ABF Journal, June 2005
June 2005

ABL Products & Services…Supporting Finely – Tuned Operations

Opportunity for Partnership —

Letter of Credit Services Can Put Money on Your Table
By Michael J. Scheller, SVP & Kenneth S. Nadler, VP, Sterling National Bank

In recent years, the demand for letters of credit from asset-based borrowers has increased substantially, as international sourcing of completed products, raw materials and components has risen dramatically. Because a sizable proportion of asset-based borrowers import products or components, ABLs can develop an incremental revenue stream by offering letters of credit to their clients.
(Ref # LSP021)

Strategies for Extracting Value: Finding Liquidity in Hidden Assets
By Richard E. Schmitt, Principal, EVP/COO, AccuVal AssociatesThe following article explores several strategies which, when valued and applied properly, will
assist a company in obtaining additional balance sheet leverage from hidden assets. In addition, professional valuation firms can help companies and lenders identify underutilized or hidden assets that may be used as collateral to support an asset-based loan.
(Ref # APP028)

The Ascent to Prominence: An Insider’s View of UCC Insurance

By Theodore H. Sprink, SVP, Director of Sales & Marketing UCC Insurance Division, Fidelity National Financial Family of Companies

Available from the nation’s leading title insurance providers, UCC insurance has become a checklist item for most major mezzanine investors and lenders, oftentimes driven by secondary market considerations. Although UCC insurance is a relative newcomer to the financial markets, lenders and investors are poised to gain many of the same benefits currently and prominently enjoyed in the real estate markets.
(Ref # INS009)

Taking Proper Precautions…

What a Typical Field Exam Won’t Tell You About an Acquisition
By David Kleinman, Managing Director, LCG Capital

Whether it is pre-merger issues or post-merger integration, the field examiner and secured lender must be aware of various issues beyond just those on the exam report for the two companies. Sometimes this requires both the lender and examiner to go beyond the scope of normal due diligence.
(Ref # FIELD006)

For ABLs, Times Are Certainly Changing… The Internet’s Effect on an Industry
By Linda Hynes, Project Manager (StuckyNet-Link), William Stucky & Associates

In the not-too-distant past, asset-based lenders typically received their reporting via courier each morning. But time and the Internet have changed all that. More and more, customers are demanding Internet reporting and competition has necessitated it as many asset-based borrowers are requiring Internet access prior to entering into loan and security agreements.
(Ref # TECH006)

Financing Inventory In-Transit: Perilous Waters for Asset-Based Lenders
By Paul D. Schuldiner, Principal, Transcap Trade Finance

A significant segment of the U.S. manufacturing community has come to grips with the concept of competition on a global scale and, in more than a few cases, manufacturers have reluctantly entered the age of off-shore production. As a result, inventory issues such as location, international and U.S. customs regulations, logistic/transportation rights and insurance could appear to be unduly onerous for asset-based lenders.
(Ref # INTL025)

Identifying the Symptoms — Bad Inventory Provides a Window Into a Debtor’s Operational Problems
By Brian Mittman, Senior Director, Getzler Henrich & Associates

Obsolete or bad inventory is often symptomatic of deeper issues in a company’s operations, and knowing how to recognize and interpret these symptoms provides lenders with a new window into operations. This ability can give lenders an opportunity to recommend improvements at the debtor’s company before a loan situation deteriorates.
(Ref # TM037)


Relationships That Are “Built to Last”…

Setting a Higher Standard of Asset-Based Lending
A Profile of Joyce White, President of Bank of America Business Capital

Presiding over the market leader in asset-based finance was not exactly something Joyce White envisioned when she embarked on a career. However, with her keen instincts for business and banking, coupled with a skill in creating lasting relationships, White was named president of Bank of American Business Capital in March 2005.
(Ref # EXEC023)

Keeping a Cool Head…

A Sensible Approach to Detecting & Preventing Fraud
By Ken Waldych, Director, Executive Sounding Board Associates (ESBA Capital Group)

In the natural course of business, there is always pressure to get deals done while maintaining a positive relationship between the borrower and lender. However, cooler heads must prevail in these instances. No one ever wants to rue the day that they took shortcuts only to find out later that the today’s problems were actually detectable the day the loan was made.
(Ref # FRD012)

Keeping on Top of the Money… Protecting Your Interest in Your Borrower’s Cash
By Elizabeth Grzywacz, Senior Associate, Wolf Block

Deposit accounts, investment accounts & control agreements – oh my! Almost every borrower has cash or cash equivalents in deposit or investment accounts. Therefore, it’s in every lender’s best interest to know where the cash is, obtain a security interest and ensure that security interest is perfected.
(Ref # LGL045)

Happiness Is Never Having to Ask… Why Did I Waive My Marshaling Rights?
By Matt Donnell, Director, Kent Laber, Managing Director & Ed Mosley, VP, Barrier Advisors

Many intercreditor and lien subordination agreements today include provisions asking junior secured creditors to waive their rights under applicable law to assert the doctrine of marshaling. This has important implications for creditor recoveries vis-a-vis other secured creditors as well as unsecured creditors. Given the recent rise in the volume of second lien financings, it is likely that marshaling will become an ever-increasing topic of conversation in workout and restructuring circles.
(Ref # TM038)