TSL April 2018

Representing the Asset-Based Financing, Factoring & Supply Chain Finance Industries Worldwide April18

The Specialty Finance Issue IN THIS ISSUE: EVOLUTION OF RETAIL: RESHAPING HOW LENDERS THINK P.12 CONSTRUCTING OPPORTUNITY FOR ASSETBASED LENDERS P.16

LENDER FINANCE Q&A P.38 JENNIFER SHEASGREEN AND TIM PETERS DISCUSS CNH FINANCE’S ACQUISITION OF TRIUMPH HEALTHCARE FINANCE P.40

THE TRANSPORTATION INDUSTRY: THE APPRAISER’S POINT OF VIEW P.20 TRUCKING COMPANIES AND NONTRADITIONAL LENDERS: A PERFECT MATCH P.24 INDUSTRY DATA UPDATE P.26 FINANCING A HEALTHCARE PROVIDER P.28 LENDING TO THE ENERGY SECTOR: FLEXIBILITY IS KEY P.32

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Representing the Asset-Based Financing, Factoring & Supply Chain Finance Industries Worldwide

Volume 74, Issue 3

April 18

FEATURES 12 Evolution of Retail: Reshaping How Lenders Think Irene Marks of Wells Fargo Corporate Banking and Lynn Whitmore of Wells Fargo Capital Finance explain why there is reason for lenders to be optimistic about the retail industry. By Irene Marks and Lynn Whitmore

12 20 The Transportation Industry: The Appraiser’s Point of View

16 Constructing Opportunity for Asset-Based Lenders: Assessing Opportunities and Risks for Asset-Based Lenders Serving the Construction and Building Materials Industry

Gordon Brothers executives offer an overview of the current state of the construction industry and what lenders should know about the challenges and opportunities if they are considering lending to this segment. By Jim Burke, Blair Nelson, Alex Sutton and Rick Wilichowski

Bryan Courcier of Hilco Industrial discusses the challenges and growth opportunities of the transportation industry, including the valuation issues.

By Bryan Courcier

24 Trucking Companies and Nontraditional Lenders: A Perfect Match

The U.S. trucking industry’s struggle with a driver shortage has been reported on for years, but the situation is quickly deteriorating. In 2016, there was a shortage of 45,000 drivers which increased to 50,000 by the end of 2017, according to the American Trucking Associations (ATA). By Mary Ann Hudson

26 Industry Data Update – Thoughts on the Third Quarter 2017 Asset Based Lending Index

While we eagerly await fourth quarter 2017 results, it is clear that the third quarter was one of the strongest quarters in the past few years for our industry. The strength in the third quarter numbers was seen across the board from growth in commitments to overall credit quality. By the CFA Data Subcommittee

28 Financing a Healthcare Provider Freed Maxick executives discuss the important items a lender needs to be aware of when financing a healthcare provider, including understanding the accounts receivable collateral base and steps to mitigate exposure on a borrowing base report. By Eric Adornetto and Robert Wood

32

16 32 Lending to the Energy Sector: Flexibility is Key Mike Lorusso of CIT Commercial Finance provides an overview of the energy sector with emphasis on renewable energy sources. By Mike Lorusso

36 Lender Finance Q&A TSL’s editor-in-chief spoke with two leaders in the lender finance business, Cyndi Giles of Wells Fargo Capital Finance’s Lender Finance division and Terry Keating of Accord Financial. By Michele Ocejo

40 Jennifer Sheasgreen and Tim Peters Discuss CNH Finance’s Acquisition of Triumph Healthcare Finance Last month, CNH Finance, L.P., a specialty finance company, announced the expansion of its national commercial healthcare lending capabilities with the acquisition of Triumph Healthcare Finance, a division of TBK Bank, SSB.

By Michele Ocejo

DEPARTMENTS 6

Letter From CFA’s CEO, Rich Gumbrecht, discusses CFA’s upcoming endeavors.

8

Collateral The latest issues affecting the ABL and factoring industries, including company news and personnel announcements.

44

What Would You Do? In this edition of What Would You Do?, the Chief Credit Officer of Overadvance Bank considers the Bank’s options when the term loan lender to one of the Bank’s Chapter 11 borrowers demands adequate protection payments from the proceeds of the Bank’s senior lien collateral. The intercreditor agreement between the Bank and the term loan lender provides that the Bank cannot “oppose” the term loan lender’s request for adequate protection against any diminution in the value of the term loan lender’s senior lien collateral. By Dan Fiorillo and Jim Cretella

46

The CFA Brief 46 53 53 56 58

Among CFA Members Among CFA Education Foundation Members CFA Welcomes New Members CFA Chapter News Calendar

58

Advertisers Index

60

Legal Notes

STAFF & OFFICES Michele Ocejo Editor-in-Chief & CFA Communications Director Eileen Wubbe Senior Editor Aydan Savaser Art Director

Editorial Offices 370 Seventh Avenue Suite 1801 New York, NY 10001 (212) 792 -9390 Fax: (212) 564-6053 Email: tsl@cfa.com Website: www.cfa.com

Advertising Contact: James Kravitz Business Development Director T: 646-839-6080 jkravitz@cfa.com

The Commercial Finance Association is the trade group for the asset-based lending arms of domestic and foreign commercial banks, small and large independent finance companies, floor plan financing organizations, factoring organizations and financing subsidiaries of major industrial corporations.

The objectives of the Association are to provide, through discussion and publication, a forum for the consideration of inter- and intra-industry ideas and opportunities; to make available current information on legislation and court decisions relating to asset-based financial services; to improve legal and operational procedures employed by the industry; to furnish to the general public information on the function and significance of the industry in the credit structure of the country; to encourage the Association’s members, and their personnel, in the performance of their social and community responsibilities; and to promote, through education, the sound development of asset-based financial services.

The opinions and views expressed by The Secured Lender’s contributing editors and authors are their own and do not necessarily express the magazine’s viewpoint or position. Reprinting of any material is prohibited without the express written permission of The Secured Lender.

The Secured Lender, magazine of the assetbased financial services industry (ISSN 0888255X), is published 8 times per year (Jan/Feb, March, April, May, June, September, October and November) $65 per year non-member rate, and $100 for two years non-member rate, CFA members are complimentary, by Commercial Finance Association, 370 Seventh Avenue, New York, NY 10001. Periodicals postage paid at New York, NY, and at additional mailing offices. Postmaster, send address changes to The Secured Lender, c/o Commercial Finance Association, 370 Seventh Avenue, New York, NY 10001.

CORRECTION NOTICE: The March 2018 issue of The Secured Lender unintentionally referred to Rod Landis of the CFA New England Chapter as Ron on page 37. Rod has also since joined North Mill Capital as vice president after we went to print. We apologize for any confusion this may have caused.

letter from

w

THOUGHTS FROM CFA AND TSL STAFF

elcome to the Specialty Finance Issue! We had a tough time narrowing down the sectors this issue should delve into considering the breadth of our industry.

Everyone involved in this space understands that the scope of opportunities and the ability to make a difference are attributes that make commercial finance dynamic and attractive, but the industry and CFA have faced a long-time challenge: How to accurately determine and promote the size and impact of our industry. We have begun to tackle this challenge head-on.

In the coming months, the CFA Education Foundation will be conducting a groundbreaking Market Sizing & Impact Study to help us with advocacy efforts, attracting capital, strategic planning and benchmarking. Stay tuned for reports on our progress. In the meantime, consider this issue a sampler of the diversity the study intends to explore.

Before diving into this issue’s feature articles, I’d like to highlight a few noteworthy events to mark on your calendars. First, please keep an eye out for our Member Survey which will begin shortly. Your input is critical to shaping our agenda for the coming year and beyond, so please take time to participate and have your voice heard.

By the time you read this, the deadline for

CFA’s 40 Under 40 Awards nominations will be just a few short weeks away (May 1). The 40 Under 40 Awards honor the achievements of young commercial finance professionals and service providers from the CFA Community. The intent is to both highlight and inspire those beginning or growing their careers and to set the bar high for personal excellence. This year, industry veterans and leaders will gather to celebrate the 2018 recipients at The Pierre Hotel in New York City on September 20. For details visit www. cfa.com/40Under40.

Whether you’re engaged in cross-border lending or just considering the possibility, you will want to be at CFA’s International Lending Conference, May 15-17, at Mayer Brown in London. This iconic Conference has a new and exciting agenda that will bring together major players in asset-based lending from the U.S., U.K., Continental Europe and elsewhere for a comprehensive summit on cross-border asset-based lending.

In June, CFA is launching a brand new event: The CFA Idea Exchange, a membersonly, invitation-only working session event targeted to mid-upper level professionals in distinct operating disciplines. Unlike other panel format meetings, this highly focused deep-dive will feature peer-to-peer interactive conversations on relevant, highimpact issues moderated by leading experts.

The CFA Idea Exchange and its opening reception cruise around lower Manhattan is sure to be one of the most productive and memorable industry events of the year.

For details, contact Kayla Stypulkoski at kstypulkoski@cfa.com.

Speaking of ideas, I hope you’ll find inspiration in our Specialty Finance articles. On page 12, in Evolution of Retail: Reshaping How Lenders Think, Irene Marks of Wells Fargo Corporate Banking and Lynn Whitmore of Wells Fargo Capital Finance

explain why there is reason for lenders to be optimistic about the retail industry.

Gordon Brothers executives offer an overview of the current state of the construction industry and what lenders should know about the challenges and opportunities if they are considering lending to this segment on page 16 in Constructing Opportunity for Asset-Based Lenders.

Bryan Courcier of Hilco Industrial discusses the challenges and growth opportunities of the transportation marketplace, including valuation issues, in The Transportation Industry: The Appraiser’s Point of View on page 20.

In Trucking Companies & Nontraditional Lenders: A Perfect Match, on page 24, Mary Ann Hudson of Bibby Financial Services tackles a key issue in transportation lending: The U.S. trucking industry’s struggle with a driver shortage.

On page 28, Eric Adornetto and Robert Wood of Freed Maxick discuss the important items a lender needs to be aware of when financing a healthcare provider, including understanding the accounts receivable collateral base and steps to mitigate exposure on a borrowing base report.

On page 36, hear from two leaders in the lender finance business, Cyndi Giles of Wells Fargo Capital Finance’s Lender Finance division and Terry Keating of Accord Financial.

And Mike Lorusso of CIT Commercial Finance provides an overview of the energy sector with emphasis on renewable energy sources in Lending to the Energy Sector: Flexibility is Key on page 32.

I look forward to getting your feedback in our member survey and hope to see you at one of our many CFA events this spring and fall.

“In the coming months, the CFA Education Foundation will be conducting a groundbreaking Market Sizing & Impact Study to help us with advocacy efforts, attracting capital, strategic planning and benchmarking.”

Warm regards, Richard D. Gumbrecht CFA CEO

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You know something called H.R. 1628 Section 112 might change everything.

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MB Financial Bank Member FDIC

collateral INDUSTRY NEWS

THE INDUSTRY IN BRIEF

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CIT Names Mike Jones To Lead Business Capital Unit And Jeff Lytle To Lead Rail Unit CIT Group Inc. (NYSE: CIT) announced leadership updates as the company continues to focus on growth and development of its core business lines.

Mike Jones, who previously led the company’s Equipment Finance business, was named president of the Business Capital unit, effective immediately. Jeff Lytle, a 22-year veteran of the railcar leasing industry and currently a senior vice president in CIT’s Rail operation, has been named president of the Rail business, effective April 1, 2018. In these roles, both will report to CIT Chairwoman and Chief Executive Officer Ellen R. Alemany and serve on the company’s Executive Management Committee.

Steve Solk, who previously was president of both the Business Capital and Consumer Banking units, will now focus on the Consumer Banking business as CIT continues to grow its deposit franchises. Solk will also maintain oversight for the Commercial Services unit, which was previously part of Business Capital.

George Cashman, president of Rail, has elected to retire in June 2018, and will work with Lytle over the coming months to ensure a smooth transition.

“We entered 2018 with a strong focus on growing our business and expanding on our core strengths in the marketplace. I’m pleased to have Mike and Jeff lead two of our key business lines and build upon the progress we have made in these areas,” said Alemany. “One of CIT’s strengths is our deep expertise in our business segments, and we were able to draw on that internal strength in naming the new heads of our Business Capital and Rail units.”

Alemany continued, “These changes will also allow Steve to focus primarily on the growth and evolution of our deposit franchises and consumer banking initiatives. This is an important area for CIT, and I’m pleased to have Steve build on the momentum created over the last

DON’T MISS CFA’S 2018 EVENTS! WWW.CFA.COM

year. I also want to thank George for his steadfast leadership in managing the Rail business and developing a strong team of professionals in that business.”

CIT’s Business Capital unit empowers small, mid-and-large cap businesses by providing equipment financing solutions via technology-enabled platforms and market-leading structuring expertise. CIT’s Commercial Services unit is one of the nation’s leading providers of credit protection, accounts receivable management and lending services to consumer product companies. CIT’s Consumer Banking unit consists of the CIT Bank national direct bank, the OneWest Bank Southern California branch network and consumer mortgages. CIT’s Rail unit offers customized leasing and financing solutions and a diversified fleet of railcars to freight shippers and carriers.

Mike Jones is a seasoned leader with more than 20 years of experience in building and driving sales organizations. He joined CIT in 2016 as the managing director of the Equipment Finance business, and prior to that was the managing director for the Vendor Group at EverBank. He also spent nine years with U.S. Bank as director of the Eastern Division, Office Equipment Leasing and Financing. Earlier in his career he served as district manager for Sunoco Oil Company, and as vice president of Operations and partner in USA Inc. Before entering business, Jones was a U.S. Army Ranger and decorated captain who retired from the military in 1990.

Jeff Lytle has over 22 years of experience in railcar leasing and joined CIT in 2005. Currently, he is the senior vice president in charge of leasing for CIT’s tank, plastic hopper and boxcar railcar portfolios, and will be president of the Rail business on April 1, 2018. Prior to joining CIT, Lytle was senior vice president of Sales for GE Rail for nine

years. He also held several management positions at Ashland Chemical.

Founded in 1908, CIT (NYSE: CIT) is a financial holding company with approximately $50 billion in assets as of Sept. 30, 2017. Its principal bank subsidiary, CIT Bank, N.A., (Member FDIC, Equal Housing Lender) has approximately $30 billion of deposits and more than $40 billion of assets. CIT provides financing, leasing, and advisory services principally to middle-market companies and small businesses across a wide variety of industries. It also offers products and services to consumers through its Internet bank franchise and a network of retail branches in Southern California, operating as OneWest Bank, a division of CIT Bank, N.A.

Encina Business Credit Hires Former Hilco Executive Jeffrey Linstrom as General Counsel Encina Business Credit, LLC (EBC) announced that Jeffrey Linstrom has joined the company as General Counsel.

Linstrom, who is based out of EBC’s headquarters in Chicago, has approximately 30 years of experience in assetbased lending, commercial finance and restructuring finance. Before joining the company, he spent five years operating his own law firm that was primarily focused on asset-based lending.

Prior thereto, Linstrom spent 12 years at Hilco Global, where he most recently served as executive vice president, having originally joined as General Counsel reporting directly to the CEO. While at Hilco, he managed the legal affairs of the enterprise, developed key strategic initiatives, negotiated acquisitions and joint ventures, and served on the credit committees for each of the business units. Before Hilco, Linstrom practiced law for 13 years as a member of the corporate restructuring practice at two

Gerber Finance Inc. Expands to San Diego Gerber Finance, the leading growth-focused lender specializing in asset-based loans and trade finance solutions, announced the firm is expanding to the West Coast with an office in San Diego.

