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January/February 2013

Risk Management Issue
Vol. 11 No. 1
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Digging Deeper… Field Examiner Uncovers Fraud - When a field examiner discovers inconsistencies upon her review of a modular home manufacturer applying for an increased line of credit, she ultimately uncovers fraud.
Basel III: Impact on Asset-Based Lending - As only one of many factors that will impact decisions about the allocations of bank capital, higher Basel III regulatory capital minimums are unlikely to move the needle up by more than 30 basis points on borrowing costs charged by the well-run lending operations of larger financial institutions to creditworthy customers.
TD Economics Forecast: Fiscal Austerity Will Slow Economic Growth in the Years Ahead - TD Economics said in its latest quarterly economic forecast that economic growth over the last year has been modest, but healing has continued as the housing market has become a tailwind rather than a headwind. The worst of the deleveraging cycle and its dampening effect on economic growth appears to be over, TD says, but, just as the U.S. economy appears set for take-off, one obstacle remains.
Asset-Based Lending: The Good, The Bad & The Ugly - In analyzing the asset-based lending market at the dawn of a new year, David Gaito, SVP and regional sales manager of PNC Business Credit, notes three significant factors: 2012 was not as bad as advertised, a supply/demand imbalance remains and ABL potential in 2013 is mixed. Prudence, he notes, will be key to short- and long-term success.


Bucking the Trend… KeyBank Expands ABL With Internal & External Strategies - While all indicators, including recent articles in ABF Journal, pointed to the fact that activity decreased in 2012, KeyBank Business Capital’s Laurie Muller-Girard has noted that for the company, asset-based lending increased prompting the company to expand its division with new personnel to cover the growing market.



Minimizing Fraud… Checks, Balances & Vigilance Go a Long Way - Fraud not only costs a company money, but also can affect its relationship with shareholders, employees, customers, vendors and financial institutions. Riveron Consulting's Andy Baker explains how strong policies and consistent oversight can go a long way toward minimizing the possibility of fraud.


Commercial Lending: Low Interest Rates Tarnish Positive Deal Flow - RMP Capital's James DiCamillo notes that 2012 was characterized by historically low interest rates that made earning a profit somewhat challenging. Looking ahead, DiCamillo says banks have continued their retreat in the small business sector, even though many enterprises that would be candidates for financing pose only a fair level of risk. As a result, more business owners in this category appear to be discovering commercial finance as a serious option.


Another Conflict in the Circuits Brewing Over Bankruptcy Court’s Equitable Powers Under §105(a) - The First Circuit's decision in Malley v. Agin highlights an ongoing conflict among the federal circuit courts regarding the scope, nature and extent of the bankruptcy court’s equitable powers under §105(a) of the Bankruptcy Code. While the issue cries out for a definitive ruling by the U.S. Supreme Court, it is uncertain when and if one of these cases will reach the high court because the dollar amounts involved are often modest, as this case illustrates.


Tenth Circuit Resolves Legal Conflict on Validity of Security Interests in Spectrum Rights - In this edition of ABF Journal’s Legal Eyes, we get a glimpse into the world of security interests in spectrum rights. For lenders and borrowers in this space, this is common knowledge, but to others, the case of Valley Bank & Trust Co. v. Spectrum Scan LLC sets a well-reasoned precedent that, as Cadwalader’s Michael Jay Cohen says, lifts the cloud on media and telecom lenders’ expectations that exists prior to this most recent decision.


FinalCut: Over Two Dozen Bidders to Vie for Hostess - ABF Journal illustrator Jerry Gonzalez shares his depiction of the barrage of bidders — including Wal-Mart Stores, Kroger Co., Grupo Bimbo and Alpha Baking — vying for the assets of Hostess Brands as part of the company’s liquidation.

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