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The time and cost of liquidating collateral can often be prohibitive and is always a nuisance. Of course, this problem is exacerbated when the asset value is less than the balance owed to the secured creditor(s), leaving no value for unsecured creditors. Lenders often step up and carve out an amount to be distributed to unsecured creditors to enable a Chapter 11 to proceed to effect a sale of the debtor’s assets free and clear of liens. Some consider this to be a price to be paid by secured creditors for the privilege of utilizing the bankruptcy court to sell their collateral. Thus, the cost of a bankruptcy can be very expensive not only to the debtor, but also to the secured lender. As a result, small and middle-market companies and their lenders have grown receptive to non-bankruptcy vehicles for the disposition of assets.

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.

While sentiment from both bank and non-bank lenders was more positive from Q2, the overarching theme of Q3 can be told by the continued decline in utilization for both bank and non-bank lenders alike. Bank groups set their lowest level in the five years since these figures were collected by SFNet, with 75% of banks reporting decreases. Non-bank usage reduced slightly over the previous quarter but are back to levels not seen since the first and second quarter of 2017. 

Greensill Capital is a UK-based commercial finance company which filed for bankruptcy protection in early March. The company had focused on providing financing to companies using supply chain financing and other related receivables finance services. 

The bankruptcy appears to have been the result of a combination of factors: unusual underwriting practices (by Greensill, their primary financier and their credit insurer); the cancellation of their credit insurance policy; the cessation of their source of financing by their largest funder and financial intermediary;  related party transactions inclusive of financing, as well as obtaining financing from one of their investors and in turn using such funding to finance the investor’s own affiliates.

While the final outcome remains to be seen in the ongoing saga, it is clear the circumstances are not typical for a supply chain finance institution. 

Golub Capital BDC, Inc. (the “Company”, “we”, “us” or “our”) a business development company (Nasdaq: GBDC), today announced the closing of a new senior secured syndicated revolving credit facility (the “Facility”). The Facility is led by JPMorgan Chase Bank, N.A. and includes a total of six bank participants.

The Facility closed on February 11, 2021. Under the Facility, the lenders have agreed to extend credit to us in an initial aggregate amount of up to $475.0 million in U.S. dollars and certain agreed upon foreign currencies with an option to request, at one or more times, that existing and/or new lenders, at their election, provide up to $237.5 million of additional commitments.

Goldman Sachs & Co. LLC is serving as financial advisor to Huntington.  Wachtell, Lipton, Rosen & Katz is serving as legal advisor to Huntington.

Keefe, Bruyette & Woods, a Stifel Company, is serving as financial advisor to TCF.  Simpson Thacher & Bartlett LLP is serving as legal advisor to TCF.

White Oak Commercial Finance ("White Oak") closed a working capital credit facility with Mana Products Inc. ("Mana"), a developer and manufacturer of high-end beauty products based in New York, at the end of the first quarter.

The innovative beauty products company has been in business for over 40 years developing formulas for some of the world’s leading beauty brands and was recently acquired by Traub Capital, an experienced private equity firm specialized in building value in consumer companies. The funding will support Mana’s growth and market opportunities.

(Editor’s Note: This is the beginning of a new interview series by Charlie Perer of SG Credit Partners.)

In this installment of our series of executive interviews, Charlie Perer sits with Ken Pardue to understand his plans to grow Triumph, the pace of change in the ABL business and state of the market, among other things.

The introduction of the novel coronavirus pandemic into the global economy starting in late 2019 created a level of disruption not seen perhaps since the world’s last major conflicts.  As we move through what we hope to be the later stages of the pandemic, we thought it might be helpful to explore its impact on the trade credit insurance marketplace and highlight what we can anticipate in the months and year ahead.

Throughout the world, surges in cases of the virus caused a significant portion of the global economy to shut down in a manner that was/is unprecedented in recent history.  This significant curtailment of economic activity brought most of the service sector (travel and leisure, entertainment/restaurant industry) and a big segment of the manufacturing sector to either grinding halts or intermittent disruptions.  Consumer demand dropped and unemployment spiked.  As economies reopened, rebounds were relatively sharp, but left many countries still well below prior levels of economic activity and currently, a second round of lockdowns continues to beleaguer a good number of countries.

The Secured Finance Network (formerly Commercial Finance Association) held its 13^th Annual International Lending Conference at DLA Piper in London, May 21-23. Attendees heard from a variety of leaders discussing the critical issues and opportunities relating to cross-border lending including looming economic upheaval, potential recession and geopolitical uncertainty.

esVolta, LP today announced that it has closed an approximately $140 million senior secured credit facility to finance a portfolio of its utility-scale battery energy storage projects. The credit facility was provided by CIT’s Power and Energy business as the Mandated Lead Arranger, and Siemens Financial Services (SFS), CoBank, ACB, and KeyBanc Capital Markets Inc. as Joint Lead Arrangers.

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.

When asked, “Is technology empowering or overshadowing expertise in asset-based lending?” the answer is simple: Yes.

We’re in an era where technology’s efficiency and human expertise should work together, and if balanced thoughtfully, we can absolutely have both. But this requires intention. As we lean into technology, we must preserve the critical thinking that defines the art of ABL.

Wingspire Capital LLC (“Wingspire”) announced that it has agented a $100 million credit facility consisting of an $80 million senior credit facility (co-led by Ares Commercial Finance) and a $20 million second lien credit facility (provided by Atalaya Capital Management) to Rubies II, LLC (“Rubies II”).

Proceeds from the financing were used to purchase substantially all of the assets of Rubie’s Costume Company, Inc. (“Rubie’s”) via a Chapter 11 363 sale process.  Proceeds will also be used to fund the on-going working capital needs of Rubies II. 

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.

Cross-border loan workouts and enforcement of security interests across multiple jurisdictions is a complex matter and greatly depends on the venue of the insolvency and the location of the collateral. These factors are also intertwined with the overall reach of the credit facility. A deep understanding of the multiplicity of issues that may arise during a workout or insolvency can not only enhance a lender’s ability to be made whole in an enforcement scenario, but can also create opportunity for liquidity providers to expand their geographic offerings and create unique value for their global borrowers.

Conducive factors include high market liquidity, low interest rates, accommodative Fed policy and a vaccination against COVID-19

The year 2021 is shaping up to be a strong and supportive one for leveraged finance, led primarily by merger-and-acquisition (M&A) and refinancing activity, according to the Capital Markets group at Mitsubishi UFJ Financial Group (MUFG). 

Key members of the group delivered their outlook for leveraged finance to reporters and editors at a virtual MUFG media roundtable earlier this month that featured Jeffrey Knowles, Co-Head of Debt Capital Markets; Grant Moyer, Head of Leveraged Capital Markets; and Art de Peña, Head of Loan Syndications and Distribution.