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March 2003


Vol. 1 No. 3
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ABF Journal, March 2003
March 2003

Creative Solutions: Trends in Deal Structuring

Borrower & Lender Collaboration: A View from “Outside the Box”
By Michael Bloomenfeld and Charles Collie

As the cash flow deals of yesterday seek refinancing, asset-based lenders are finding the restructuring of a company’s senior debt increasingly difficult. Confronted with collateral shortfalls, lenders are required to think “outside the box” and work with a prospective borrower to find creative and flexible financing solutions that meet both parties’ needs. (Ref # IND035)

Tranche B Loans… Bridging the Gap
By Colin P. Cross

Whether supplementing an existing credit, funding growth and acquisitions, or helping to take out the existing bank group with a new loan, the Tranche B loan can be the one vehicle available for a company to get the funding it needs to complete the capital structure. (Ref # LSP009)

Economic Influences on Asset-Based Finance
By David Baker

David R. Baker, Chief Credit Officer of the Asset-Based Lending Division at GMAC Commercial Finance shares his views regarding
current trends in the industry – where it’s been and where it’s headed. (Ref # IND036)

Institutional Structures: A Growing Pool of Liquidity
By Barry Bobrow

While institutional lenders have not been as active in the asset-based market as they have in the broader leveraged market, during 2002 there were several broadly syndicated asset-based transactions in which institutional lenders played a significant role. (Ref # CAP002)

Structuring the Deal — What Borrowers Want From an ABL Relationship
By Michael H. Trager, CPA

An asset-based lender’s success is not determined by the interest rate alone. Other factors, such as fee disclosure, a helpful support staff and above all – being proactive and quick responsiveness are valued by customers and ultimately contribute to the ABL’s success. (Ref # IND037)

Getting the Deal Done With Insurance-Based Solutions
By Craig Ostrander

The prevalence of restructuring activities in today’s environment has created opportunities for asset-based lenders and mezzanine players to provide liquidity into the market. Insurance-based solutions can provide risk financing solutions to complement existing risk management activities and reduce the overall cost of risk financing. (Ref # INS003)

ABLs and Appraisers: An Indispensable Partnership
By David K. Levy

Appraisals have become an important part of a well-informed lender’s decision-making process. As such, it is imperative that the lender and appraiser understand the intended use of the appraisal and the type of transaction the assets are intended to support.
(Ref # APP009)

Financing a Canadian Restructuring:

Are There Any DIPs in Canada?
By Kevin J. Morley

While U.S. borrowers are able to finance themselves while they try to restructure by seeking debtor-in-possession financings, Canada has no comparable statutory provisions in its insolvency statutes although limited access to such financing is available. The recent restructuring of Algoma Steel demonstrates that ABLs can benefit from DIP lending.

(Ref # INTL041, BANK021)

Tranche B Lending Grows As Economic Uncertainty Continues
By John Brignola

Today’s economic “slump” has put earnings under severe strain and as a consequence, wary bankers have trimmed under-performing loans and borrowers have “maxed out” the amount they can borrow under their senior lender’s asset-based facilities. In such cases, these borrowers can turn to Tranche B lenders to provide funding for the gaps in the capital structure. (Ref # LSP008)

Asset-Based Lending & Purchase Order Financing: Similarities & Distinctions
By Mark Landes

At first glance, purchase order funding may resemble a form of alchemy that mysteriously changes a customer’s invoices into cash. In simpler and less esoteric terms, organizations that provide this form of financing purchase pre-sold inventory while keeping tight control of both the inventory and its proceeds until receiving payment. (Ref # FAC014)
Columns

A PROFILE OF SUCCESS
Making the Most of Assets and Opportunity
A Profile of Jim Connolly, President & CEO of Fleet Capital Corporation

Ask the people who work for him, and they will describe Fleet Capital’s President and CEO, Jim Connolly, as straightforward, no-nonsense, and approachable. Connolly describes his management style as distinguished by a disciplined approach to decision-making. These factors have fostered an ABL culture that aspires to be the “best-in-class” and the benchmark by which competitors compare themselves. (Ref # EXEC004)

PUTTING IT TOGETHER: ANATOMY OF ABL TRANSACTIONS
Merrill Lynch Capital:

Flexibility and Creativity Make the Difference for NewRoads & Atlantic Premium
By Mark Gertzof and Chris Domke

When the managers and investors of NewRoads and Atlantic Premium Brands were seeking flexible structures to meet their financing needs, Merrill Lynch Capital stepped up with financing structures customized to meet each company’s unique situation. (Ref # DLS004)

FACTORING FOCUS
New Challenges in Protecting Receivables
By Stanley Officina

In true-Darwinian fashion, retailers are not exempt from the theory of the “survival of the fittest” and periodically, even the mightiest fall in the face of an intensely competitive retail climate. As a result, increased concentration by retailers has created new risks for factors. (Ref # FAC013)

LEGAL EYES
Just When Lenders Thought it Was Safe…
By Patrick M. Jones

Recently, the Bankruptcy Court in In re UAL Corp. breathed new life into the debtor’s authority to pay certain prepetition claims at the debtor’s discretion. This is not good news for lenders and “non-critical” creditors intent on focusing the debtor’s assets on future operations or subsequent distribution to all claimants on an equal basis. (Ref # LGL010)

TURNAROUND CORNER
Underwriting Instead of Underwater
By Dan Dooley and David Weinstein

In today’s underwriting environment, caution and collateral coverage are more important than ever. And, although economists say we’re in recovery mode, underwriting in the near term will be affected by the expensive lessons learned in 2001 and 2002. (Ref # TM010)

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