A decade ago, if the CFO of a middle market company needed debt capital, it was as simple as picking up the phone and calling his friendly local banker. Then the Great Recession struck and banks squeezed many small to mid-size companies out of their credit box. The same CFO found himself stranded without access to the debt capital needed to run and grow his business.
“There was a lot of turmoil and dislocation in the market. There were borrowers who were wondering if their lenders were going to continue to support them. Our team came together and said, ‘We know lenders who are lending in the market. With our experience, we can help our private equity friends and direct companies find the debt capital they need in these challenging times,’” says Brent Krambeck, co-managing partner of Monroe Credit Advisors, an advisory and debt placement practice launched by Monroe Capital in 2009.
Although the economy has made a slow but steady recovery, many lenders are still wary of lending to the middle market.
“There’s a real need in today’s marketplace for non-bank lenders. When a CFO makes some calls to local banks and gets ‘no’ for an answer, where do they look next? With the growth in the commercial finance market all the way through the private debt market, the number of groups that are providing debt in a variety of different forms has grown significantly,” Krambeck says. “There’s a lot of investment that’s coming in from those alternative sources of lending to provide new financing options to the middle market. We make it our business to understand who is lending and where they like to lend.”
Broad Product Focus
While Monroe Credit initially focused on borrowers seeking debt capital solutions through asset-based, cash flow and term loan structures, the firm soon expanded the practice to include lease and capital equipment finance advisory and placement services.
“While many of our competitors focus only on cash flow, ABL or leasing, we have deep experience across the debt spectrum to offer virtually any type of debt structure for our clients,” Krambeck says.
“The leasing option is a differentiator given that the majority of middle market and large corporate clients lease some portion of their equipment, whether it’s a soft asset like technology or a hard asset like manufacturing equipment or rolling stock,” says Managing Director Linda Crothers, whose leasing experience adds to Monroe’s capabilities.
Strong Lender Relationships
The Monroe team has developed relationships with a broad spectrum of lenders, including banks, commercial finance companies, leasing companies, credit opportunity funds, hedge funds and other specialty lenders.
“While we work very hard to maintain the existing relationships where we’ve closed transactions, we are also constantly getting to know the new lenders that are coming into the market,” Crothers says. “That is really what we bring to the table, making sure that we’ve covered the market. We identify the borrower’s needs, and then go out and find a lender to fill those needs.”
“Our execution process is not driven off of going to as many folks as we can,” Krambeck says. “We pinpoint our execution process to identify those lenders that will be excited about the transaction, will be a good long term partner and who will commit the time and resources to championing it through their credit process.”
When forming new relationships, Monroe looks for lenders that are responsive, dependable and consistent. “I think it’s always great if you’ve got a lender that can be a bit creative too,” Crothers says. “As with any transaction, there are ebbs and flows during the process. It’s great to have a lender that will diligently work with the borrower to get through the challenges that come into play.”
Clients of Many Credit Types
The Monroe team takes pride in its ability to step in and help challenged borrowers who have exhausted their options, in addition to healthy companies seeking a market solution that offers the most attractive pricing and terms.
“For companies that are doing well, we bring a broad range of lenders and lessors to the table,” Crothers says. “So when they work with us we can make sure that we’re delivering the best execution, the best pricing and the best terms available in the market.”
Even though Monroe will work with companies in myriad industries and across a broad range of credit risk, the team is selective when committing to a client engagement.
“We do a fair amount of work before we engage a client,” Crothers says. “We make sure that we can deliver a solution that meets our client’s goals.”
Experience to Manage the Process
Each member of the Monroe team joined the firm with a proven track record as a lender, having worked at GE Capital, Merrill Lynch Capital, Bank of America and various commercial finance companies. Together, the team boasts decades of experience lending at transaction sizes ranging from $1 million to $500 million.
“As experienced lenders, we understand the credit and underwriting process,” Krambeck says. “We identify the key credit issues, and in our execution process, we properly frame the credit for the lenders, enabling them to best understand the risks, risk mitigation and credit attributes.”
“Knowing how to properly evaluate a company and its credit profile enables us to come up with the right structuring solutions and market the borrower successfully,” Crothers adds.
Krambeck says the team’s lending background helps Monroe manage the process most effectively. “Being able to navigate the process of a transaction, bringing the constituents together to close and managing the challenges is really where our lending experience helps us ultimately deliver for our clients.”
Teamwork is one of Crothers’ favorite aspects of her work at Monroe Credit. “Our team’s collaborative approach really allows us to evaluate credits well and come up with the right market-driven solutions for our clients,” she says. “I love that aspect of it.”
Krambeck says the entire team thrives on the diversification of the client base and the needs across the debt capital markets. “We advise companies that operate in a variety of industries, have different focuses and have different debt capital needs. Being able to provide solutions across the board from a debt perspective is really interesting for our team.”
“Most importantly for me, I love the feeling of a job well done for a client because we are there from the beginning through the closing process,” Crothers says. “It’s really a wonderful feeling to know you’ve executed for a client, and I get personal satisfaction out of that every time we close a transaction.”
And if the Monroe team feels that way about a successfully closed transaction, just imagine the experience of that middle market CFO who turned to Monroe after multiple rejections from traditional lenders — nothing beats the feeling of sweet relief.