Industry veterans Rachel Donaghy and Lorraine Julius have each been appointed to the role of vice president and senior relationship manager, leading West Coast operations as a team to serve clients and help build the Gerber portfolio.

“Gerber Finance has experienced tremendous growth over the past few years, particularly on the West Coast,” said Gerald Joseph, founder and CEO of Gerber Finance. “Combined with our operations on the East Coast, our physical

presence in the West gives us the ability to further expand our portfolio and better service our West Coast clients.”

With over 20 years of experience in lending, Julius brings a wealth of knowledge and experience in sourcing and cultivating new deals.

“We were fortunate to find someone of Lorraine’s caliber to join our team,” noted Gerber Finance president Jennifer Palmer. “Her understanding of the marketplace and ability to create flexible customized solutions will help us expand our client base and strengthen our existing relationships.”

Prior to joining Gerber, Julius was vice president at LSQ for 13 years, where she consistently grew the company’s portfolio. Before that, she served as national sales manager of Capital Partners.

Noted Julius, “One of the main lessons I have learned over my career is that success is a direct result of meaningful relationships. By being on the ground to represent Gerber on the West Coast, I can foster existing relationships in this market while relying on my extensive contacts to expand our base.”

Alongside Julius, Donaghy joins Gerber with over 10 years of industry experience at eCapital LLC, where she consistently rose through the ranks and gained critical experience in each area of the firm’s business.

“Rachel is an ideal fit for our firm,” said Palmer. “Her knowledge base is well-rounded with a focus on sales, operational efficiency and relationship management. While Rachel’s interpersonal skills will be instrumental to our growth, her operational skills will be key to our expansion plans.”

“I’m excited to start a new chapter of my career and look forward to working closely with the New York team to further develop their already extensive West Coast portfolio,” noted Donaghy.

Added Joseph, “Knowing that Lor-

raine and Rachel are on the ground and able to work closely with our West Coast clients provides us with a tremendous amount of comfort. They will both play a key role in managing our risk while providing high-quality service to our clients.”

Founded in 1995, Gerber Finance is an asset-based and trade finance lender focused on financing companies in need of a flexible partner. Gerber specializes in working with growing companies and seasonal clients in need of creative facility with each credit facility designed to meet the individual needs of a business to allow it to meet its long-term goals.

INDUSTRY NEWS

distinguished law firms – Jones Day and Skadden, Arps, Slate, Meagher & Flom LLP. Launched in March 2016, EBC is an independent asset-based lending platform targeting middle-market borrowers in the U.S. and Canada that cannot obtain required financing from traditional banks. The firm provides revolving lines of credit and term loans ranging in size from $5 – $75 million and secured by accounts receivable, inventory, machinery and equipment and real estate. The platform lends to both privately-owned (sponsor and nonsponsor) and publicly-traded companies across a wide range of industries, including manufacturing, retail, automotive, oil and gas, services, distribution and consumer products. Borrowers use loan proceeds to fund working capital, acquisitions, refinancings, growth, restructurings/turnarounds, debtorin-possession (DIP)/exit financings and other special situations. Positive cash flow is not a requirement.

Monroe Capital Establishes Independent Sponsor Finance Vertical Monroe Capital LLC (Monroe) announced it has established an Independent Sponsor Finance vertical. Brad Bernstein, Chris Larson and Zia Uddin will lead the vertical, based out of the firm’s Chicago office. Brad, Chris and Zia have an average of over 20 years’ experience in private equity and independent sponsor finance.

The Independent Sponsor Finance vertical focuses on providing comprehensive “one-stop” solutions for independent sponsors seeking both debt and equity financing for acquisitions, mergers, business combinations and recapitalizations. In the last few years, Monroe funded 12 transactions involving over $300 million of debt and equity capital to independent sponsors. The team has a broad investment mandate and prides itself on its ability to move quickly and efficiently on new opportunities. The Independent Sponsor Finance vertical complements the existing healthcare, technology, media, specialty finance, and retail and consumer products asset-based lending

THE SECURED LENDER APRIL 2018 9

INDUSTRY NEWS

collateral

focused verticals.

In 2017, Monroe financed 77 direct lending investment transactions, involving over $2.0 billion of new capital deployed. Monroe manages in excess of $5.2 billion in various funds including private credit funds, separately managed accounts (SMAs), a publicly-traded BDC and other fund vehicles.

Monroe Capital LLC (Monroe) is a private credit asset management firm specializing in direct lending and special situations investing. Since 2004, the firm has provided private credit solutions to borrowers in the U.S. and Canada. Monroe’s middle-market lending platform provides senior and junior debt financing to businesses, special situation borrowers, and private equity sponsors. Investment types include unitranche financings; cash flow, assetbased and enterprise value-based loans; and equity co-investments. Monroe is committed to being a value-added and user-friendly partner to business owners, senior management, and private equity and independent sponsors. The firm is headquartered in Chicago and maintains offices in Atlanta, Boston, Dallas, Los Angeles, New York, and San Francisco. Monroe has been recognized

by Global M&A Network as the 2017 Small Middle-markets Lender of the Year; Private Debt Investor as the 2016 Lower Mid-Market Lender of the Year; M&A Advisor as the 2016 Lender Firm of the Year; and the U.S. Small Business Administration as the 2015 Small Business Investment Company (SBIC) of the Year. www.monroecap.com

PNC Announces Appointments to Senior Secured Financing Team in Chicago, Seattle PNC Business Credit, the senior secured lending division of PNC Bank, N.A., announces three appointments to its

10

DON’T MISS CFA’S 2018 EVENTS! WWW.CFA.COM

senior secured financing team in the Upper Midwest and Western regions.

Luke Tripodi has been appointed senior vice president and business development officer for PNC Business Credit. Based in Chicago, he has responsibilities for private equity and direct origination in the Minnesota and Chicago markets. Tripodi joins the organization from BMO Harris Bank where he spent the last 10 years, most recently serving as vice president for BMO’s asset based lending group. He holds a bachelor’s degree in business and psychology from Illinois Wesleyan University.

Brian Caldwell, also based in Chicago, is now senior vice president and business development officer with PNC’s senior secured financing team.

He is responsible for originating assetbased and cash flow loans for Chicagobased private equity firms. Caldwell joins PNC Business Credit from PNC’s corporate bank, where he served as senior vice president and senior banker responsible for new business development and relationship management for public and privately-held companies in Chicago. He holds a bachelor’s degree from Miami University of Ohio and a master’s degree from the University of Chicago Booth School of Business, with concentrations in finance and accounting.

Jenna Shah is now vice president and business development officer for PNC’s senior secured financing team. Based in Seattle, she is responsible for originating asset-based and cash flow loans with middle-market companies and private equity firms across the Pacific Northwest. A 10-year PNC veteran, Jenna most recently served as a relationship manager in Chicago for PNC Business Credit. She holds a bachelor’s degree in fine arts from Temple University, where she also completed post-graduate coursework in finance.

PNC Bank, National Association is a member of The PNC Financial Services Group, Inc. (NYSE: PNC). PNC is one of the largest diversified financial services institutions in the United States, organized around its customers and communities for strong relationships and local delivery of retail and business banking including a full range of lending products; specialized services for corporations and government entities, including corporate banking, real estate finance and asset-based lending; wealth management and asset management. www.pnc.com

Eric Gill Joins Siena Lending Group as Director - Southeast Originations Siena Lending Group LLC (Siena) announces that Eric Gill has joined the firm and will be leading its business development efforts in the Southeast as director-Southeast Origination. Eric is well qualified to lead this expansion into the Mid-Atlantic and Southeast United States with over 35 years of experience and $1 billion in closed transactions. Eric was formerly Chief Credit Officer with Virginia Commercial Finance since 2013 and has held senior sales positions with Webster Business Credit, GE Commercial Finance, and The CIT Group.

Eric’s thorough knowledge of all aspects of the credit process and experience with a myriad of industries has allowed him to serve as both a trusted advisor and lender to small and middlemarket businesses. Eric is active with the Commercial Finance Association, Turnaround Management Association, and Association for Corporate Growth and will be headquartered out of Charlotte, NC. “We are very pleased to be entering the Southeast regional market with

Gordon Brothers Enhances Business Development Team Gordon Brothers, the global advisory, restructuring and investment firm, announced enhancements to its business development team within its valuation

group across North America. These new appointments strengthen the group’s business development footprint across the northern, midwestern and western regions of the u.S. As well as canada, complementing its presence in the northeastern, mid-atlantic and southeastern U.S. “We’re excited to announce these new additions to our business development team to provide the broadest coverage of any appraisal firm in North America,” stated Frank Grimaldi, Senior Managing Director of North American Sales for Gordon Brothers’ valuation practice.

“All of our new additions are prior commercial and industrial appraisers.

They will bring practitioners’ knowledge of the appraisal process and values directly to our clients,” stated Ken Frieze, CEO of Gordon Brothers. “It’s exciting to see talent developed and promoted internally,” he added.

Based in Chicago, Ryan Ray’s client base has expanded to include all of Illinois, Ohio, and western Pennsylvania.

Ray has been active as an appraiser and business development officer in the midwest region for over 15 years.

He holds his Uniform Standards of Professional Appraisal Practice (USPAP) certification.

Based in Toronto, Mosana Khan will provide business development support for clients across all of Canada. Khan is a native Canadian and has experience as an industrial inventory appraisal analyst with Gordon Brothers. He holds a master degree in economics from the University of Waterloo.

Based in Milwaukee, Eliot Kaufmann will be responsible for the northern region as well as some portions of the midwest (North Dakota, South Dakota, Nebraska, Kansas, Minnesota, Wisconsin, Iowa, Missouri, Michigan, Indiana, and West Virginia). Kaufmann served as a senior appraiser of machinery

and equipment and holds a Uniform Standards of Professional Appraisal Practice (USPAP) and American Society of Appraisers (ASA): Introduction to Machinery and Equipment Valuation certifications.

Based in Los Angeles, Jordan Henrich was appointed in October 2017 to provide business development coverage for Gordon Brothers in the West (California, Oregon, Washington, Nevada, Idaho, Utah, Montana, Wyoming, Alaska, and Hawaii). He previously worked as a senior consumer products and industrial appraisal analyst and holds his Uniform Standards of Professional Appraisal Practice (USPAP) certification.

Based in Austin, Aaron Walton has been promoted to Managing Director in recognition of his continued success in client service. Walton has added Arizona to his client base and will continue to cover his existing Southwestern territory (Colorado, New Mexico, Texas, Oklahoma, Arkansas and Louisiana).

Michael D. Sullivan will continue to serve the mid-Atlantic, Fran Garvin will continue to serve the northeast, and Conrad Lauten will continue to serve the southeast. They work alongside seasoned business development leadership, Frank Grimaldi and Rick Ferron, who both work across the U.S. and Canada.

Gordon Brothers also maintains valuation practices across Europe, Asia, Australia and South America. It became the largest appraisal firm serving the asset-based lending industry in the world following its 2015 acquisition of AccuVal.

INDUSTRY NEWS

an experienced industry veteran. Eric will help us continue our growth and expand our reach to help companies obtain financing,” said David Grende, president and CEO of Siena Lending Group.

“I am very excited to join a group of experienced asset-based lenders that have a very proven and successful track record of helping small and middlemarket businesses,” stated Eric. “Siena’s turn key servicing platform for community and regional banks also provides an excellent solution that creates a win-win outcome for both the borrower and the lender.”

Eric can be reached at (704) 256-8090 or egill@sienalending.com.

For middle-market companies nationwide that may have difficulty accessing traditional financing, Siena is a leading independent asset-based lender, offering asset-based loans from $2 million to $30 million, and consistently finding creative ways to provide financing when others struggle. With deep lending experience and expertise in complex situations, Siena provides more flexibility and liquidity than borrowers could obtain elsewhere. Clients can feel confident knowing Siena will effectively help them overcome critical challenges and work with them as a committed partner.

Siena also offers a turn key servicing platform, ABL Alliance, which allows regional and community banks and credit funds to offer asset-based lending while mitigating risk and eliminating traditional infrastructure requirements.

Remember

THE SECURED LENDER APRIL 2018 11

Evolution of Retail: Reshaping How Lenders Think

BY IRENE MARKS AND LYNN WHITMORE

12

DON’T MISS CFA’S 2018 EVENTS! WWW.CFA.COM

Irene Marks of Wells Fargo Corporate Banking and Lynn Whitmore of Wells Fargo Capital Finance explain why there is reason for lenders to be optimistic about the retail industry.

For the better part of 2017, it seemed that many were panicking over the state of the retail industry; were changing consumer habits, seismic demographic shifts in spending, and the continued rise of Amazon to be the death knell of the retail industry?

Ominous headlines appeared almost daily predicting the apocalyptic demise of all things retail. But some few months into 2018, it appears the retail industry does not, in fact, seem doomed and, when taken as a whole, last year ended on a relatively positive note for retailers. Holiday sales were better than expected for many, which has generated some bright spots and renewed investor interest in the market. And, in fact, it seems some retailers are not just surviving, they are finding new ways of thriving. As retail continues to evolve, the challenge for both retailers and those involved, such as manufacturers, wholesalers, landlords and lenders, is understanding these changes and – for lenders in particular – finding and embracing new ways to serve the capital needs of retail clients.

Evolution of the Consumer and Retail’s Adaptation Overall, retail is seeing moderate growth, though a deeper look into the numbers shows a more positive outlook for those retailers willing to navigate the mindset of today’s consumer. On a standalone basis, brick-and-mortar locations can still be a draw. But to be successful, it’s no longer enough to draw customers in with attractive window displays and advertised sales promotions. Stores need to be an integrated component of a retailer’s overall offering to customers and find a way to resonate with them. ◗ Is the retailer working to prove it really knows and understands its customers? Perhaps its store footprint should include digital/ systemic capabilities to interface with smartphone technology, equip store personnel with each

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customer’s past purchase history and suggest products that appeal based upon more than guesswork might have historically. ◗ Is the retailer offering convenience and ease of shopping experience?

Perhaps brick-and-mortar locations should complement online and direct mail efforts to serve as a pickup location for purchases made online. Having stores equipped with the technology to understand when customers are en route, and having the inventory pulled, packaged and waiting maximizes the customers’ satisfaction. ◗ Are customers expecting a retailer to possess a high level of community involvement and/or environmental consciousness as its commitment to customers?

Brick-and-mortar stores should potentially serve not only as purchasing depots with racks and shelves of products for sale, but also as gathering places centered on communal interests and engagement in the greater city or town, reflecting the very personal, but shared, interests of those customers living there. Similarly, environmental awareness should be reflected in every step of the manufacturing, sourcing and delivery of the products; many consumers want to feel good about buying products, and retailers who are winning by appealing to this have embraced a partnership whereby they help customers “give back.” ◗ Is a retailer truly “omni-channel”?

A retailer’s presence must truly connect with customers across all channels: brick and mortar, e-commerce websites, catalogs and digital applications with total transparency to the customers.

Creatively using these outlets to complement each other, as in the case of online retailers like Warby Parker opening brick-and-mortar locations in order to showcase their merchandise, provides broader appeal to target customers

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and more successfully connect a retailer to the shopper.

What we are seeing is that some retailers are able to comfortably navigate the new retail reality and are taking full advantage of the opportunities it presents. Christa Hart, senior managing director of FTI Consulting, talked about Amazon at the Commercial Finance Association’s Asset-Based Capital Conference recently, stating that FTI estimates Amazon’s online retail sales (including third-party sales) accounted for nearly 40 percent of total U.S. online retail sales in 2017 versus 34 percent in 2016. 1 The key to success today lies in how companies are differentiating themselves with customers, whether it be with an exceptional omni-channel experience or by offering a product or service they simply want. In short, companies disrupting the traditional retail model are successfully integrating retail with technology, like Amazon.

