ABF Journal, March 2005
March 2005

Whereof What’s Past Is Prologue… Once Again, Competitive Forces Set Underwriting Standards Awhirl!

Whereof What’’s Past Is Prologue…

Asset-Based Loan Underwriting Standards Begin to Slide
By Howard Brod Brownstein, Principal, Nachman Hays Brownstein and Contributing Editor, ABF Journal

At recent meetings of asset-based lenders, a common theme was sounded: A scant 12 months into what many feel is a shaky economic recovery, asset-based loan underwriting standards are already sliding. Those who have been around secured lending for even a decade can easily remember similar cycles. Undoubtedly, Shakespeare said it best when he wrote, “Whereof what’’s past is prologue.”
(Ref # TM088)

From Workout to Turnaround —The Right Stuff For Borrowers & Lenders
By Mark A. Tito, Relationship Manager, PNC Business CreditThe great moments of asset-based lending occur when a lender discovers a client in a situation that looks close to hopeless, and then finds ways to help that borrower turn the corner and recover. Recently, a wave of successful
recoveries has contributed to new confidence in the lending industry and greater competition amongst lenders for distressed situations. How does a company go from workouts to turnaround status?

(Ref # TM034)

Whom to Tell When & How to Say It:
Handling Bankruptcy Communication in the Middle-Market
By Daniel F. Dooley, Principal, Morris-Anderson & Associates

The following article is a basic framework for proactive and positive communications to the various stakeholders as a company prepares and files for a Chapter 11 bankruptcy. In larger cases, professional public relations and communication firms are regularly engaged to handle this critical
task. However, in the middle-market, turnaround and workout firms often handle this task internally.

(Ref # BANK012)

Determining the Proper Path…
Machinery & Equipment Liquidation Versus Auction
By James Carlson, Appraiser/Auctioneer, Buxbaum/Century

When it comes to loans involving machinery and equipment (M&E), most lenders insist on an Orderly Liquidation Value (OLV) appraisal. Admittedly, rules enforced by their own institutions compel some of these lenders to take such a stance. However, even lenders that are not bound by mandates of
any kind will often refuse to waive an OLV appraisal requirement. While OLV may very well be the most prudent way to go in many cases, other considerations bear weighing before definitive action is taken.
(Ref # APP026)

Early Warning Signs:
Which of Your Customers Are Heading for Problems?
By Juanita Schwartzkopf, Principal, Focus Management Group

From February through April, lenders typically receive the majority of your customers’ year-end financial statements. This is the perfect
time to take a hard look at your borrowers and determine which ones are exhibiting the warning signs of problems in the future. Finding the early warning signs provides lenders with an opportunity to push for refinance, bring in outside consultants to improve performance, or renegotiate the lending relationship to better protect your assets — all before the financial crisis hits.
(Ref # TM089)

Converging Practice & Procedure in Canada…
A “Kinder, Gentler” Insolvency Process

By Kevin Morley, Chair/ABL Team and Tony Reyes, Partner, Ogilvy Renault

In Canada, the two most notable trends over that last few years have been a continuing convergence of substantive and procedural aspects of previously distinct processes, and a movement toward a “kinder, gentler” insolvency process, which has been more inclusive and cognizant of the rights of various stakeholders such as employees, unions and landlords.

(Ref # INTL022)

Speaking of Dilution…
A Guide to Dilution Analysis & Receivable Statistics (Part III)

By Joseph R. Caplan, President, Clear Choice Seminars

One of the most hotly debated areas of asset-based lending field exams is dilution and the related data stemming from the calculation
of receivable roll-forward data, often called AR Stats. Bar-room level fights? Perhaps not, but business development officers and borrowers have pounded their fists in protest of the results and have been humbled by the findings.

(Ref # IND060)


The “Not-So-Little” Inventory Nuance:
Small But Important Things to Consider In Field Exam Reports
By Michael J. Gilberg, Vice President, CIT Business Credit

LaSalle Business Credit provided financing for Archibald Candy Corporation, helping keep the company operational and its workforce employed while
it sought new ownership. This noteworthy transaction was recognized by the Turnaround Management Association as the Transaction of the Year
for 2004.

(Ref # FIELD005)

Postcard From the Future:
IFA’s 2005 Factoring Conference in Vancouver

By Bert Goldberg, Founder & Executive Director, IFA and President, Distinctive Solutions (Ref # FAC043)

Deepening Insolvency: A New Remedy or Problem Child?
By Valinda Barrett Wolfert, Shareholder and Jaime L. Myers, Associate, Winstead Sechrest & Minick P.C.

As with any emerging theory of legal liability, deepening insolvency has met its share of skepticism and criticism from the courts and legal commentators. As exciting as a general theory of liability against nearly every player involved in the demise of an insolvent corporation is to trustees seeking recovery, the very vague and seemingly shifting contours of this policy are troubling, to say the least, for secured lenders, directors, officers and any other professional who may be involved in a bankruptcy case.

(Ref # LGL042)