubbe

Jennifer Palmer, CEO, Gerber Finance, Paul Schuldiner, executive vice president and purchase order finance division manager, Rosenthal & Rosenthal and Ken Wengrod, co-founder/president, FTC Commercial Corp. discuss the impact of Coronavirus.

8. What a Lender Needs to Know: Key Loan Document Terms in a Time of Crisis
By David W. Morse, Esq.

As circumstances are moving rapidly, companies and their lenders are dealing with unprecedented times.  While companies try to determine the full impact of the current economic tailspin on their businesses, lenders are looking to understand their risks and how they can respond to them. 

The credit agreement sets out the rules of the road for the relationship between a company and its lenders.  In the list of credit agreement provisions set out below we attempt to provide a map for the secured lender for navigating those rules, anticipating where there may be bumps or wrong turns and providing some guidance for where a lender may go in the credit agreement to determine its path when confronted with a borrower in distress.

9. CIT Names Managing Director to Lead Asset-Based Lending Unit
By CIT Group Inc.

CIT Group Inc. (NYSE: CIT) today announced that it has named Chris Esposito as managing director in charge of its newly expanded Asset-Based Lending business.

In this role, Esposito is responsible for managing the Asset-Based Lending team, overseeing the national ABL business, building new client relationships, developing strategies to address new target markets and ensuring outstanding customer service and satisfaction.

10. Lender Stayed From Proceeding With UCC Article 9 Sale
By Marc L. Hamroff & Danielle J. Marlow

Moritt Hock & Hamroff recently reported on the impact of the COVID-19 pandemic on Uniform Commercial Code (“UCC”) Article 9 sales.  Now, a second significant decision on this issue has been published.  While our last alert concerned whether Article 9 sales may proceed in light of Governor Andrew Cuomo’s Executive Order precluding foreclosures (and reported a decision holding such Article 9 sales may proceed), this latest decision addresses the Article 9 “commercial reasonableness” standard in the present environment, holding that the sale terms established by the lender in question were  not reasonable and staying the sale for at least thirty (30) days.