The “M” Word Perhaps the largest influencer upon the changes in the retail industry is the Millennial generation – those born between the early 1980s to early 2000s. They are often associated with the evolution of the industry, based upon the radical changes in their shopping and spending habits relative to that of earlier generations, but are they getting a fair assessment?

Are Millennials really shopping that differently from their parents?

According to Hart, not entirely.

Although many do research and comparison-shop online, nearly 67 percent of their purchases are surprisingly made offline. Statistics also show that shopping habits of younger versus older Millennials is also distinct, in that the latter prefers the mobile shopping experience, whereas the former tend to prefer physical locations.

Additionally, Millennials, much like their parents, look for savings. Many would easily switch brands or go to a

physical store location if it meant a discount of 30% or more, Hart found.

What this generation does not want, however, are their parents’ brands.

They still want to shop with retailers that appeal to their moral and social standards, ethnical practices, shopping preferences and price points.

What Does This Mean for Asset-Based Lending?

For asset-based lenders, the changing landscape of retail has translated into their own ongoing evolution of how banks are approaching loan structures. Once solely focused on traditional collateral such as inventory, accounts receivable and real estate, lenders are now much more willing to consider other assets – both tangible and intangible — such as patents, trademarks and customer lists. While this has presented some challenges, these challenges are far outweighed by the opportunities to enhance the asset-based loan offerings and support customers in today’s new retail reality. TSL Christa Hart, SEC filings and FTI analysis, Commercial Finance Association’s 2018 Asset-Based Capital Conference, February 6, 2018

1

Irene Marks is a managing director and head of the Retail team in the Consumer & Retail Group of Wells Fargo Corporate Banking. She is responsible for a portfolio of retailers in all sub-sectors – department stores, apparel, hard lines, specialty, grocery, e-commerce and others – and her group provides innovative capital solutions, financing expertise and traditional banking products.

Lynn Whitmore is a managing director of Retail Finance for Wells Fargo Capital Finance. She leads the business development and underwriting efforts for the Retail Finance Division that provides customized product capabilities for retailers across North America.

CAPITAL THAT WORKS AS HARD AS YOU DO. Sharon Bender, SVP 732.590.9380

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ASSESSING OPPORTUNITIES AND RISKS FOR ASSET-BASED LENDERS SERVING THE CONSTRUCTION AND BUILDING MATERIALS INDUSTRY

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BY JIM BURKE, BLAIR NELSON, ALEX SUTTON AND RICK WILICHOWSKI Gordon Brothers executives offer an overview of the current state of the construction industry and what lenders should know about the challenges and opportunities if they are considering lending to this segment.

THE SECURED LENDER APRIL 2018 17

The past eight years have seen significant growth in the construction industry. However, that growth story consists of winners and losers across sectors and asset types.

Construction loans currently represent only a small fraction of asset-based lending activity, about 1-2 percent. This disconnect between strong industry performance, the asset intensiveness of construction, and the small penetration of asset-based lending to the industry represents untapped value for investors. But capitalizing on that opportunity requires careful consideration of the sources of value, positive and negative.

Understanding the optimal timing for liquidation, the costs required to do so, and other factors that impact performance and recovery values will ensure lenders can succeed. Major drivers of construction asset values include overall market activity; trends within subsectors supported by construction; seasonality; asset specificity; equipment manufacturer preferences; commodity cost exposure; liquidation costs, and the viability of other soft assets that complement hard assets, such as rental streams.

Market Activity The construction industry is currently in mid-cycle expansion with steady activity at current levels expected in most regions.

Since reaching a cyclical low in 2010, the construction industry has enjoyed a steady increase in the value of construction put in place, a measure of construction industry output. Total construction spending in 2017, as reported by U.S Census Bureau, was up 53 percent from 2010 levels. Over this period, many construction companies and their lenders have seen positive returns. Based on current industry forecasts, this performance trend will likely continue.

The Architectural Billings Index (ABI), a leading indicator of expected activity based on a survey of architects, remains at elevated levels for the coming year. Architects of all specializations (commercial, institutional, and residential) have reported an increase in both billings and design contracts, as well as increasing levels of inquiries. On a regional basis, business conditions are strong across the U.S., with the exception of the Northeast where the outlook dropped

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through the last quarter of 2017.

Another indication of industry stability and growth is the increase in construction pricing as indicated by the Turner Building Cost Index. The cost index records U.S. non-residential building construction costs.

Since 2010 the index has increased 32 percent, reflecting steady growth in construction material and labor inputs.

While these leading indicators point to continued near-term growth, lenders need to consider the potential for a downturn and what this would mean for the underlying collateral.

Sector Risk Lenders also need to have a good understanding of the key drivers of their clients’ activity and what sector exposure they might have. Even with increasing construction activity, there can be areas of strength and weakness based on sector variations.

Residential construction, having reached historic lows through the recession, has performed well through this cycle with activity levels up over 100 percent. Nonresidential construction growth has been more subdued, representing total growth of 27 percent since 2010.

Within nonresidential, sectors such as office, lodging, manufacturing, power, communication, amusement, and recreation have overperformed, while other sectors such as education, healthcare, and water infrastructure have underperformed. As a result, construction companies serving the lodging or power sectors may have experienced growth over this period, while those serving the education sector may have struggled. Some mitigating factors include having long-term service contracts and orders booked through the targeted loan period.

Seasonality As in any asset-based loan, understanding collateral dynamics is critical. Unsurprisingly, building products and construction is a very seasonal business; April through October is typically the high selling period during which time as much as 70 to 80 percent of sales may occur. However, variations in weather can shift this timeframe from year to year, which is why a high-low

analysis is always recommended as part of the appraisal scope. Depending on the asset type, values can swing by as much as 5 to 15 points between seasons.

A longer construction season in warmer parts of the country creates more stable demand in those regions. Elsewhere, demand is seasonal with major purchasing of equipment happening in late winter and early spring, after builders have contracts lined up. Because of these fluctuations in the asset base, lenders may consider a more conservative advance rate on assets located in the Midwest or Northeast where seasonality is more pronounced.

Asset Specificity Lenders need to consider how easily their collateral can be repurposed if needed.

While some equipment is multipurpose and can be redeployed to other uses, some is job-specific. Recovery values on job-specific or customized assets can be impacted by industry downturns as demand for those assets shrinks. For example, during the post-recession oil and gas boom, demand for construction equipment rentals surged.

When oil prices declined in late 2014, utilization of rental fleets serving the oilfield dropped, causing portfolio exposure for lenders.

For assets that can be repurposed, but require modifications, the costs to do so need to be carefully considered. For example, many crawler cranes coming out of the oilfield lack booms and other features civil contractor buyers might want. As a result, those buyers will pay less for cranes serving the oilfield, knowing modifications will be needed to make the equipment productive.

For equipment that has many uses, it’s still important to consider variations within the category. For example, mobile cranes have wheels and can drive on the road, which makes remarketing the assets easier as the equipment can be readily relocated or grouped with similar assets to attract a larger pool of buyers. Crawler cranes, on the other hand, are not road-ready and need to be trucked. Costs to tear down and trailer the cranes increase recovery expenses.

Additionally, a crane’s age, capacity and accessories are all major value drivers.

Lenders should expect appraisers to list

these detailed specifications and auxiliary equipment, as these specifications affect the asset’s marketability.

In a small number of cases, highly specialized equipment may recover better because the asset is of strategic importance to a competitor. For this reason, it’s important to work with appraisers that understand the nuances of different equipment types and the forces affecting the industry.

Equipment Manufacturer Preference Lenders should also be cautious of the recovery implications of different original equipment manufacturer (OEM) brands and their acceptability in the marketplace.

While the assets may be of high quality and condition, appraisers and liquidators also consider the brand loyalties of prospective buyers. For many, the OEM brand can be a benefit if their employees are pre-trained and experienced in using that equipment. It can also be a significant drawback and lead to reduced recoveries if re-training requirements exist for the buyer. Other softer factors, such as preference and manufacturing, may also affect recoveries of various equipment. This consideration applies most heavily to equipment leasing borrowers.

Commodity Cost Exposure Another area of consideration lenders should assess is whether borrowers may be exposed to fluctuations in commodity values. Building materials distributors, equipment manufacturers and civil or commercial contractors may be vulnerable as they require commodity inputs or maintain commodity inventories. The prices of commodities fluctuate based on market conditions, which are in turn affected by regulatory and geo-economic changes.

Within the last 12 months, a major trade case related to soft wood lumber was decided, increasing lumber prices.

The current renegotiation of NAFTA may potentially affect other building products as well. At the time of this writing, new steel tariffs imposed by the Trump administration loomed, likely causing price increases.

As a result, borrowers may face unexpected cost increases that could compress margins.

Operators that work on a project basis are most vulnerable as input prices may

differ at the time materials are purchased from when the contract price was agreed.

Recoveries on existing steel inventories, on the other hand, may benefit.

Liquidation Costs While individual asset recoveries may be strong within certain segments of the construction industry, the costs to undertake a liquidation can be quite high. As mentioned previously, transportation costs for heavy equipment assets can be significant if relocation is required.

On the inventory side, while gross recoveries may be strong for building-products distributors, liquidation expenses can be as high as 20 percent. Many of these companies sell to either retailers or professional builders, which rely on delivery of products to stores or job sites. In these scenarios, the costs to maintain the delivery fleet are typically included in the liquidation expenses and can be as high as seven percent. For companies that rely heavily on salespeople to maintain customer relationships and market products, an additional commission expense may be built into the liquidation assumptions. Depending on whether buildings are owned or leased, real estate may also contribute to the expense burden.

Rental Streams In addition to lending against hard assets, lenders should examine the possibility of evaluating contracts for equipment rental companies, which are often overlooked.

Contracts range in duration from one to six months for short-term contracts, to one to four years for long-term contracts Long-term contracts can have significant unexpired terms as of a liquidation or valuation date, which can produce substantial cash flow. Lenders to equipment rental companies should consider including the value of those rental streams. It’s important to partner with appraisers that have experience valuing contracts to conduct this type of analysis.

Conclusion While construction holds significant opportunity for asset-based lenders, it’s important to partner with professionals that understand the industry and can help identify

risks and additional sources of value. There’s a wealth of collateral across the industry, but the assets can behave very differently in liquidation based on the factors detailed above, and more. TSL Jim Burke is director, Commercial & Industrial, for Gordon Brothers. He is responsible for deal analysis and structure, financial management, and ongoing industrial deal operations for Gordon Brothers. He has experience in a variety of sectors, including construction equipment; machine tools; metals and metalworking; oil and gas; ship building; steel production & processing; and woodworking and timber processing.

Blair Nelson is managing director, corporate development, for Gordon Brothers. He is responsible for the development and execution of strategic initiatives across the firm, including supporting divisional planning efforts and assessing new business opportunities. Before joining Gordon Brothers, Nelson served as the General Manager, Corporate Development for Fletcher Building in New Zealand, a multi-national industrial conglomerate.

Alex Sutton is managing director, Industrial Valuations, for Gordon Brothers. He oversees the production of Gordon Brothers’ industrial inventory valuations. With more than a decade of experience, Alex has directed inventory appraisals across a wide range of industries, including building products, industrial machinery, lumber, machine tools, and transportation.

He has completed the Uniform Standards of Professional Appraisal Practice (USPAP) coursework and is a Candidate of the American Society of Appraisers.

Rick Wilichowski is managing director, Machinery & Equipment Valuations, for Gordon Brothers. He oversees the production of machinery and equipment valuations. Prior to this role, Rick headed AccuVal-LiquiTec’s Machinery & Equipment Valuation practice, prior to its acquisition by Gordon Brothers in 2015, where his team produced reports used primarily for financing, financial reporting, property tax and litigation support.

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The Transportation Industry: The Appraiser’s Point of View

BY BRYAN COURCIER Bryan Courcier of Hilco Industrial discusses the challenges and growth opportunities of the transportation industry, including the valuation issues.

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The transportation industry is a massive part of the U.S. economy. It employs millions upon millions of people and touches nearly everything that we as consumers rely upon for our personal and professional lives.

From the cars that we drive to the appliances used in our homes, groceries we bring home, the food we eat when dining out, and anything that arrives within 24-48 hours after an order is finalized on with an online retailer has been on a commercial vehicle. Freight is brought from near and far on trucks and trailers. A long-haul operator can average as many as 500 miles per day on the road, bringing cargo of all shape, size and purpose.

Since climbing out of the recession years, freight transportation in the U.S. and Canada has been in a relative boom. However, in that same period of time, EPA standards and the technologies that accompanied the new emissions policies have not come without some significant and not-so-significant hiccups along the way. Fleet operators have had to relearn how to treat and service their trucks in the garage and on the road to get the most out of their assets. Many of the changes to the trucking industry have diminished vehicle efficiency, diminished performance, increased service costs and increased new truck pricing. All the above have come about because of emissions regulations that everyone associated with Class 8 trucks knew about years before the new laws came into effect. Nonetheless, the last several years have been an adjustment period. Specific examples can be cited, but no manufacturer has been completely immune to the industry’s regulatory growing pains. In response to the strain environmental requirements have put on truck performance, technological advancements have countered in several different ways, which we will get into below. As they say, the show must go on. And with roughly 70% of all U.S. freight being moved by trucks on an annual basis, the industry has some serious inertia

and is expected to grow at a steady rate over the next five years.

EPA regulations aren’t the only challenge truck transportation is facing.

For an industry that is expected to grow in freight volume at a rate of 3% per year through 2023, a primary concern is the lack of competent drivers.

The pace at which drivers are retiring, growth patterns, and an unappealing work/life balance for long-haul carriers is causing a bottleneck that needs to be addressed. Better overall compensation for drivers is a component of how trucking companies are working to bring in more qualified operators. Like so many generally well-paying vocational careers, trucking does not appeal to up and coming generations growing into adulthood.

Maintaining current driver numbers is a challenge for a rather healthy industry. Growing the number of commercial drivers licensed (CDL) operators in North America is a real and present challenge. According to Barry Pottle of the American Trucking Association, freight haulers experience somewhere in the range of a 50% rate of annual turnover with their drivers. This is a serious challenge for the industry at large and poses a real challenge to increasing demand for freight volume today, and in the immediate future.

The trucking industry, in its current format, will not be able to keep up with the demands of U.S. consumers.

From a manufacturing perspective, changes in truck technology have been made to address driver shortages. Automatic transmissions were nearly unheard of in pre-recession 2007. Long-haul and mid-range freight carriers are adopting automatic transmission fleets to place less onus on an individual driver to know how to operate a double clutch. Benefits to an automatic transmission include a massive list of electronically monitored vehicle diagnostics that take fuel efficiency, savvy load weight management systems, and even GPS-driven road-grade responsiveness out of the driver’s seat, and into the technology

THE SECURED LENDER APRIL 2018 21

within the truck tractor itself. Volvo, in particular, has been a leading manufacturer for high-volume long-haul fleet providers.

Modern electronic logging-device rules (ELD Mandate) were established in December of 2015, and the deadline for carrier compliance was December 2017. ELDs bring all fleets into the 21st century with up-to-date systems that monitor driver’s daily hours, how hard each operator runs their rig, and how well each driver generally looks after the unit on a trip-by-trip basis. An ELD is now required whether a freight provider has automatic or manual transmissions. Fleet operators within the industry have been hemming and hawing about some potential negative consequences of the ELD Mandate, but the facts are electronic diagnostics are mandatory for all haulers. Other voices in the industry are quick to point out that dispatchers can identify and predict the efficiency of their drivers, understand when certain deliveries and loads are expected to make it to their destinations, and plan in real time accordingly. Ultimately, electronic logging systems are presenting more benefits to freight hauling than drawbacks.

