Middle Market Debt Weekly: ABL Market Shows Robust Activity Amid Economic Headwinds

Asset-based lending activity for the week ending Sept. 14, 2025, demonstrated strength with $2.3 billion in announced facilities despite manufacturing contraction and tightening credit conditions. The standout transaction was Gordon Brothers’ $1.5 billion equipment finance joint venture with Davidson Kempner and Wells Fargo, signaling continued institutional appetite for asset-backed lending even as traditional banks pull back. Middle market borrowers faced a bifurcated market: strong demand from non-bank lenders offering creative structures, while banks maintained conservative underwriting with SOFR-plus spreads ranging from 190 to 310 basis points. The week’s activity underscored ABL’s growing role as critical financing for companies navigating economic uncertainty, with distressed situations commanding rates above 15% while well-capitalized borrowers accessed competitive facilities.

Major facility announcements signal market confidence

The week’s transaction volume reflected healthy middle market activity across diverse sectors. Aequum Capital Financial closed a $250 million debt facility with Wells Fargo on September 9, marking a significant expansion for the Castlelake-backed specialty lender targeting $5-35 million ABL deals.¹ The facility enables Aequum to expand its technology-enabled lending platform serving small and medium businesses nationwide. Summit Ridge Energy secured $305 million from Bank of America the same day for its community solar portfolio spanning Illinois and Maryland, with the oversubscribed facility supporting 158 megawatts of capacity that will serve 5,000 households while creating 3,000 jobs.²

The Gordon Brothers equipment finance joint venture announced September 4 represents a watershed moment for specialized ABL. The $1.5 billion partnership with Davidson Kempner Capital Management and Wells Fargo dramatically expands Gordon Brothers’ capacity to serve middle market and large corporate clients across construction, manufacturing, and transportation sectors.³ The facility offers comprehensive equipment financing including loans, capital leases, TRAC leases, and fair market value leases, positioning Gordon Brothers to compete directly with bank-owned equipment finance divisions. This transaction followed Gordon Brothers’ September 3 acquisition of London-based Atlantic RMS, expanding its accounts receivable audit and realization capabilities across Europe.

BlueLinx Holdings’ $350 million five-year syndicated ABL facility closed August 27, just outside the target week but significant for the building products distribution sector.⁴ The Bank of America-led facility with Citizens Bank and Truist provides total liquidity of approximately $730 million with an option to increase commitments by another $300 million, demonstrating continued lender confidence in asset-heavy distribution businesses.

Distressed lending commands premium pricing

The distressed ABL market revealed stark pricing disparities as troubled companies paid steep premiums for emergency financing. Azzur Group obtained $23.5 million in DIP financing from M&T Bank on September 9 to maintain operations during its Chapter 11 sale process, with ELIQUENT Life Sciences serving as stalking horse bidder at $56 million.⁵ The broader DIP market in 2025 has seen exceptionally expensive facilities, with Ligado Networks paying 17.5% PIK rates on its $939 million facility and Wilson Creek Energy accepting 13.5% interest plus 10% in total fees for just $15 million.⁶

Manufacturing and retail sectors showed particular stress, with 15% of companies with $100-500 million revenue considered vulnerable and facing $20 billion in near-term refinancing needs. Team Inc. successfully amended its $130 million Eclipse Business Capital facility, extending maturity from August 2025 to September 2027 while securing lower spreads and higher advance rates—a rare bright spot for distressed borrowers.⁷ Genesis Healthcare sought court approval September 8 to extend its $172 million facility purchase deadline as asset sale processes stretched into 2026, highlighting timeline pressures facing restructuring companies.

The rise in covenant amendments signals borrowers’ efforts to avoid bankruptcy. DXP Enterprises increased its ABL facility from $135 million to $185 million on July 1 despite growing from $1 billion to $1.9 billion revenue since 2020, demonstrating how even growing companies require additional flexibility.⁸ Nabors Industries amended its credit agreement September 4 to allow $100 million in annual equity repurchases while maintaining liquidity covenants, showing lenders’ willingness to accommodate performing borrowers.⁹

Technology integration transforms factoring and supply chain finance

Alternative financing channels experienced significant technology-driven expansion during the week. Amsterdam-based Factris secured a €100 million facility from Brand New Day on September 9, enabling cross-border SME financing across 27 EU markets through its Finance Automation for Business system delivering instant credit decisions.¹⁰ Toronto’s FundThrough closed a $25 million Series B led by Klister Credit while acquiring American platform Ampla, adding AI-powered automated underwriting to its platform that has already funded $3 billion in invoices.¹¹

Supply chain finance showed particular strength with Bank of America providing a multi-million dollar receivables facility to SemiCab India at just 1% above Indian Treasury rates, demonstrating competitive pricing for quality credits.¹² The global supply chain finance market, valued at $13.48 billion in 2025, is projected to reach $18.64 billion by 2029 with an 8.4% compound annual growth rate.¹³ Technology integration accelerated with FleetNow and Approve partnering September 8 to reduce construction equipment financing approval times from weeks to days through single digital applications accessing wide lender networks.¹⁴

The equipment finance sector demonstrated resilience with Fleet Advantage winning ELFA’s inaugural Excellence in Innovation Award on September 12.¹⁵ Industry new business volume reached $100.6 billion through October, up 3.7% year-over-year, though credit approvals dipped to 75.1% from historical ranges.¹⁶ The SBA’s new Manufacturer’s Access to Revolving Credit program launched September 3, targeting the 98% of US manufacturers classified as small businesses with flexible working capital options.¹⁷

