The Commercial Finance Association (CFA) released its Quarterly Asset-Based Lending Index, Q3/09, revealing a dramatic 29% increase in new credit commitments among asset-based lenders. Additionally, non-accruing loans continued to trend downwards, which, according to the CFA, represents further stabilization in the asset-based lending market.

“It’s clear that asset-based lending filled a crucial access to capital void in the third quarter,” said Andrej Suskavcevic, CEO, Commercial Finance Association. “Due to the sound business practices inherent to asset-based lending, our members continue to have the ability to provide vital financing to businesses of all sizes and across all industry classifications.

Maria Dikeos at Reuters Loan Pricing Corporation provided the following insight into third-quarter domestic ABL deals: “At just under $10 billion, Q3/09 asset-based issuance — although slightly down year over year and shy of Q2/09 figures — was nonetheless quite robust. Indeed, at roughly $34 billion, year to date ABL issuance was down only 7% compared to Q3/08 volume levels. With lenders cautiously and selectively returning to the business of lending, asset-based structures have benefited. Event driven transactions in the form of M&A remained scarce, yet refinancings fuelled issuance via amend and extend and cash flow to ABL conversions.

Arrangers point out that in Q3, the demand for ABL assets largely exceeded supply and that reverse inquiries were not uncommon. In turn, spreads came under increasing pressure and there was even some modest loosening of deal terms (LIBOR floors, for example, made a brief appearance on a few ABL deals earlier this year, but have been absent from more recent credits). Looking forward, hopes for fourth-quarter activity have been qualified. Coming off the end of August and into September, issuance slowed and the pipeline of deals remains fairly limited. Several lenders point out that in an otherwise conservative lending environment, they have already met budget and few expect a lot of deal commitments after the beginning of December.”