EPA compliance, qualified driver shortages, technological & diagnostic advancements, are all macro trends that are universal for all small, midsized and large fleets in North America. The industry itself is so vital to the U.S. and Canada, and such an integral part of the economy, that investing in the industry is understandably a serious consideration for any organization with expertise in equipment finance, commercial finance, leasing, asset-based lending and factoring.

So, what needs to be kept in mind when investing in transportation?

Profit margins can be razor-thin.

Operating a healthy, well-maintained fleet, while avoiding unnecessary expenditures, is a requirement of any fleet operator if they want to stay in the game long term. Gaining an understanding of the company’s core

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competencies and pro-active knowledge of a rapidly evolving industry is key to continued success. Periodic collateral inspections combined with updated valuations by a reputable third-party appraisal firm ensure an active running knowledge of the company’s operation and maintenance programs. Building a running book on a freight company’s fleet will ensure an immediate recognition of any falloff in care and maintenance of the assets you are invested in. The absolute most timeless and indicative sign of fleet company mismanagement and/ or financial struggles is a falloff in fleet maintenance, leading to degradation of value. Make sure your operator maintains the same level of service it had at the outset of the relationship.

If an operator is putting in a new order, here are some major factors that effect resale value: What color is the fleet that you are financing?

White is the most common color. If a company has a specific brand identity, then so be it. However, painting trucks a distinctive color can have negative ramifications in the resale market.

The same dynamic exists with decal wraps. Repainting or de-identifying trucks can end up costing several hundred dollars per unit and amounts to time delays in getting those newly acquired units back out onto the road and earning money. Do not order the most “bare-bones” trucks. Attracting operators to sit in the driver’s seat for 8-10 hours requires some amount of comfort. Placing order on trucks that have mid-grade finishes and amenities will cost marginally more up front, but will be rewarded in the resale market when the next tier of truck operators buy the same trucks used. Don’t be afraid of automatic transmissions. It is the future and now of freight hauling and should be embraced.

Trucking remains a vibrant, vital and integral industry to the American economy. This year looks to be one of growth and increased demand. Most forecasting within the industry predicts several more years of challeng-

ing yet fruitful years. On the horizon, trucking experts can see more radical innovations and advancements in technology: however, in the immediate future the same fundamental rules apply to investing in transportation that have prevailed the past three to four years. Late model, quality trucks reward their owners in the resale market. Finding quality operators will continue to be a challenging issue for fleet and overall growth. Freight transportation, while an ever-evolving industry with real capacity challenges, remains one of the bedrocks of North American industry and for the time being is full steam ahead. TSL Bryan Courcier is senior vice president of Hilco Global. He joined Global in 2016 from his previous position at Ritchie Bros. Auctioneers, where he served as a National Account Manager with a focus on insolvency, restructuring and special situations within the transportation, construction, and heavy equipment industries. Courcier serves Hilco Valuation Services and Hilco Industrial today with an extensive knowledge of equipment lending and asset management functions from a banking, finance, and operations perspective. He graduated from the University of Northern Colorado in 2006 and is based in Colorado. He is an active member of the Turnaround Management Association, the Commercial Finance Association and the American Bankruptcy Institute.

CFA IS LOOKING FOR THE BEST AND BRIGHTEST IN THE INDUSTRY

CFA 40 UNDER 40 AWARDS

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CFA 40 UNDER 40 AWARDS

Trucking Companies & Nontraditional Lenders

A Perfect Match

BY MARY ANN HUDSON The U.S. trucking industry’s struggle with a driver shortage has been reported on for years, but the situation is quickly deteriorating. In 2016, there was a shortage of 45,000 drivers which increased to 50,000 by the end of 2017, according to the American Trucking Associations (ATA). If the trend continues, we could see a shortage of 174,000 drivers by 2026. This is bad news for the entire supply chain as over 70 percent of all freight is transported on America’s highways.

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Experts have identified a number of reasons for the shortage. Today’s trucking workforce is comprised of an average driver age of 49 years old and 94 percent of them are male. There is a lack of qualified drivers in the job market as well, exacerbating the problem as many carriers understandably maintain a strict selection process to ensure safety and professionalism on the road. Of the skilled drivers, many are either retiring or accepting other jobs in growing markets like the oil and gas industry that do not require as much time away from home.

The current situation has created intense competition among trucking companies to recruit and retain both new and seasoned candidates by offering a range of incentives, including pay raises, sign-on bonuses, and more comprehensive benefit packages.

Many trucking companies are navigating how to fund these increased operational costs as a result.

More Operational Costs Driver wages have steadily increased in an attempt to attract more people to the profession. Cumulative pay for truck drivers increased by 6.4 percent in 2017, rising to 9 percent at the start of 2018, according to Glassdoor’s Local Pay Reports. Some trucking companies are going further in their recruiting efforts by advertising unprecedented sign-on bonuses of $8,000 to $10,000 for new drivers to join their fleet along with more paid vacation time.

The incentive programs implemented by trucking companies have had a significant impact on operational costs. The American Transportation Research Institute found that average marginal operational costs for driver wages increased 5 percent and 18 percent for benefits from 2015 to 2016. In total, 43 percent of all trucking operational costs go to wages and benefits, outweighing all other categories including fuel and maintenance.

Funding the Higher Costs With the increased operational costs, trucking companies need faster cash flow to keep their businesses running. These companies need efficient processing to invoice their customers and ensure that payments are received on time. Many of them are turning to alternative financing providers with the capacity to do both.

Let’s say a new, small trucking company just landed a large contract and needs to hire additional drivers fast. With the increased competition for drivers, the company decides to offer a significant sign-on bonus for every new driver, while increasing the pay per mile for its current fleet.

As a growing business, the company needs more cash on hand to cover these emerging operational costs. It looks to traditional lenders like banks for help, but the company has no extensive revenue history or high-value assets to serve as collateral, and the request is rejected.

Alternative financing providers are filling this void by working with companies that may not have the credit or balance sheet to satisfy traditional lenders. These providers are developing customized financing solutions that help many trucking companies to meet immediate cash needs and promote long-term growth.

The quick cash flow allows trucking companies to cover their driver recruitment incentive programs immediately and not lose ground to competitors. The flexible agreement terms and back-office support for accounting, payment processing and collections are ideal for trucking companies under operational stress by taking away the strain from a high volume of invoices and flagging any potentials risks or trends in late payment.

to proactively work with a financing provider to create a solution that allows them to be competitive in the labor pool without losing an edge out on the road. It is likely that we will see more trucking companies turn to alternative financing providers to achieve this goal. TSL Mary Ann Hudson is the executive vice President of Bibby Transportation Finance (BTF). In this role, she is focused on daily operations and on expanding the company’s presence in the transportation sector. Hudson joined Bibby Financial Services in 2006 as vp of operations, bringing 20 years of experience in financial and data transaction processing to her position. She is a member of several transportation and commercial finance organizations. In June 2017, Hudson was profiled as one of the 50 accomplished Women in Commercial Finance in The Secured Lender. To learn more about Bibby Transportation Finance visit https:// www.bibbyusa.com/products/transportation-finance

The Road Ahead In the next few years, we are likely to see even more investment from trucking companies to recruit new drivers.

It is important for these companies

THE SECURED LENDER APRIL 2018 25

t

industry DATA UPDATE

houghts on the Third Quarter 2017 Asset-Based Lending Index By the CFA Data Subcommittee While we eagerly await fourth quarter 2017 results, it is clear that the third quarter was one of the strongest quarters in the past few years for our industry. The strength in the third quarter numbers was seen across the board from growth in commitments to overall credit quality.

Growth in Commitments A headline metric we all look at is the Total Commitments for Large and Medium Enterprise Lenders (“Large Lenders”). We ended the third quarter with $246.8B of commitments, the highest level recorded under the current CFA reporting methodology, and a healthy growth of 2% over the prior quarter and 5% over Q3 2016. The same holds true for Entrepreneurial Lenders (Outstandings Under $500mm) as Q3 2017 was a new high point with Total Commitments of $2.35B, which represented quarter-over-quarter growth of 2% and year-over-year growth of 14%. Q3 2017 was one of the strongest quarters from a new business standpoint with $10.9B of New Commitments for Large Lenders. As we dig deeper into the numbers, one area where we really see the strength of the third quarter results is on the basis of net commitment growth (i.e., New Commitments minus Runoff Commitments) where we have net growth in commitments of $3.6B for Large Lenders which compares very favorably to net growth in commitments of $0.1B in Q2 2017, $1.3B in Q3 2016, $0.7B in Q3 2015 and $2.0 in Q3 2014.

Asset-based lending was a bright spot in the overall bank lending landscape. Third quarter “Commercial & Industrial Loans”, as reported by the FDIC in the “Quarterly Banking

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Profile Third Quarter 2017”, grew by 2.5% compared to Q3 2016 to $1.99 trillion, which is lower than the 5% growth seen for ABL Total Commitments for Large Lenders, and a somewhat lower level relative to prior years.

Economic Growth As we think about what has been driving the Q3 growth in our industry, we can safely say that the economy has been in growth mode. Third quarter GDP grew 3.3% according to the third estimate from the Bureau of Economic Analysis released on December 21, 2017. It also marked the first time GDP has grown over 3% in two consecutive quarters since 2014. The third quarter growth comes on the heels of the 3.1% growth in the second quarter of 2017.

Line Utilization According to the Bureau of Economic Analysis, “The slight acceleration in real GDP in the third-quarter primarily reflected acceleration in private inventory investment and an upturn in state and local government spending…” [emphasis added by writer].

Interestingly, credit line utilization, as measured by Loans Outstanding as a % of Total Credit Commitments, for both Large Lenders and Entrepreneurial Lenders is up relative to recent quarters. It is within historically observed levels but somewhat elevated nonetheless, with Entrepreneurial Lenders at 54.7% utilization and Large Lenders at 43.2%.

It may be a stretch to directly tie private inventory investment to the growth in the asset-based lending industry and specifically credit line utilization, but we do know that inventory is basic component of many borrowing bases. At a minimum, we can say that the economy grew at a robust pace in Q3 and

that the asset-based lending industry has been one of the beneficiaries of this macroeconomic growth.

Credit Quality While typically somewhat of a lagging indicator, we see that credit quality metrics in Q3 2017 were very strong. This is evidenced by Gross Write-Offs as a % of Total Outstandings which approached historic lows and, to a lesser extent, by Non-Accruing Loans as a % of Total Outstandings which were also solid. So, you may be wondering when these “historic lows” occurred. Not surprisingly, the historic lows for Gross Write-Offs were achieved in 2014, a time when we experienced two consecutive quarters of GDP growth greater than 3%, as seen in the chart above. The credit quality trend was also observed in broader Commercial & Industrial Loans with Charge-offs that were down 20.6% year over year for the third quarter, as reported by the FDIC. Conclusion It appears that there may be some broad similarities between what we observed in Q3 2017 and Q3 2014 in terms of macro-economic growth. Looking back at the CFA’s historical information for our industry, the period from Q3 2014 to 2017 was one of continued asset growth and solid credit performance.

A wise man once said, “Past performance is no guarantee of future results,” but at least we can confidently say that the third quarter was a strong one for asset-based lending!

If you are interested in participating in CFA’s Quarterly and Annual Data Surveys, contact Michele Ocejo mocejo@cfa.com.

No matter how we say it, we’re happy to have you CFA 2018 Welcomes Service Providers as Members This is a milestone in our 75-year history, and the next step in becoming the essential community for all organizations and professionals who deliver and enable commercial lending.

To learn more about joining CFA, community.cfa.com/membership or contact James Kravitz, Business Development Director, (646) 839-6080 or jkravitz@cfa.com.

www.cfa.com

FINANCING A

PROV Freed Maxick executives discuss the important items a lender needs to be aware of when financing a healthcare provider, including understanding the accounts receivable collateral base and steps to mitigate exposure on a borrowing base report.

BY ERIC ADORNETTO AND ROBERT WOOD

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HEALTHCARE

IDER

THE SECURED LENDER APRIL 2018 29

Over the prior decade there has been no denying that there has been a spike in commercial lending. Commercial loans at all commercial banks totaled $2.1 trillion dollars as of December 2017, compared to $1.4 trillion as of December 2007. Asset-based lending credit commitments continue to be a significant portion of commercial loans and totaled $199 billion in 2016. The healthcare industry has been eager to tap into the capital provided from asset-based lenders.

Even with the significant increases in financing, many asset-based lenders remain reluctant to lend to the healthcare industry.

This reluctance stems primarily from a lack of understanding associated with healthcare accounts receivable. Some key items a lender needs to be aware of when financing a healthcare provider include: The posting of accounts receivable to the general ledger and aging are not like a traditional asset-based lending relationship (i.e., a manufacturing company). Accounts receivable may be recorded on the aging at an amount that the provider more than likely knows it will not receive. The amount it expects to receive may not be recorded to the accounts receivable because the service reimbursement may vary significantly by the numerous payor classes and services provided. The provider may have established an accounting policy to record the gross receivable amount. The difference between the gross amount recorded and the net collection value is referred to as a contractual allowance. The provider may recognize the contractual allowance at the time of billing or at the time of reimbursement/cash receipt. When a provider recognizes the contractual allowance at time of billing, the accounts receivable aging is stated at the net value, and when the contractual allowance is recognized upon reimbursement/cash receipt, the accounts receivable aging is stated at gross. In a worst-case scenario, the provider records accounts receivable to the aging at gross and, upon cash receipt, neglects to remove the contractual allowance. In this scenario, the contractual allowance will remain on the accounts receivable aging and may improperly be included as an eligible receivable on a borrowing-base report. When an accounts receivable aging is reported at

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gross, management should have historical reimbursement information available to estimate the net collection value of the receivables for collateral reporting purposes. Preparation of accounts receivable statistics and detailed reimbursement testing can easily determine if the accounts receivable aging is stated at the gross or net amount. If the aging is stated at the gross amount, the testing is crucial in determining the net collection value of accounts receivable.

Assigning an appropriate advance rate and contractual allowance ineligible based on payor reimbursement rates is necessary to give assurance to the lender. The net collection value of accounts receivable can differ significantly by payor class. Common payor classes include Medicare, Medicaid, Commercial and Private payors. One payor’s reimbursement for a gross amount on the aging may be 10 percent while another payor’s may be 80 percent. The significant variances in reimbursement rates can be attributed to the specific payor agreements and federal and state published rates on services performed. Classifying accounts in the correct payor class is important, especially if reimbursement between payor classes varies significantly. It is common for a lender to group all payor classes together on a borrowing base report when the aging is reported at net and assign a standard advance rate of 85%. When an accounts receivable aging is reported at gross, reporting on a borrowing base report can be more complex. If reimbursement rates across all payor groups are consistent, then applying a contractual allowance ineligible and a standard advance rate of 85% is normally adequate. A contractual allowance ineligible is simply 100% less the calculated reimbursement rate and multiplied by eligible accounts receivable. If the calculated reimbursement rate for all payor classes is 25%, then a 75% contract allowance ineligible would be necessary prior to the 85% advance rate. When reimbursements rates vary by payor class, it is more conservative to calculate a contractual allowance ineligible per payor class prior to applying an 85% advance rate. In a more in-depth review, the detailed preparation of accounts receivable statistics and reimbursement testing by

payor class reveals necessary contractual allowance ineligibles. The review can also be utilized to verify management’s historical reimbursement information for financial statement presentation.

