Lending Moxie Offering a Unique Palette of Financing Structures
With the founding of four successful finance companies under their belts, James Irwin, CEO, and Dan O’Rourke, EVP/CCO, talk about the genesis of Metis Commercial Finance and why they believe smaller middle market borrowers can benefit from a lender with a “big-ticket” product suite.
Metis Commercial Finance was launched in August 2014 by a group of restless entrepreneurs and seasoned senior managers. The group boasts an impressive 150 years of aggregate lending experience — and ambitious lending goals. A portfolio company of Garrison Investment Group, the independent lender is focused on servicing small and medium-size enterprise (SME) borrowers with $1 million to $20 million credit facilities and creatively engineered across a wide spectrum of structures/complexity.
The founders say they plan to nimbly “snap around” a swath of asset classes to provide borrowers with maximum liquidity as a strategy to win transactions in today’s competitive market. “Oftentimes, companies haven’t had access to broader product suites; we see these types of transactions daily — and they have to throttle back from aggressively pursuing acquisition targets or investing in new initiatives,” says Metis EVP/CCO Dan O’Rourke.
Heading up Metis are two industry aces: James Irwin, CEO, who founded Meridian Healthcare Finance and MC Healthcare Finance; and O’Rourke, co-founder of Salus Capital Partners and NewAlliance Commercial Finance.
The seed for the lending company took root early in Irwin’s career. As a young financier on Wall Street, Irwin worked at Drexel Burnham, an investment bank whose success was largely derived from providing debt solutions in the form of junk bonds to borrowers most investors thought were undesirable because they fell below investment grade.
“Back then, there was a perception that lower middle market borrowers were not worthy,” he explains. “This is very true today in terms of lending. Financing structures offered by larger lenders are typically not available to smaller or lower middle market borrowers. The genesis of Metis was in response to a market need and the observation that smaller borrowers can benefit from a lender with a big-ticket product suite.”
Irwin and O’Rourke were drawn to the Metis enterprise as “battle-scarred entrepreneurs” and industry veterans whose expertise complements one another. Irwin brings healthcare prowess, and O’Rourke has a track record of commercial and industrial (C&I), and retail successes. Irwin’s EVP/CCO also has tremendous experience across A/R, equipment inventory, cash-flow, real estate and DIP financing — areas where he has gaps. “Between the two of us, we can fulfill a large percentage of the ABL marketplace today, which you don’t always find with smaller finance groups that try to stay in a very narrow bandwidth,” O’Rourke says.
That being said, Metis wants to offer deep expertise to the sectors it services to carve out a niche and avoid competing against the “big boys” and generalists. Coming from an initial healthcare-focused concept, Metis is especially interested in capturing what Irwin calls “tweeners” — companies that have a healthcare aspect to them but aren’t purely healthcare entities.
“Healthcare lenders can’t get their arms around them. Similarly, neither can non-healthcare lenders because they have a healthcare component,” Irwin says. “So these ‘tweeners’ are very comfortable for us, but they’re in limbo or neverland for other lenders. I think it helps set us apart.”
A Team-Oriented Approach
Irwin and O’Rourke have built many successful teams in the past. In fact, the majority of the Metis group worked at two and as many as four of the leaders’ previous startups. “They are believers of Dan’s and my vision, and frankly, our ability to execute on a plan like this,” Irwin says.
The senior management team, all former recruits, includes: Bob Seidenberger, managing director, Sales and Marketing; Traci Crabtree, SVP, Underwriting; and Sarah Larson, senior director, Operations.
“When you look at employees, most individuals would love to be part of a group that thinks entrepreneurially and likes to get a transaction to close,” O’Rourke says. “We would be attractive to people who are frustrated in their current situation and who may not enjoy enough visibility with the management team as they would with us. Our team-oriented approach is ideally suited for individuals who can thrive in such an environment.”
The Right Investor
Metis Commercial Finance would not be possible without the backing of Garrison Investment Group. Founded in 2007, Garrison is a middle market credit and asset-based lender that has a similar vision to Metis leaders and offers them the flexibility to evolve. As an example, they quickly got on board with an early lane shift from the initial concept of solely lending to healthcare borrowers.
A like-minded investor respected in the marketplace is critical to Metis’ growth and success, Irwin says: “Investors can range from entirely uninvolved on one end of the spectrum to micromanaging daily operations on the other. And I’ve had all varieties of those. What’s great about Garrison is that they offer us tremendous support beyond just giving us capital — from transaction referrals to sourcing warehousing debt. Their relationships help us across the spectrum, and they couldn’t be a better partner.”
Distinct Structures Palette
Though they are targeting lower middle market borrowers, Metis is not afraid to jump into the deep end of the lending pool. A press release announcing its launch touted “a unique palette of financing structures.” Metis’ products include: asset-based lending (encompassing revolvers, asset-based term loans, enterprise value term loans and DIP financing), unitranche loans, cashflow lending and real estate lending. O’Rourke says Metis’ structures are tailor-made to borrowers’ financing needs: “We’re very comfortable providing traditional revolvers and working capital assets — inventory and accounts receivable — but we’re equally as comfortable providing term loans with other assets, including real estate, equipment, intellectual property and similar-type assets. And we provide cash based on certain parameters.” The offerings don’t stop there. “For example, maybe we’re first-in, last-out, or we could be pari-passu,” Irwin says. “One of the hallmarks of Metis is that we’re flexible and creative and responsive.” The lender will often look to offer these facilities in a single structure simplify the lender-borrower relationship.
Metis can also syndicate transactions that exceed its targeted $1 million to $20 million by leveraging off of Garrison’s relationships and external contacts when working on larger opportunities that reflect similar credit and structural points.
Throughout his lending career, Irwin noticed that smaller credits often “went wanting” and couldn’t execute on business plans or expand marketing. “You don’t have to stretch a lot to service SMEs,” Irwin says. “If we bring in, say, an accounts receivable revolver plus an inventory financing or a small term loan, it functions to do two things: It helps our borrowers get more capital, and it allows us a competitive advantage against our competitors. Additionally, by providing, say, real estate and accounts receivable financing in one fell swoop, it allows us to avoid intercreditor agreements that can torpedo a transaction.”
Metis anticipates partnering with community banks, credit unions and business development companies to originate, underwrite and manage healthcare/retail loans. O’Rourke also foresees referrals from private equity and turnaround firms, satisfied customers and by building a solid industry standing. “There is a global hunger to book assets,” Irwin says. “A lot of lenders want to do so, but lack the expertise. That’s what we can bring to the table.”
Though O’Rourke expects Metis will experience the usual growing pains of building a successful lending platform — from attracting talent to maintaining deal flow, managing the portfolio and communicating the brand, he says Metis leaders have the wisdom of experience in building lending platforms, and the unique point of view of established business executives.
“We know the pressures small companies face,” Irwin explains. “We’re quite different than garden variety bankers or other lenders. I wouldn’t go so far as to call them ivory towers, but some other lenders, for example, have never had to figure out how to make payroll, which is something our borrowers have obviously experienced.”
Irwin believes the biggest hurdle will be internal — finding a way to balance big ambitions with sound business judgment. “It’s the classic B-school case study: Do we stick to our knitting, or do we leverage off of our existing skills and infrastructure? We see daily transactions that are attractive opportunities that may make sense a year from now but not necessarily today, so one of our challenges is to be a very disciplined lender — to know what we can do and what we can’t do.”
Jill Hoffman is editor of ABF Journal