Market conditions reflect cautious optimism

ABL market conditions during the week reflected competing forces of growth opportunity and economic uncertainty. The Federal Reserve maintained rates at 4.25-4.50% with markets pricing an 87% probability of a September rate cut, though ABL spreads showed no compression in anticipation. Manufacturing PMI registered 48.7% in August, marking six consecutive months of contraction despite new orders finally expanding.¹⁸ Retail sales grew a solid 0.5% month-over-month to $726.3 billion in July, with 3.9% year-over-year growth showing resilient but moderating consumer spending.¹⁹

Advance rates compressed across asset classes as lenders adopted more conservative stances. Accounts receivable advances held at 80-85% for quality borrowers, but inventory advances dropped to 45-50% from traditional 50% levels. Equipment advance rates declined further due to accelerated depreciation concerns. BRG research indicated lenders implementing more aggressive reserves and earlier intervention strategies, with banks increasingly pushing marginal deals to private credit markets that posted 40% year-over-year growth in asset-based finance.²⁰

Major bank earnings guidance remained cautious. Wells Fargo CFO Michael Santomassimo characterized potential Fed rate cuts as “helpful but not decisive” for loan demand ahead of October 14 earnings. PNC’s Bill Demchak noted businesses aren’t using working capital traditionally due to lingering pandemic effects, focusing instead on consumer lending penetration. JPMorgan continued investing in commercial banking capabilities while maintaining selective ABL approaches.

Strategic consolidation reshapes competitive landscape

The week witnessed significant consolidation among specialized lenders. ORIX Corporation USA’s completion of its 71.4% acquisition of Hilco Global on September 3 combined ORIX’s $91.3 billion in assets with Hilco’s asset appraisal expertise, creating enhanced asset-based private credit capabilities across Professional Services and Capital Solutions divisions.²¹ Hilco simultaneously spun off its HRP Group property arm September 8 as an independent entity targeting a $250 million value-add investment fund for complex redevelopment projects.²²

Regional and community banks showed varied approaches to ABL expansion. White Oak Commercial Finance closed a multicurrency facility of up to $125 million with Wells Fargo, supporting lending across the US, Canada, UK, and Australia. Multiple syndicated facilities demonstrated strong institutional appetite, with Wells Fargo Capital Finance and Bank of America leading most major transactions. The trend toward syndication reflects risk distribution preferences as individual banks limit exposure while maintaining client relationships.

Technology adoption accelerated across the sector with ABLSoft reporting its cloud-based portfolio management software can double staff productivity while cutting operational costs by 30%.²³ Digital platforms increasingly integrate with accounting software like QuickBooks and OpenInvoice, becoming table stakes for competitive lenders. AI-powered credit assessment and fraud detection capabilities differentiate leading platforms, with human touch models like Factris’s dedicated account managers proving successful against pure digital competitors.

Items to Consider

Monitor Equipment Finance Expansion: Gordon Brothers’ $1.5 billion joint venture represents significant new competition for traditional bank equipment lenders, potentially pressuring pricing and terms across the sector.

Evaluate Distressed Pricing Opportunities: The spread between performing credits (SOFR plus 190-310bp) and distressed situations (15%+) creates arbitrage opportunities for lenders with specialized workout capabilities.

Assess Technology Integration Impact: Digital platforms like Factris and FundThrough are reducing friction in factoring markets, potentially disrupting traditional relationship-based models.

Track Manufacturing Sector Stress: Six months of PMI contraction below 50 suggests continued pressure on ABL borrowers in industrial sectors, requiring enhanced monitoring.

Consider Rate Environment Implications: Despite Fed cut expectations, ABL spreads haven’t compressed, suggesting credit concerns outweigh rate relief anticipation.

Conclusion

The week revealed an ABL market adapting to persistent economic uncertainty through selective growth, technological innovation, and strategic consolidation. The $2.3 billion in announced facilities demonstrates continued demand for asset-based financing despite manufacturing weakness and rate pressures. Gordon Brothers’ massive equipment finance platform launch and ORIX’s Hilco acquisition signal institutional confidence in specialized lending’s long-term prospects. Yet the bifurcation between premium-priced distressed facilities exceeding 15% interest rates and competitive pricing for quality credits underscores the importance of strong asset bases and operational performance. As the Federal Reserve contemplates rate cuts and manufacturing seeks recovery, middle market borrowers face a landscape where access to ABL increasingly depends on embracing technology, maintaining asset quality, and partnering with lenders offering both capital and strategic value.

Footnotes

¹ Aequum Capital Secures $250 Million Debt Facility with Wells Fargo to Accelerate Growth

² Summit Ridge Energy and Bank of America Close $305 Million Credit Facility for Solar Portfolio

³ Gordon Brothers Propels Commercial Equipment Finance with $1.5B Joint Venture

⁴ BlueLinx Secures New $350 Million Asset-Based Lending Facility, Extending Maturity to 2030

⁵ Azzur Group Secures $23.5MM DIP Financing to Support Chapter 11 Sale Process

⁶ High-cost DIP loans and unique structures shape bankruptcy financing in early 2025

⁷ Team, Inc. Announces Amendment and Maturity Extension of Its ABL Credit Facility

⁸ DXP Enterprises, Inc. Announces Amendment of ABL Revolver

⁹ Nabors Industries’ Credit Agreement Amendment: A Strategic Move for Liquidity and Covenant Flexibility

¹⁰ Factris raises €100M to scale cross-border invoice factoring for European SMEs

¹¹ FundThrough acquires American company Ampla alongside fresh Series B funding