The provider’s accounts receivable aging may be aged in varying formats. The accounts receivable will be aged in most instances in one of three ways: a service date, a discharge date, or a bill date. It is common for detailed accounts receivable aging reports to include all three dates.

A bill-date aging can create a significant amount of re-aged/refreshed accounts receivable. The re-aging may arise based on the number of times a claim may be re-billed to a different payor. When a claim is initially billed to one payor and rejected and subsequently re-billed to a different payor, this can result in the bill date being refreshed on the accounts receivable aging.

The refresh of the bill date extends the eligibility of the account receivable based on past-due ineligible criteria on a borrowing base report. If the rejection of the claim by payor, occurs and the claim needs to be rebilled to another payor the claim may be ultimately rejected due to untimely filing.

Reviewing the provider’s billing practices can help uncover the risks associated with the different accounts receivable agings.

Discussion regarding the provider’s billing procedures may identify the existence of unbilled services included on the accounts receivable aging. Unbilled service may exist due to the provider’s services requiring extensive billing support to file a claim. The provider normally can segregate the unbilled services on the accounts receivable aging. When the provider cannot segregate the unbilled services, there is a risk of potentially lending on unbilled services. A discharge-date accounts receivable aging could have a significant amount of unbilled services as the discharge date doesn’t always correspond to the bill date. Normally, unbilled services represent rendered services and may be billed in a liquidation situation. Unbilled accounts receivable testing can determine the lag time between discharge date and bill date in addition to verifying that the billed amount corresponds to the unbilled balance included on the accounts receivable aging. Based

upon the results of testing, a decision can be made by the lender as to the eligibility of unbilled accounts receivable on a borrowing base report. The lender should always ensure to apply, if necessary, applicable contractual allowance ineligible to unbilled accounts receivable on a borrowing-base report.

It is important to understand how a payor remits payment on claims filed. A provider may be reimbursed from a payor based on an established interim payment plan. Based on the payor contract terms, a provider will receive payment generally weekly or semi-weekly. The procedure to account for interim payment plans needs to be understood to determine how these payments are applied or not applied to outstanding accounts receivable. The review of financial statements should always be performed to identify unapplied cash liability accounts that could offset accounts receivable.

To reduce risk, it is recommended that lenders have the borrower’s accounts receivable remitted directly to a controlled account (Lock Box) that the lender has a perfected security interest. Government payors, Medicare and Medicaid, are subject to voluminous federal and state regulations. Currently, a lender cannot have a perfected security interest in the provider’s bank account where Medicare and Medicaid deposits are initially made. The Centers for Medicare & Medicaid Services “CMS” requires Medicare & Medicaid deposits be initially deposited into a provider’s account in which the provider can only issue instruction on. The risk is mitigated by lenders requiring daily sweeps from the provider’s deposit accounts to a lender-controlled account. Consultation with CMS and Legal Counsel regarding current regulations should always be made in setting up controlled accounts due to the ever-changing requirement imposed on providers.

If the provider is required to file cost reports, the settlement of these cost reports could result in potential liabilities that could be off-set against eligible accounts receivable. Cost reports give information regarding a provider that could be beneficial to the lender, such as the provider’s facility characteristics, utilization data, cost and

charges. Per CMS, Medicare-certified institutional providers are required to submit an annual cost report to a Medicare Administrative Contractor (“MAC”). Medicare providers primarily consist of hospitals, nursing homes and home health agencies. The provider must file the cost report to their respective MAC within five months after the provider’s fiscal year end. If filed late, the MAC can suspend reimbursements. When the cost report is filed, it is then reviewed by the MAC and a tentative and then final settlement is calculated. Based upon the type of provider situations where monies may be owed to the Medicare program may occur.

If not paid by the provider, the liability can be off-set against future reimbursements.

A lender should always ensure that cost reports are filed in a timely manner by the provider and review the provider’s financial statements to determine the existence of liabilities relating to cost reporting that could be off-set against accounts receivable.

The third-party relationship that exists between the payor and provider invites abuse of the reimbursement process. The patient is not the payor; this by nature can lead to the process to fraudulent activity.

Traditional examination procedure of accounts receivable phone verifications with the patient confirming the service cannot be performed due to the HIPPA regulations. Assessment that services have been rendered can be accomplished through various other procedures and techniques from examination of patient records and historical cash collections. Additionally, there is no substitute for on-site visits, which should include a complete tour of the facility. In the complex healthcare environment, evaluation of management should always be performed. In order for management to meet the challenges of healthcare reform, it must be informed and understand the potential impact of the changes. Major changes in management, directors, ownership and nature of the business should be investigated and the reasons for the changes determined. The low interest rate environment has invited providers to further seek out asset-based loans to maximize working capital. The increased demand had enticed other lenders to enter the market. Before entering the

healthcare field, extensive understanding of the issues raised above should be obtained.

The lender should become familiar with the reimbursement environment and how it can affect the lender’s collateral accounts receivable reported on a borrowing base report. The understanding can be enhanced through utilization of healthcare examination specialists. In a climate of varying payor classes and reimbursement rates, emphasis must be placed on performing adequate due diligence prior to the financing of a healthcare provider. TSL As a field examination manager for Freed Maxick ABL Services LLC., Eric Adornetto leads pre-loan and rotational collateral examinations in addition to assisting with staff oversight and client relations. Home-based in South Florida, Adornetto primarily serves clients in the Southeast region. He has significant exposure to healthcare-related industries with evaluating their collateral bases for various lenders. Adornetto joined Freed Maxick in 2008 after graduating from St. Bonaventure University with a bachelor of business administration in Finance, and is a Certified Fraud Examiner. He can be reached at Eric.Adornetto@freedmaxick.com or 954-9993575.

Robert Wood is a principal for Freed Maxick ABL Services. He joined the firm in 1994 and has over 20 years of experience in the ABL industry. He is responsible for staff supervision, quality control, recruiting, training and developing and maintaining lender relationships. Wood has experience in performing due diligence exams, including pre-loan surveys, collateral monitoring and fraud investigations across various industries. He has also performed numerous examinations involving leasing companies, payday loan facilities, as well as loan securitization financing.

In addition, Wood also has experience in portfolio acquisition, due diligence and forensic examination assignments of troubled loans involving fraud. He has served as an instructor for the Commercial Finance Association. A graduate of St. John Fisher College, Bob is a Certified Public Accountant (CPA). He can reached at bob. wood@freedmaxick.com or 716-847-2651.

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LENDING TO THE ENERGY SECTOR:

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BY MIKE LORUSSO Mike Lorusso of CIT Commercial Finance provides an overview of the energy sector with emphasis on renewable energy sources.

FLEXIBILITY IS KEY

Celebrated innovator Thomas Edison is credited with inventing the light bulb -and with it the need for widespread electric power. But he was no fan of fossil fuels, worrying about dwindling supplies even as he imagined alternatives.

“I’d put my money on the sun and solar energy,” Edison, ever the visionary, told friends as far back as 1931. “What a source of power! I hope we don’t have to wait until the oil and coal run out before we tackle that.”

Don’t worry, Thomas; we’ve got you covered.

CIT’s Energy Finance group, as a leader in power project finance for a quarter century, has had a front-row seat on just how quickly the energy sector is evolving. And it is no exaggeration to say we are witnessing a historic transformation in how electricity is generated in the U.S. Cost pressures, technological innovation, environmental concerns, energy efficiency, consumer preferences, government regulations and incentives – all have combined to drive sweeping industry changes.

And one of the biggest is the rapid rise of renewable energy sources in contributing to America’s power generation mix.

Surprised? Consider these facts: ◗ Renewable power – including wind, solar, hydro, geothermal and biomass -- now accounts for about one-fifth of total U.S. electricity generation. ◗ Renewable power construction had its two biggest years ever in 2016 and 2017, primarily due to major new wind and solar projects. ◗ In the last decade, total renewable power generation has doubled and is now on the verge of surpassing nuclear power for second place in overall contributions -- trailing only fossil fuels, primarily natural gas and coal.

As one of the most active lenders to the renewable power industry, CIT’s Energy Finance group has been effective in taking the financing structures long used for conventional power generation and successfully adapting them to serve this

THE SECURED LENDER APRIL 2018 33

fast-growing renewable power sector.

One area where we’ve been successful is in solar projects, which have become increasingly attractive as manufacturing efficiencies and technological innovations have led to sharp declines in solar panel costs in recent years. Just how attractive? The Federal Energy Information Administration estimates that total solar electricity generation in the U.S. will grow from 209,000 megawatthours per day in 2017 to 287,000 by 2019 – a whopping 37 percent increase in just two years. And the nation is currently right in the midst of that growth.

Solar power projects are directly contributing to that increase. In February, for example, CIT served as the sole lead arranger of $46.5 million in constructiononly financing on behalf of Cypress Creek Renewables, a leading developer and owner of solar energy facilities nationwide. That financing will support construction of six utility-scale solar projects in North Carolina totaling 29.9 megawatts of generation capacity.

We’ve also helped finance other solar projects for Cypress Creek, which now has 2.2 gigawatts of solar energy deployed in more than a dozen states. Such projects increase our sustainability, enhance our economic competitiveness and foster economic development. They create good jobs and help secure the nation’s energy independence.

But first, they have to make good business sense for all parties involved.

And that’s where a lender’s skill in analyzing complex projects and coming up with financing structures to address them is most valuable. Partnering with a lender that possesses the right expertise helps clients identify optimal financing solutions, which increases the ease and certainty of execution on the transaction.

Beyond utility-scale solar projects, financing for distributed solar installations for commercial, industrial and municipal complexes is also a growing market. Additionally, middle-market companies working with homeowners to install residential rooftop solar systems have been active in seeking financing.

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Like solar, wind power is also on the rise as a source of renewable power generation. Wind power currently generates about three to four times as much power as solar – and it’s set to grow another 11 percent between 2017 and 2019. At that point, wind power is projected to eclipse hydropower in overall power generation – an incredible feat considering hydropower had a 100-year head start.

Taken together, CIT’s total renewable energy portfolio now encompasses more than 8,000 megawatts – or, if you prefer, 8 gigawatts – of generation capacity.

That’s enough to provide for the energy needs of an astounding 5.6 million homes!

But perhaps even more importantly, these projects generate power in a sustainable fashion that avoids producing greenhouse gases that contribute to climate change. If you assume that all the capacity in CIT’s renewable portfolio was in continuous operation and replacing conventional power generation, it would be equivalent to: ◗ Taking more than 11 million cars off the road; ◗ Saving more than 700,000 tanker trucks full of gasoline; ◗ Avoiding consumption of more than 120 million barrels of oil.

Those big numbers hint at the magnitude of change rippling through the power generation industry. And sudden industry changes often open up new areas of opportunity.

When it comes to renewable power, one such opportunity is the requirement for battery storage systems to stockpile electricity for later use. After all, the sun doesn’t always shine and the wind doesn’t always blow, but homes and businesses need an uninterrupted source of electricity around the clock.

Last year, we led financing for a 50 megawatt fleet of behind-the-meter, battery storage systems located in certain grid-constrained pockets of the West Los Angeles Basin service territory of Southern California Edison. One can easily imagine battery storage systems routinely accompanying renewable

energy projects to help manage the ebb and flow of peak generation periods, support grid activity and meet customer demand. That kind of technological innovation will be essential to the continued evolution of renewable power.

Yet, as fast as renewables are growing, we foresee a continuing role for conventional-power generation for many years to come and those projects will continue to need financing as well.

Natural gas-fired plants have benefitted from falling natural gas prices in recent years. In addition, natural gas has the benefit of burning cleaner than other fossil fuels – especially when combusted using the latest technology in a new and more efficient plant.

Today’s trends won’t be the last shifts that will come in power generation.

Technology, public sentiment, government regulation and simple economics will undoubtedly lead to new and perhaps unexpected developments. To keep pace, lenders will have to be flexible in their approach and nimble in adapting to those developments. TSL Mike Lorusso is group head and managing director for CIT Group’s Energy Finance unit. In his role, he is responsible for overseeing financing activities in primary parts of the energy value chain, including the power project sector and the oil and gas sector. He has particular expertise in financing for renewable and conventional power generation, as well as oil and gas exploration and production. Prior to joining CIT, Lorusso served as the head of Energy and Project Finance, Americas, for National Australia Bank. Before that, he served as Senior Vice President of Structured Finance for ABB and as a deal team leader originating, structuring and closing energy transactions for GE Capital.

Want Your Potential Customers To Find You? Join the CFA Service Provider Directory and Find Industry Partners You Need To Optimize Your Company’s Success

CFA Service Provider Directory BECOME A VISIBLE INDUSTRY RESOURCE

Share information about your business and tell commercial finance professionals how you can help them solve problems and grow their business on CFA’s Online Service Provider Directory. Business leaders will be able to read about the services and products you provide, then reach out to your key contacts for more information.

CFA’s Service Provider Directory will allow you to easily find and contact the industry partners you need to optimize your company’s success.

community. cfa.com/comm uni ti es /s pd We have over 75 service providers at your fingertips with current contact information to ensure you do not waste any time finding what you need when you need it.

Contact James Kravitz Business Development Director Commercial Finance Association Tel:(646)839-6080 | jkravitz@cfa.com

LENDER FINANCE

TSL’s editor-in-chief spoke with two leaders in the lender finance business, Cyndi Giles of Wells Fargo Capital Finance’s Lender Finance division, and Terry Keating of Accord Financial.

BY MICHELE OCEJO

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Cyndi Giles leads the Lender Finance division of Wells Fargo Capital Finance. The Lender Finance division is a leading provider of credit facilities to middle-market, specialty finance companies throughout North America. She began this role in November 2017.

With more than 20 years of experience, Giles joined Capital Finance from the Middle Market Banking (MMB) team, where she had led the Oklahoma regional office since 2015. She previously held leadership positions in the Dallas regional office. Prior to joining Wells Fargo in 2011, Giles held progressive leadership positions with First American Bank/Citibank, Amegy Bank of Texas, and Regions Bank. Her diverse background includes experience in the financial sponsors, real estate, energy, and middle-market banking segments.

Giles has held leadership roles within Wells Fargo’s Team Member Networks and advisory groups within the bank on the regional and national level. Her passion for developing effective mentorship programs has been a consistent theme throughout her banking career. Giles is active in supporting her community, and has held board positions for the Suicide Crisis Center of North Texas and the March of Dimes of Dallas. She earned a bachelor degree from Texas A&M University.

What are the current trends in the lender finance industry?

GILES: The lender finance industry is experiencing an increase in sources of capital available to support portfolio growth. Not only are more traditional lenders available, there is rising interest from private equity companies and other asset managers. This appears to be driven in part by the diversification provided by owning specialty finance companies and the ability to reach smaller and more geographically diverse companies than the asset managers might otherwise be able to invest in directly.

With the entrance of asset managers, there is more capital available

Terry Keating is executive vice president of Accord Financial. He is responsible for leading Accord’s factoring and asset-based lending business in the U.S. Prior to joining Accord in 2014, Keating spent nearly 30 years in the financing services industry. As Managing Director with Amherst Partners, he provided strategic and financial advisory services on mergers, acquisitions, turnarounds and restructurings. As a senior executive at LaSalle Bank, he established a business unit charged with providing credit and other bank products to mid-sized finance and leasing companies throughout the US. Keating has served on numerous professional and non-profit boards throughout his career, and remains active in the leadership of several organizations. He is also frequently interviewed and quoted by numerous national and local media outlets on matters concerning banking, financial services and the economy. Keating holds a BA in economics from Valparaiso University and an MBA from the Keller Graduate School of Management at DeVry University.

for specialty finance companies. The pressure to deploy capital appears to be causing specialty finance companies to explore multiple asset classes, higher concentrations in single obligors and industries, and to seek growth through participations, broker relationships and an increased network of originators.

point, Nations Equipment, Transfac Capital, Capital Business Credit, North Mill, Marquette, Gibraltar and I have missed a good number. Rosenthal acquiring BB&T factoring business was a significant industry transaction.

