Despite a consensus suggesting ABL activity was down in 2012, Laurie Muller-Girard, national director of KeyBank Business Capital, says, Key has seen an increase in volume as a result of its internal growth, outward reach and client relationship approach.
“I really think Key is bucking some of the trends in the market,” she says. “Part of that is because we reinvigorated our focus on the product, and one of the ways in which we have done that is by bringing in professionals from outside organizations into Key to really support this … both within the Middle Market, or Commercial Bank ,and in the Corporate bank.”
With a middle-market franchise that spans from Alaska to Maine, Muller-Girard says the Cleveland-based company experienced ABL growth by adding business development officers to support bankers, actively offering ABL to clients throughout the bank’s 14-state footprint. To expand its resources, KeyBank Business Capital made a number of new hires in 2012 and is continually looking for more business development professionals and others in order to strengthen and develop the bank’s ABL capabilities. “We started first with hiring new business development officers and then brought in infrastructure to support them, which included hiring new portfolio managers and underwriting professionals who could manage a deal through our credit process,” Muller-Girard said.
Muller-Girard is also a new addition to the ABL team at KeyBank. While she has spent the last 17 years of her career at Key — 14 of which were in the Debt Capital Markets group in the Corporate Syndications team — Muller-Girard assumed her position as national director of KeyBank Business Capital in August 2012.
“It’s really an exciting opportunity because it gives me the ability to work with our middle-market as well as with our corporate practice — what we call KeyBanc Capital Markets (KBCM) —and devote attention to both but also to bring the discipline that KBCM has to our ABL practice,” she notes.
KeyBank Business Capital supports middle market businesses in the Commercial Bank and KeyBanc Capital Markets focuses on mid-cap borrowers through industry verticals including groups such as industrials, consumer and retail, diversified industries and energy, as well as sub-verticals within each group. Through these verticals, Muller-Girard finds a lot of opportunities for ABL. She says manufacturers, distributors, wholesalers and product applications for food, beverage and apparel companies are all a “good fit” within the industrial, manufacturing and consumer retail spaces.
“ABL is just a great tool because it couples very nicely with the institutional term loan product as well as the high-yield product and certainly with the syndicated loan product – all of which Key has within its platform. This means we can bring the ABL product to our clients along with these other debt capital market products,” Muller-Girard says.
One of the things Muller-Girard says makes Key stand out from the rest of the ABL industry is its approach to clients. While Key serves a wide range of businesses, from small middle-market companies to very large companies, Key’s consistent use of its relationship approach makes Key unique in the ABL space.
That relationship approach is why Key does not classify clients as “ABL-only” clients. The bank focuses on keeping open lines of communication between clients, middle market bankers and other bankers to ensure ongoing discussion of clients’ broader strategic plans and needs. “We’re not offering the product in isolation,” she explains. “Many clients will move into ABL for a period of time to meet a very specific need, and later they move back to a cash-flow solution. We want them to have that continuity in their banker whether it’s a cash-flow transaction or an ABL transaction. We don’t want at that point and time, when the client is awaiting a cash-flow transaction, to all of a sudden need to add a brand new banker. We really want that flow and continuity in the relationship because we think it benefits the clients.”
In the spirit of remaining relationship oriented, some of Muller-Girard’s goals for 2013 and onward are to continue to support the middle-market franchise and to facilitate growth and capital for relatively small businesses. “We’re very relationship focused. And that is really a theme within KeyBank’s middle market and within KBCM. And so, our greatest goal is to meet client needs.”
Muller-Girard looks forward to the potential for increased business confidence, assuming that the government continues to focus on developing clearer tax and budget policies.
Many of the growth challenges the ABL industry faces, she explains, are related to market uncertainty and lingering concern about issues that were not resolved by last-minute legislation blocking the U.S. economy’s tumble over the fiscal cliff.
“My outlook on 2013 differs depending on what our government does next to deal with residual fiscal cliff issues. I think the economic environment could be very positive if the government shows it wasn’t just “kicking the can” when it comes to economic policy on residual fiscal cliff concerns and ongoing concern about the debt ceiling. Both factors – debt ceiling and lingering fiscal cliff issues – foster a general sense of uncertainty, and uncertainty keeps business owners from making additional investment in their companies.”
Once that cloud of uncertainty lifts, she believes the market will see greater investments from clients, entrepreneurs and private equity firms, which will help fuel activity within the ABL market.
Muller-Girard predicts opportunities for growth in multiple sectors in the space. Assuming strong retail spending continued in December, it would bode well for growth in the consumer sector, there anticipated growth in China’s economy carries with it potential for a commodity price rebound in the metals and mining sector.
Construction is also a sector that has taken advantage of asset-based lending, giving a brighter outlook for the ABL market. “Building products is a place where we have seen the ABL product used as well. And as we see a rebound in construction — both on the commercial and certainly on the residential side — we could see increased application of the ABL product for companies in that sector” she adds.
Regardless of the ongoing uncertainty created by concern over the fiscal cliff, Muller-Girard says that the ABL and other capital markets are healthier by far than they were during the Great Recession.
“There are a lot of alternatives that are available to borrowers today, more alternatives than were available after the fiscal crisis,” Muller-Girard says. “In 2008, 2009, 2010, clients who needed an ABL facility as their source of capital didn’t have a lot of choices. Today, cash-flow lenders are very hungry for assets, which has created a bit more optionality for borrowers. It’s a good thing for borrowers certainly; they get more access to capital.”
Muller-Girard says that Key is committed to the ABL business and that it is a priority for the bank. Although ABL once carried a negative connotation, Muller-Girard says ABL is a very good financing option for many companies, which is why Key’s ABL program has had success and has potential for more success. “It is a financing tool that once upon a time that had some taint around it perhaps,” she explains. “It was perceived to be a tool that was used for companies that were under some financial distress or some financial challenges. Today, this is a tool that can be used for a wide variety of applications. We look at the business we’re doing today, it includes acquisition financing [and] growth capital for investments. We’re actually doing a number of dividend recaps that should close prior to year end. So there are a variety of very positive reasons why people are using this product.”
She continues, “It’s a tool that’s really moved into the mainstream of financing options. And for any borrower who has an asset rich balance sheet — particularly with accounts receivable and inventory — this could be a solution for them. Pricing is attractive right now and it’s something they should investigate, in addition to potentially considering a cash-flow transaction.”
Megen Donovan is the assistant editor of ABF Journal.