In Accord’s case, we made two deals in 2017, investing in Bondit Media Finance and CapX Partners.

KEATING: Ownership changes and consolidation has picked up considerably in the past couple of years. Many formerly independent firms have been acquired by banks, private equity, BDCs or some form of an investment fund. Recent transactions that come to mind are Federal National, North-

What is the outlook for 2018?

KEATING: Generally, a good environment for portfolio quality as the economy seems to be continuing its stable upward trend, though the pace of growth is not robust. This means that for companies seeking to grow more than 2-5% (and aren’t we all)

THE SECURED LENDER APRIL 2018 37

we can’t rely solely on traditional organic growth, unless we “buy” growth through lower credit standards and pricing thresholds.

Absent a “black swan” event, I expect current trends to continue.

GILES: We anticipate lenders will continue to experience competitive pressure on structure and margins. I agree, lenders appear to be experiencing positive portfolio performance. As the competitive pressure continues, portfolio performance could begin to

could be offset by a negative impact to portfolio performance as borrowers have been in a low-cost capital environment for some time. Technology is also expected to become a competitive differentiator. The challenge for specialty finance companies will be to maintain a customer-centric service model while advancing efficiency through technology.

KEATING: The intermediate period has many more factors that can impact the favorable economic trajectory

“Several dynamics are influencing an increased use of technology for specialty finance companies to gain greater efficiency.

Rate pressure from the increasingly competitive environment, the unfortunate rise in fraudulent activity and marketing to a tech-savvy generation are causing lenders to embrace technology for both customer acquisition and portfolio management. The technology push appears to be greater for the lenders focused on high-volume, smallerticket transactions, such as factors.”

— CYNDI GILES deteriorate if lenders are not careful to maintain discipline. A continuing theme from 2017, capital-constrained, independent specialty finance companies may consider a platform sale.

What do you foresee for the next 3-5 years?

GILES: Based on the success asset managers are experiencing acquiring and building specialty finance platforms, the amount of capital available to the industry is expected to be high over the next few years. With this dynamic and without significant economic headwinds, the current competitive environment will continue. An interest rate increase could help lenders with ROE challenges; but,

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we’ve been on. For example, while I don’t expect a widespread “trade war” to break out; this can’t be fully discounted given recent events. Not making a political statement, but with my background in economics, a true trade war will result in a dampening of growth across the globe and in the United States in particular. The real impact of tariffs is to raise the costs of goods and services and curtail economic efficiencies which benefit all over the long term.

We believe the recent trend of consolidation will continue, given the tremendous amount of liquidity here in the United States and around the world. All this money seeks a home

and commercial finance offers attractive gross yields. When you combine that with benign losses since the trough of the Great Recession, the money will keep flowing in.

With the bank regulatory framework being relaxed, we see an acceleration of the number of banks getting into the commercial finance business.

Many already are, but even more will likely jump in.

All of this means the intense competitive environment will persist and ratchet up the pressure for commercial lenders to evolve their businesses, figure out new ways to be efficient and attract clients without eviscerating credit and pricing.

What are the biggest challenges and opportunities? Do they differ for bank-owned vs. independent?

GILES: One of the largest challenges for the industry presents an opportunity. There is a large knowledge gap between industry veterans and rising talent. Specialty finance companies, who strategically plan to address this challenge, can also utilize early talent to embrace the technology movement.

By also addressing increased diversity in the workforce, lenders will benefit with additional creative ways to reach the full universe of prospects.

Many of the same challenges exist for bank-owned vs. independent specialty finance companies with the regulatory environment creating the key difference. While a higher regulatory hurdle may seem a disadvantage, it does provide a structured environment to help lenders address risks such as fraud and loss of reputation.

Both bank-owned and independents have the same opportunity: placing emphasis on the most valuable asset – people. Having the right team helps any organization to be customerfocused, business-oriented and successful.

KEATING: Maintaining credit quality and not being lulled to sleep by good economic conditions is always

a challenge. Beyond that, growth is a persistent challenge. We all want to grow 10-15% (or more) but we live in a 2-5% economic growth world.

Cyndi mentioned human capital as an opportunity, but it’s also a persistent challenge. Good people are the most important resource any company has and it can be challenging to not only find them, but also cultivating and supporting them. This is a daily focus for me.

What impact has technology had?

GILES: Several dynamics are influencing an increased use of technology for specialty finance companies to gain greater efficiency. Rate pressure from the increasingly competitive environment, the unfortunate rise in fraudulent activity and marketing to a tech-savvy generation are causing lenders to embrace technology for both customer acquisition and portfolio management. The technology push appears to be greater for the lenders focused on high-volume, smaller-ticket transactions, such as factors. This segment of the industry is moving towards technology more quickly as i) new business activity adds small incremental revenue, ii) the cost of client acquisition is high and iii) the close alignment of small business activity with the consumer who is becoming increasingly reliant on technology to guide decisions. Specialty finance companies also know that generating reliable, real-time information for portfolio monitoring and fraud prevention is one of the most effective ways to prevent loss due to fraud.

There is also a significant movement towards more efficient electronic file storage and document delivery.

KEATING: Technology has always changed the way business is conducted. We’ve gone from paper ledgers, to computerized ledgers, to now entirely new ways of organizing and analyzing data. At Accord, we think about how technology can change how we operate the business so that we can have

a) more and better information to act on, and b) less paper.

Clearly technology gets a lot of attention on the origination side, particularly in the context of the “fintech” lenders. That frequently is focused on a) direct originations and b) automated credit decision processing.

I think of technology as reshaping how we focus our origination team on our highest value channels and products, and how we leverage our credit monitoring team on clients who

plying large amounts of capital and then push for growth. Though BDCs tend to be steady growth, dividend platforms, most of these institutional owners are very growth-oriented. This only increases the competitive pressures the industry has always operated with. They are willing to pay a rich premium to acquire a company and then provide the fuel and the pressure to achieve significant growth. Somehow these trends and forces never turn out well over time.

“PEGs, BDCs and other forms of institutional owners have been supplying large amounts of capital and then push for growth. Though BDCs tend to be steady growth, dividend platforms, most of these institutional owners are very growth-oriented. This only increases the competitive pressures the industry has always operated with.”

— TERRY KEATING are drifting into “at risk” territory.

The other way technology impacts our business is facilitating better and more efficient collaboration across geography. What once was a barrier can become an advantage with technology bridging the geographic gap. In a broad sense, enabling us to be in two places at the same time. As an example, I can actively manage our business from virtually any place in the world now. I can be at client meetings in Seattle and the same day fully participate in a credit meeting with our team in Greenville, having members from Tampa and Chicago in the same meeting with the same realtime information.

What role are the P/E Firms, BDCs and Asset Managers as capital providers for specialty finance companies playing?

KEATING: PEGs, BDCs and other forms of institutional owners have been sup-

GILES: There is an increasing level of interest in specialty finance companies by asset managers. This trend is providing an unprecedented amount of capital for lenders. Each of the groups has different time horizons for the investment, ranging from a threeto-five-year strategy to long-term hold. The amount of capital available is fueling growth of the industry, but is helping to create a highly competitive environment. Being owned by an asset manager with multiple lending platforms can benefit lenders by providing some common functions such as accounting or even referral programs between platforms. Interest for investing in specialty finance companies by asset managers is expected to continue. TSL Michele Ocejo is editor-in-chief, The Secured Lender and director of communications for CFA.

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TSL INTERVIEW

JENNIFER SHEASGREEN AND TIM PETERS DISCUSS CNH FINANCE’S ACQUISITION OF TRIUMPH HEALTHCARE FINANCE

BY MICHELE OCEJO

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Last month, CNH Finance, L.P., a specialty finance company, announced the expansion of its national commercial healthcare lending capabilities with the acquisition of Triumph Healthcare Finance, a division of TBK Bank, SSB.

CNH Finance, L.P., specializes in middle-market and lower-middlemarket asset-based lending, with clients that are looking for working capital up to $20 million. The healthcare team of Triumph Healthcare Finance includes Jennifer Sheasgreen, who previously served as president of Triumph Healthcare Finance and will be named managing director, and head of Healthcare Finance and Edward Kauffman, who previously served as SVP, national sales manager, will now serve as SVP, national sales manager for CNH Finance, L.P. The healthcare team will continue to be based out of Portland and will join the CNH Finance, L.P. team, combining efforts to expand healthcare lending across the nation.

synergistic fit for our team and we look forward to being fully integrated as one collaborative team.

Here, Sheasgreen and Tim Peters, principal and co-founder of CNH Finance, LP, discuss what the acquisition means for the companies and their clients as well as the opportunities and challenges facing the healthcare industry.

SHEASGREEN: We view this as a positive move for our existing and prospective clients as we navigate away from a regulated banking environment to one that will allow us to move at an even faster pace and provide for more flexibility in structuring and management of our relationships. The principals of CNH Finance have been entrenched in healthcare just like our team and will provide our clients the assurance of knowing that we have the backing of a company that understands the dynamics of their unique reimbursement models as well as the ever-changing political landscape.

Why was this acquisition an attractive opportunity, both from Triumph’s viewpoint and CNH’s?

PETERS: Beyond the obvious increase in portfolio size, this transaction enabled us to grow the depth of our human capital by adding a seasoned team of business development, underwriting and servicing personnel to our existing team of professionals who have worked together for many years. By combining the two operations, we’re reinforcing our foundation to allow us to grow at the pace of the current healthcare market.

SHEASGREEN: The acquisition of Triumph Healthcare Finance by CNH Finance brings two highly respected and reputable competitors together to expand our nationwide healthcare lending footprint. The teams will integrate the best practices of both operations to grow the portfolio with a strong, disciplined and consistent performance. This is a highly

How will the acquisition affect existing and prospective clients?

PETERS: CNH’s existing borrowers will see very little change aside from some new people that may enter the relationship.

The acquired borrowers will see a new email address and possibly some small changes in operations as we merge the back offices of both groups. Our goal is to make a smooth transition for each borrower without any material changes that would affect their business. Moving forward, our new business development, underwriting and expanded legal capabilities will allow us to process new transactions more efficiently and our time needed to close will decrease.

Healthcare is an industry fraught with change and complexities. What would you say is the biggest challenge for lenders in this industry right now?

PETERS: If you asked 100 people this questions you’d get 75 different answers depending on what sector and market cap they lend to within the healthcare industry. Since we primarily lend into the healthcare services sector, we spend a lot of our time staying ahead of regulatory changes, industry trends that can affect reimbursement, enforcement actions and M&A activity that will impact our borrowers or specific group of providers.

We spend countless hours researching

THE SECURED LENDER APRIL 2018 41

trends and regulatory issues to understand how the continuous change in the industry will impact our borrowers. In many cases, this requires an understanding of national, state and even individual town dynamics that will dictate if a healthcare provider is successful or is out of business. The challenge is to understand the research and stay disciplined in your growth and lending strategies to avoid the pitfalls that make headlines around the country.

changes is at the forefront of predictive collateral valuation.

collaboration, which is where the entire industry needs to head. TSL

What do you foresee for the rest of the year for the industry?

PETERS: The most predictable event in healthcare is change and, when there’s change, there’s opportunity. We see opportunities in the fragmenting skilled nursing market, home health and hospitals systems divesting underperforming assets. Our lower middle-market lending

Tim Peters is a principal and co-founder of CNH Finance, LP. He was the founding principal of Lakeside Capital and has more than 20 years of specialty-finance experience.

Prior to Lakeside, Tim was a principal at CardinalPointe Capital Group, which owned finance companies in the healthcare, auto, and hospitality industries. Tim oversees the day-to-day operations of CNHF, sits on the credit committee and is a liaison to the equity holders, lenders and investors. He is a 1992 graduate of Bowling Green State University and an active member of the Commercial Finance Association, Turnaround Management Association, American Bankruptcy Institute and multiple trade groups within the healthcare industry.

“The most predictable event in healthcare is change and when there’s change there’s opportunity. We see opportunities in the fragmenting skilled nursing market, home health and hospitals systems divesting underperforming assets. Our lower middle-market lending strategy benefits from changes that create disruption to large national providers that seek to maintain margins by selling to smaller, leaner, regional providers of healthcare. We believe these trends will continue for the next 12-24 months as more corporate providers of healthcare realize bigger isn’t always better.”

SHEASGREEN: Healthcare continues to be a dynamic industry in which to lend. The biggest challenge for healthcare lenders right now is the inconsistency in healthcare policy which translates to the need to stay on top of reimbursement changes.

With the repeal-and-replace initiative lacking any solid movement, healthcare providers are forced to grapple with a disjointed Medicaid system that varies by state, combined with confusion on funding between joint federal and state partnerships, which are ultimately leading to reimbursement shortfalls and continued challenges for healthcare providers, which is an opportunity for CNH Finance. As a healthcare lender, understanding those dynamics is key and keeping up with regulatory

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strategy benefits from changes that create disruption to large national providers that seek to maintain margins by selling to smaller, leaner, regional providers of healthcare. We believe these trends will continue for the next 12-24 months as more corporate providers of healthcare realize bigger isn’t always better.

SHEASGREEN: As we look towards the remainder of the year, we’ll likely continue to see a fragmented approach to tackling ACA reform through various pieces of legislation and a slow rollback of Medicaid expansion without any riveting legislation. On a positive side, the focus on the opioid epidemic is the beginning of true collaboration between payers, providers, regulators and even some pharmaceutical companies. It’s a sign of cross-sector

Jennifer Sheasgreen is Managing Director – Head of Healthcare Finance for CNH Finance, L.P.(CNH). Prior to joining CNH, Jennifer served as President for Triumph Healthcare Finance, a division of TBK Bank, SSB. Jennifer previously served as Managing Director of Doral Healthcare Finance, where she launched the division as a de-novo for Doral Bank in 2011 and which was acquired by Triumph in 2014.

Jennifer has over 20 years of experience in executive leadership roles spanning all aspects of commercial finance within the healthcare industry to including, credit, underwriting, loan closing and structuring, operations and portfolio management and business development. She holds a Bachelor of Science degree in Strategic Management from California State University at Sacramento and is certified as a Fellow.

Michele Ocejo is editor-in-chief, The Secured Lender and director of communications for CFA.

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what

i

WOULD YOU DO?

n this edition of What Would You Do?, the Chief Credit Officer of Overadvance Bank considers the Bank’s options when the term loan lender to one of the Bank’s Chapter 11 borrowers demands adequate protection payments from the proceeds of the Bank’s senior lien collateral. The intercreditor agreement between the Bank and the term loan lender provides that the Bank cannot “oppose” the term loan lender’s request for adequate protection against any diminution in the value of the term loan lender’s senior lien collateral.

Needing Protection from Adequate Protection?

Overadvance Bank. The relationship dates back to the late 80’s, when B&Q was a 4 store operation with a $7 million line of credit. Over the years, B&Q has grown to an 80-plus store chain and has increased its secured revolving credit line with the Bank to $100 million. B&Q, however, has recently hit hard times because of increased

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competition from larger competitors and an over-levered capital structure.

Consequently, B&Q made the difficult determination to wind down its business in a Chapter 11 proceeding.

As part of its Chapter 11 preparations, B&Q negotiated with Overadvance Bank for the consensual use of the Bank’s cash collateral, so that B&Q could use collections from the company’s going out of business sales to both fund its Chapter 11 wind down expenses and pay down the Bank’s existing loan balance in accordance with a budget approved by the Bank.

B&Q’s restructuring advisors did not, however, include B&Q’s senior secured term loan lender, Airball Enterprise Capital Lending, LLC, in the cash collateral use negotiations. Airball is the agent for a $125 million term loan facility advanced to B&Q as part of B&Q’s prior business expansion activities. Absent a miraculous sale process in B&Q’s Chapter 11 case, Airball’s term loan is likely under-secured by a significant margin.

Overadvance Bank and Airball executed an intercreditor agreement, which sets forth the terms and conditions governing this “spilt” collateral arrangement. Under the intercreditor agreement, Airball holds a first-priority security interest in the “term priority collateral” including B&Q’s real property, machinery, equipment and related assets, and a second-priority security interest, junior to the Bank’s interest, in the “ABL priority collateral” including all inventory, accounts receivable other related assets of B&Q. Of note, the intercreditor agreement specifically addresses the right of each lender to request adequate protection for any diminution in the value of its senior lien collateral. Specifically, the lender with a junior security interest on the applicable collateral is prohibited from “opposing” any

request made by the lender with the senior security interest in such collateral for adequate protection against any diminution of the senior lender’s interest in such collateral.

The interim cash collateral order, which was entered at B&Q’s Chapter 11 “first day hearing”, did not provide for any cash payments to Airball during the course of the wind down. Leading up to the final hearing on the cash collateral order, Airball filed a limited objection to B&Q’s cash collateral use arrangements with the Bank on the basis that the cash collateral order fails to provide Airball with adequate protection in the form of cash payments of its interest and fees to account for the diminution of Airball’s interest in the term loan collateral. Specifically, Airball requested monthly cash payments of approximately $2.5 million in interest and fees during the case.

The Chief Credit Officer at Overadvance Bank is concerned and annoyed

by Airball’s objection. He is concerned because B&Q has thus far failed to achieve the projected sales and cash receipt forecasts in the budget, and revising the budget to include payment of Airball’s interest and fees could further jeopardize the Bank’s prospects for full repayment. He is annoyed because Airball’s requested adequate protection payment for the diminution of its term loan collateral would come out of Overadvance Bank’s revolving loan collateral proceeds.

Accordingly, the Chief Credit Officer wants to oppose Airball’s adequate protection request, but he is wary of violating the terms of the intercreditor agreement.

If you were the Chief Credit Officer, what would you do?

For starters, the concept of adequate protection is provided for under Section 361 of the Bankruptcy Code. It is intended to protect secured credi-

tors from any diminution in the value of their interests in the collateral occasioned by the debtor’s bankruptcy, such as by the debtor’s use or sale of the collateral or by the imposition of the automatic stay, which prevents the secured creditor from exercising its rights against such collateral.

Under the Bankruptcy Code, adequate protection can be provided in various forms, such as cash payments, replacement liens, priority administrative expense claims and/or such other pro-

collateral, the Bank cannot oppose Airball’s request to obtain adequate protection for its senior interest in the term loan priority collateral in the form of cash payments from the proceeds of the Bank’s senior priority collateral.

As Overadvance Bank agreed in the intercreditor not to “oppose” a request by Airball for adequate protection of its security interest in the term loan priority collateral, the filing of opposition papers in B&Q’s Chapter 11

Bank’s priority collateral, he is not willing to jeopardize the entire sale process over this adequate protection issue.

Accordingly, the Chief Credit Officer decides to negotiate with Airball to permit the current payment of interest and reasonable legal fees of Airball, subject to Airball agreeing to disgorge any payments it received to the extent of any deficiency in the pay down of Overadvance Bank’s loan. The Chief Credit Office also makes a note

“As with many ‘split collateral’ intercreditor agreements, the intercreditor agreement between Overadvance Bank and Airball provides that, in any B&Q bankruptcy proceeding, the creditor with the junior security interest in the applicable collateral agrees it will not interfere with the efforts of the creditor with the senior security interest in such collateral to seek adequate protection for such senior interest in the collateral.” tections that provide the “indubitable equivalent” of the secured lender’s interest in the diminished collateral.

As with many “split collateral” intercreditor agreements, the intercreditor agreement between Overadvance Bank and Airball provides that, in any B&Q bankruptcy proceeding, the creditor with the junior security interest in the applicable collateral agrees it will not interfere with the efforts of the creditor with the senior security interest in such collateral to seek adequate protection for such senior interest in the collateral. However, the intercreditor agreement does not specify or limit the form of adequate protection that the creditor with the senior security interest in the collateral may obtain. As such, notwithstanding the junior and subordinate lien rights of Airball in the Bank’s senior priority

case to Airball’s motion for adequate protection could subject the Bank to a breach of contract claim by Airball.

However, the Chief Credit Officer wonders if either the Bank’s refusal to approve a cash collateral budget that provides for any adequate protection cash payments to Airball would be tantamount to “opposing” Airball’s adequate protection request in violation of the intercreditor agreement.

Of course, if B&Q loses the ability to use the proceeds of the Bank’s priority lien collateral to fund the liquidation sales, which it might if the Bankruptcy Court upholds Airball’s objection, the going out of business sales would almost certainly come to an immediate end. While the Chief Credit Officer is not happy with the prospect of having to pay adequate protection payments to Airball from the proceeds of the

to check its existing split collateral intercreditor agreements to better understand the extent of the Bank’s potential exposure on this point.

We hope you enjoyed the column and, of course, are always interested in your feedback. As such, if you have any scenarios you would like to see discussed in a future column, please let us know at Dfiorillo@otterbourg. com or Jcretella@otterbourg.com.. TSL Dan Fiorillo and Jim Cretella are Members of the law firm Otterbourg P.C.

THE SECURED LENDER APRIL 2018 45

the cfa brief AMONG CFA MEMBERS

CFA NEWS IN PRINT

Accord Financial, Inc.: Alexandra (Alex) Lewis has joined as a new director of finance.

Lewis comes to Accord from Charlotte, NC, where she was the accounting manager for a global manufacturing company. In that role, she managed a team of eight accountants in various roles, oversaw all day-to-day accounting and financial reporting, and was point person for external and internal audits. Alex boasts a strong background in finance, performing a variety of roles and utilizing numerous financial software platforms with previous employers. She earned her CPA after graduating cum laude with a bachelor of business administration from Roanoke College in Salem, VA. As director of finance, Lewis will provide value to Accord’s clients by supervising and managing the overall financial and back office operations, as well as all the accounting and production of reporting. Accord is known for providing excellent client service, and under Alex’s leadership, will continue that tradition.

AloStar Capital Finance: Randy Lederman, a veteran corporate finance and business development specialist, has been named business development director of AloStar Capital Finance with responsibility for the New York City region.

Lederman will focus on raising the visibility of AloStar Capital Finance by building relationships with intermediary partners, private equity sponsors, fellow lenders and specialty finance companies, which in turn will increase opportunities for clients in the

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region.

“This is an exciting time to join AloStar, with their expansion of services and recent merger with State Bank & Trust Company,” said Lederman. “There are ample opportunities for AloStar to pursue fruitful partnerships and I look forward to leading that charge.”

Lederman brings significant experience in business development, leveraged finance and bankruptcy/restructuring to AloStar. Most recently, he served as director in Cowen Inc.’s Special Situations Group in New York City. At Cowen, Lederman was responsible for sourcing and executing distressed investment banking transactions for both debtors and creditors. Prior to his role at Cowen, Lederman spent time at various middle-market investment banks, and began his career as an analyst in Bank of America’s Liability Management Group.

Lederman is an active member of the Turnaround Management Association, Commercial Finance Association and the Association for Corporate Growth. He earned a bachelor in business administration in finance from the Ross School of Business at the University of Michigan.

Bank of the West: Tami Farrow was appointed to executive vice president, head of Channel Administration for the Retail Banking Group. She will be responsible for leading the Bank’s Retail Channel Strategy, Planning and Administration, Controls and Governance, Operations Risk, Branch Optimization and Group Operations functions, and replaces Beth Hale, who was promoted to head of Product & Payments Solutions at the Bank earlier this year.

Farrow has nearly 20 years of financial services experience and was most recently head of Retail Sales Strategy and Communications at TD Bank. She will be based out of Bank of the West’s San Ramon office and will report to Ryan Bailey, executive vice president, head of the Retail Banking Group.

“Tami’s strategic capabilities – paired with her deep experience in financial ser-

vices – are the ideal combination to lead the future of our retail strategy and planning,” Bailey said. “She is a perfect fit for this role and I’m glad she’s joining my retail banking leadership team.”

Farrow’s career spans more than 12 years at TD Bank, where she led Retail Sales Strategy and Communications. Prior to that, she spent several years in various Product roles. She has also held leadership roles in finance at American Express and was a consultant at PricewaterhouseCoopers. Farrow received her bachelor of arts in mathematics from The College of New Jersey and her MBA in Finance and Management from Columbia Business School.

Berkshire Bank, America’s Most Exciting Bank®, announced Diane Williams has joined as VP, asset-based loan officer for the Mid-Atlantic region. Williams will be responsible for managing all asset-based lending lines of credit, monitoring current accounts for the region and building new relationships to increase the asset-based lending portfolio.

In the last nine months the Mid-Atlantic asset-based lending team has closed five deals, totaling over $45 million in commitments and $30 million in loan outstandings.

These deals support various industries throughout the region from PA to NJ, including IT support services, specialty millwork, and a facility to support building product distribution.

Williams previously held the position as vice president of asset-based lending for Lakeland Bank in New Jersey. There she originated, structured, underwrote and managed ABL lines of credit, equipment lines of credit, term loan facilities, and owner-occupied commercial mortgages ranging from $1.5 million to $25 million.

Williams attended college in New Jersey where she earned a bachelor of science degree in business management from Rutgers University and went on to get an MBA of business administration from Rowan University. Residing in West Milford, NJ, Wil-

liams is on the board of both the Commercial Finance Association and the NextGen Turnaround Management Association. Williams is located at 4420 Route 27, Kingston, NJ 08528 and can be reached at (973) 534-2669 or drwilliams@berkshirebank.com.

BlueVine: Ana Sirbu was appointed chief financial officer in a management milestone.

Sirbu became BlueVine’s vice president of finance and capital markets in 2016, helping the online business lender secure more than $200 million in equity and debt financing over the past two years.

“Ana has played a critical role in BlueVine’s growth and success,” company founder and CEO Eyal Lifshitz, said. “She has done an incredible job spearheading our capital markets strategy, building out our finance and analytics functions, and strengthening our position in the online business lending market.”

“Ana Sirbu has been instrumental in BlueVine’s impressive rise as one of the most successful fintech startups today,” Tyler Sosin, a partner at Menlo Ventures, a BlueVine investor, said. “I’m sure she will make even more significant contributions to BlueVine’s growth in her new role as CFO.” In November 2017, Sirbu was named to the Women in Fintech Powerlist, which recognizes the contributions of women professionals in the rapidly expanding industry.

A graduate of Harvard University, Sirbu began her career in investment banking on Wall Street. She later was a technology investor at Silver Lake Partners and Google Capital, before joining BlueVine. Sirbu is a passionate advocate for fintech, which is a sector she has focused on throughout her career.

Sirbu takes on the new role at BlueVine after a solid year for the online business lender. BlueVine’s total funded volume since founding topped $700 million in 2017. The company also earned the Best Business Finance Provider in North America award at the 2017 Trade Finance Global Awards.

BMO Harris Bank: Erminia (Ernie) Johannson has joined as group head, U.S. Personal and Business Banking. Based in Chicago, Johannson will lead the bank’s U.S. strategy for the personal and business banking segments, in addition to the oversight of the North American Retail and Small Business Payments and North American Fraud teams. Johannson will build on the strong momentum of BMO’s new digital capabilities and recent product launches to deliver a first-class customer experience across the bank’s key markets in the United States. She will also be part of the bank’s Executive Committee.

“Ernie’s extensive North American banking experience, combined with her diverse knowledge of personal and business banking, will be a tremendous asset to our team,” said David Casper, president and CEO, BMO Harris Bank. “I look forward to working closely with her as we focus on delivering a great customer experience.”

Johannson’s role was previously held by Alex Dousmanis-Curtis, who was recently named head of sales and distribution, BMO’s Canadian Personal and Business Banking.

Most recently, Johannson served as head, North American Retail Credit and Chief Risk Officer, Canadian Personal and Business Banking and Wealth Management.

Johannson has been in the financial services industry for over 20 years, including the last six with BMO in a variety of leadership roles.

Johannson has served on several boards, including past Chair of the Canadian Marketing Association; she has received their Honorary Life Membership Award for her contributions in developing the marketing industry. She is currently on the Board of Directors for Payments Canada and Moneris Solutions Corporation. She looks forward to supporting and being engaged in communities across Chicagoland.

CapFlow Funding is pleased to announce the addition of Donna Hinrichs, Gina Mackenzie and Beth Malin to its business

development team, where the three will be originating commercial lending transactions through their strategic partnerships.

Hinrichs brings 20 years of factoring, ABL, and cash advance experience to CapFlow.

She is based in Chicago, IL. Mackenzie is a seasoned industry professional with substantial experience in the financial services arena. Prior to her involvement in the working capital space, Mackenzie served in various capacities at investment banking and commercial lending firms in New York.

She is based in the New York/New Jersey area. Both Hinrichs and Mackenzie come to CapFlow from RapidAdvance.

Based in Atlanta, Malin has worked in the financial services industry helping smalland medium-sized businesses achieve their financial goals since 1983. Her areas of expertise include commercial banking and twelve years of alternative, non-bank lending including factoring, asset-based lending, and purchase order funding.

CapFlow’s business development team offers a unique combination of knowledge, experience and compassion for small businesses that will greatly benefit CapFlow and its partners. CapFlow Funding Group is an independent finance company providing a broad range of working capital solutions to its clients. CapFlow uses a straight-forward philosophy of assisting customers with their challenging working capital needs by providing creative solutions and options.

Capital One Bank: Ric Kearny, Capital One’s Baton Rouge market president and manager of Commercial Banking for Southwest Louisiana and North Central Louisiana, retired in early March after more than 26 years of service to Capital One. David Mullens will become Baton Rouge market president and manager of Commercial Banking for Southwest Louisiana and North Central Louisiana upon Kearny’s retirement.

A longtime member of Kearny’s team, he currently serves as a senior vice president and relationship manager in Capital One’s Middle-market Commercial Lending group

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the cfa brief

in Baton Rouge.

As market president, Kearny has been responsible for the design, development and implementation of an integrated community strategy for Capital One Bank in greater Baton Rouge. He has played a critical role in ensuring that Capital One Bank lives up to its promise of “Investing for Good” in greater Baton Rouge. In his commercial banking executive role, he has led a team of local commercial bankers responsible for the bank’s full range of commercial products and services in Southwest and North Central Louisiana.

A Baton Rouge native, Kearny received a bachelor degree in general business from Louisiana State University and an MBA in finance from the University of Texas at Austin. He is an active member of his local community, serving as chairman of the boards of the Baton Rouge Area Chamber and the Baton Rouge Downtown Development District. Kearny also serves on the boards of the Salvation Army, Cristo Rey Franciscan High School and Tiger Athletic Foundation.

“As a banker and community leader for nearly three decades, Ric’s impact on Louisiana -- and greater Baton Rouge, in particular -- has been tremendous,” said Chris Haskew, Capital One’s Louisiana Middlemarket Commercial Banking Executive and State President. “Among the many bankers who have benefited from Ric’s leadership and knowledge is David Mullens, whose banking expertise and community commitment will serve our customers and greater Baton Rouge well and build on our strong momentum after he moves into the market president role.”

Mullens joined Capital One in 2007. After completing the bank’s middle-market commercial credit analyst program, he became a business banker, earning several internal awards for success in meeting the needs of a wide range of small-business clients in greater Baton Rouge. In 2013, he joined Capital One’s Middle-market Commercial Lending group in Baton Rouge and was

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named a senior vice president in 2015.

A Baton Rouge native, Mullens received a bachelor degree in finance from Louisiana State University and an MBA from Southeastern Louisiana University. He is a Certified Management Accountant and Certified Treasury Professional and is a member of the Institute of Management Accountants and the Association of Financial Professionals. He is Credit Risk Certified through the Risk Management Association and is a member of that organization.

Active in the community, Mullens is a member of the board of directors of the Mid City Redevelopment Alliance. He is also a member of the Board of Trustees of the Boys and Girls Club of Greater Baton Rouge and the Baton Rouge Rotary. He was named a Great Futures Honoree, recognizing outstanding young professionals who contribute to the Baton Rouge community.

In addition, he is a member of the Finance Committee for the Pelican Chapter of the Associated Builders and Contractors. He is a 2015 graduate of the Baton Rouge Area Chamber’s Baton Rouge Area Leadership Program. In 2017, Mullens was named to the Baton Rouge Business Report’s “40 Under 40” list.

Capital One announced that Stephanie Perry has joined its Financial Sponsors Group for developing and maintaining relationships with private equity firms and originating and evaluating new lending opportunities, including first lien, second lien and unitranche loans.

“We’re thrilled to have Stephanie join our team. She brings a wealth of knowledge and experience in private equity, enabling her to provide our clients with the highest level of service,” said Mark Patchell, senior managing director for the Financial Sponsors Group at Capital One. Perry has more than 20 years of private equity and investment banking experience, most recently as Principal on the investment teams at a middle-market private equity firm and a large BDC. She previously

spent 14 years at Deutsche Bank Securities in New York where she was a managing director and head of Middle-market Sponsor Leveraged Finance. Over her career, Stephanie has executed more than 100 transactions across all major industry sectors, with a combined market value of over $50B. Perry received a B.S. in business administration, magna cum laude, from Indiana University of Pennsylvania and a M.B.A. in finance from Columbia Business School.

Capital One N.A. Financial Sponsors Group is a leading provider of financing, banking and capital markets services to the middle-market private equity sponsor community, offering creative and flexible capital to customers across a broad range of industries. Customized financing solutions provided include acquisition financings, refinancing of existing debt, recapitalizations, support for working capital needs and funding growth initiatives.

Capital One Financial Corporation (www. capitalone.com) is a financial holding company whose subsidiaries, which include Capital One, N.A., and Capital One Bank (USA), N.A., had $243.7 billion in deposits and $365.7 billion in total assets as of December 31, 2017. Headquartered in McLean, Virginia, Capital One offers a broad spectrum of financial products and services to consumers, small businesses and commercial clients through a variety of channels. Capital One, N.A. has branches located primarily in New York, Louisiana, Texas, Maryland, Virginia, New Jersey and the District of Columbia. A Fortune 500 company, Capital One trades on the New York Stock Exchange under the symbol “COF” and is included in the S&P 100 index.

CIT Group Inc. (NYSE: CIT) announced that Vince Mollica was named managing director of the Equipment Finance business. In this role, he will lead the Equipment Finance sales organization with responsibility for commercial lending and leasing in the Industrial, Technology and Office Products markets, as well as for Lender Finance. Mol-

lica will report to Mike Jones, president of the Business Capital division.

“Vince is a seasoned leader with deep industry expertise and over 23 years of experience at CIT,” said Jones. “His skill set in vendor financing and business development makes him a natural fit to lead the Equipment Finance division and advance our growth strategy.”

The Equipment Finance division is part of CIT’s Business Capital operation and works with manufacturers, franchisors, distributors, resellers, dealers and systems integrators to finance their equipment, software and services to commercial customers.

Mollica joined CIT in 1995 and most recently was senior vice president for business development and Structured Transactions in the Equipment Finance operation. Prior to this, he had key roles in Vendor Finance and led programs for a number of technology clients. Earlier in his CIT tenure, Mollica was in the finance function and supported business lines, as well as corporate finance efforts. Prior to joining CIT, he was with Bank of America and PricewaterhouseCoopers.

Founded in 1908, CIT (NYSE: CIT) is a financial holding company with approximately $50 billion in assets as of Dec. 31, 2017. Its principal bank subsidiary, CIT Bank, N.A., (Member FDIC, Equal Housing Lender) has approximately $30 billion of deposits and more than $40 billion of assets. CIT provides financing, leasing, and advisory services principally to middle-market companies and small businesses across a wide variety of industries. It also offers products and services to consumers through its Internet bank franchise and a network of retail branches in Southern California, operating as OneWest Bank, a division of CIT Bank, N.A. CIT Group Inc. (NYSE: CIT), a leading provider of commercial lending and leasing services, announced three key additions to the Restaurant Franchise Finance team within its Equipment Finance business to support

growth in this part of the industry.

“With these appointments, we are continuing to build our Franchise Finance team to support our growth efforts, particularly in the mid-cap sector of our market,” said Michael Vallorosi, managing director of CIT Franchise Finance. “These appointments add significant experience and expertise to CIT as we continue to serve the franchise industry.”

Rejoining CIT is Greg Burns in the position of senior vice president, underwriting.

Burns previously worked at CTL Capital and CTL Securities where he sold secured private placements to insurance companies and pension plans. Prior to that, Greg held various senior-level Franchise Finance positions at companies like American International Group (AIG) and CIT. Also joining the Franchise Finance team is Chris Capecci, who will serve as vice president, Franchise Finance. Capecci was most recently employed as a director of Restaurant Finance at Fifth Third Bank.

He previously worked, also in Franchise Finance, at TD Bank and GE Capital.

In addition, Matt Ensley is joining as vice president, underwriting. Ensley comes to CIT from Regions Bank where he served as a debt products manager in their Middlemarket Finance Group. Prior to that, Ensley worked as a vice president in the Restaurant & Franchise Finance Group at TD Bank.

CIT’s Franchise Finance team works with franchisors and franchisees to provide innovative financing and advisory services in all stages of a company’s growth, including working capital, growth capital, acquisitions, debt refinancing, recapitalizations and restructurings, equipment and technology updates, relocations and remodeling.

Encina Business Credit, LLC (EBC): Stephen Beriau has been appointed managing director of originations with responsibility for leading new business development activity for the Midwest Region. Beriau, who is based out of the company’s headquarters in Chicago, assumes this new role with the

benefit of 12 years of underwriting experience in asset-based lending. He joined EBC in August 2016 as managing director of underwriting, having previously served as vice president of underwriting at First Midwest Bank and assistant vice president of underwriting at MB Financial Bank. Beriau can be reached at sberiau@encinaBC.com.

Hilco Valuation Services: Tom Boniface was appointed to vice president of business development for the Midwest Region of the United States, supporting the Valuation, Monetization and Advisory platforms.

Boniface will be based in Chicago and will have the specific responsibilities of both maintaining existing relationships and creating new relationships with financial institutions, investment banks, private equity firms, hedge funds, and other professional service firms.

Boniface has been with Hilco since 2015, most recently serving in a Director role, primarily supporting renewal valuations for existing appraisal customers. In this role, he worked closely with many of Hilco Valuation Services’ clients and colleagues to scope and close appraisal assignments.

He also provided valuable market research to enhance our origination efforts. Boniface will utilize the valuable knowledge gained in the role as he transitions into his new role. Boniface will begin his new role and responsibilities for the Midwest Region effective immediately.

Prior to joining Hilco Valuation Services, Boniface has served as a project manager at Lasalle Network and worked in human resources at Enlivant, a firm that specializes in assisted living facilities. Boniface graduated from Bates College in 2012 where he was a competitive swimmer and coach. He graduated with a bachelor’degree in applied mathematics.

LBC Credit Partners (LBC), a leading provider of financing solutions to middle-market companies, announced the promotion of seven of its team members. Kevin Doogan

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has been promoted to managing director; Michael Hertz has been promoted to director; Nevin Murkley has been promoted to vice president; and Jonathan Adler, Rocco Christino, Brian Einfeldt and Manu Rao have been promoted to senior associates.

Doogan is responsible for accounting, finance and tax matters. He has 21 years of experience in the asset management and alternative investments industries. Hertz is responsible for sourcing, structuring and negotiating new investments in the Northeast region. He has 11 years of experience in leveraged lending and financial services.

Murkley is responsible for fundraising, marketing and investor relationship management. He has seven years of experience in financial services. Adler is responsible for supporting the sourcing, structuring and negotiating of new investments and has six years of leveraged lending and financial

services experience. Christino is responsible for supporting the research and underwriting of new and existing investments. He has 15 years of leveraged lending and financial services experience. Einfeldt is responsible for managing a portfolio of loans, capital markets research and loan syndications and has six years of leveraged lending and financial services experience. Manu Rao is responsible for supporting the research and underwriting of new and existing investments and has six years of leveraged lending and financial services experience.

MidCap Financial: Michael Marziani has been named managing director and team leader of the MidCap Financial Services, LLC Technology Finance Group. Marziani comes to MidCap with over 17 years of technology lending experience and has been responsible for transactions totaling in excess of

$1.5 billion of capital. At MidCap, he will be responsible for sourcing loans within the Technology Finance group, which seeks to provide growth capital in the form of term debt and working capital facilities to VC-backed and publicly traded software, telecom and IT-related companies.

Marziani was most recently a managing director at Ares Management, and co-head of Ares Venture Finance. Prior to joining Ares in 2012, Marziani was a managing director at BlueCrest Capital, where he focused on originating, structuring and negotiating investment opportunities. Marziani holds a B.S. from Fairfield University in finance and an M.B.A. from the Northwestern University Kellogg School.

Opus Bank (Opus) announced the expansion of its Commercial Banking team with the hires of Tim Claridge and Tony Yee, each

The liquidity you need. Assistance you appreciate.

You have big goals for your business. At Webster, you also have your own go-to team of asset-based lending specialists and direct access to senior decision-makers who can help you move forward faster. It’s this higher level of assistance that’s made us one of the largest banking organizations in the Northeast*… one relationship at a time. locations: Atlanta, Baltimore, Boston, Charlotte, Chicago, New Milford, New York, Philadelphia call: Warren Mino at (212) 806.4501 email: wmino@websterbcc.com

*Source: National Information Center. All credit facilities are subject to the normal credit approval process. Webster Business Credit Corporation is a wholly owned subsidiary of Webster Bank, N.A. Member FDIC. Equal Housing Lender is a registered trademark in the U.S. ©2018 Webster Financial Corporation. All rights reserved.

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The Webster symbol

joining Opus as managing director, senior client manager. Claridge, a 21-year banking veteran, is responsible for further expanding Opus’ commercial and corporate client base in the Tacoma and Olympia markets.

Yee, a 22-year banking and finance veteran, is responsible for further expanding Opus’ commercial and corporate client base in the Seattle/Puget Sound region.

Claridge joins Opus most recently from Columbia Bank, where from 2014 he served as vice president, commercial loan officer.

While at Columbia, Claridge was responsible for managing and growing a portfolio of middle-market commercial clients in the South Sound markets of Tacoma and Olympia. From 2006 to 2014, Claridge served as senior vice president, commercial loan officer at Timberland Bank, where he led a team of bankers focused on Commercial and Industrial and Commercial Real Estate Lending in the South Sound area. From 2005 to 2006, Claridge served as vice president, business relationship manager at Key Bank, N.A., where he was responsible for developing and growing a portfolio of lower middle-market clients. From 2002 to 2005, Claridge served as vice president, branch manager and business loan officer at First Utah Bank, N.A., where he was responsible for originating C&I and SBA senior debt transactions. Claridge began his career in 1996 at Key Bank, N.A. where he served as assistant vice president. Claridge holds a bachelor of science degree in economics from the University of Utah and is a graduate of the Graduate School of Banking at the University of Colorado.

Yee joins Opus most recently from Umpqua Bank, where from 2014 he served as vice president, corporate relationship manager. While at Umpqua Bank, Yee was responsible for managing and growing a $100MM portfolio of middle-market and upper middle-market commercial clients across western Washington. From 2013 to 2014, Yee served as vice president, senior relationship manager at Union Bank, where he was focused on building client relation-

ships with and providing financial solutions to upper middle-market companies in the Pacific Northwest. From 2007 to 2013, Yee served as vice president, senior credit officer at Bank of the West, where he was responsible for analyzing, structuring, and underwriting senior term credits and relationship management, focusing on middle-market clients in Washington. From 2005 to 2007, Yee served as vice president, commercial loan officer at Columbia Bank, where he was responsible for originating commercial, industrial, and commercial real estate debt transactions. From 2001 to 2005, Yee served as vice president, syndicated finance credit manager at Washington Mutual Bank. From 1999 to 2001, Yee served as assistant vice president, large corporate portfolio manager at Key Bank, N.A. Yee began his banking and finance career in 1995 at GE Capital in their executive training program serving as financial analyst, marketing analyst, and credit analyst. Yee holds a bachelor of arts degree in economics from the University of Washington.

Renasant Business Credit: David Ellington was promoted to vice president, Assetbased Lending Division. Ellington originally joined Renasant in July 2014 as an analyst, and since then he has distinguished himself in a variety of asset-based lending roles.

“We are excited to reward David for his loyalty and hard work,” said Mike Knuckles, the EVP and division manager. “David has established a solid foundation of assetbased lending skills during the past three and a half years, and we look forward to his continuing development.”

Renasant Business Credit, the Atlantabased lending division of Renasant Bank, provides asset-based lines of credit from $2-30 million to lower and mid-market companies throughout the Southeast.

Renasant Corporation, a 114-year-old financial services institution, is the parent of Renasant Bank. Renasant has assets of approximately $10 billion and operates more than 175 banking, mortgage, wealth

management and insurance offices in Alabama, Georgia, North Carolina, Florida, Mississippi, and Tennessee.

Summit Investment Management: Jonathan Bloom was appointed as director of originations and marketing in January of 2018. In his role, Jonathan will source distressed debt acquisitions, balance sheet restructures of operating companies, special situation capital, bridge loans and joint ventures. Bloom has had various roles in the restructuring and asset monetization space during the last 16 years with organizations such as The Huntington Bank, Loeb Equipment and Appraisal and The Hilco Organization. Bloom holds a bachelor degree in marketing and management from Indiana University and is an active member of the Turnaround Management Association, Commercial Finance Association and the American Bankruptcy Institute.

Utica Leaseco, LLC: Gil Torres has joined as East Coast business development market manager. Torres has been a leading marketer of lending solutions for nearly three decades.

David Levy, president of Utica, said, “Gil Torres has been a fixture in the Metro New York market and we are delighted to have him as our representative to further assist American companies in financing with their collateral, not their credit.”

Utica is proud to provide financing to important companies based solely on the value of their equipment. Torres is located in New York and can be reached at (914) 5220054 and gilbert.torres@uticaleaseco.com.

Wells Fargo Middle Market Banking announced today that it has promoted 14‑year banking veteran Jeff Brouillard to lead its San Antonio Middle Market Banking team as regional vice president. He replaces former market leader Mark Metcalfe, who recently transitioned to another leadership role within the bank.

In his new role, Brouillard now oversees

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Wells Fargo’s local commercial lending operations, which provide credit, treasury management, and deposit products to middle-market companies with revenues of $20 million and higher in San Antonio, New Braunfels, Hill Country, Corpus Christi, Laredo, and the Rio Grande Valley. His team delivers a localized lending approach, providing more than 80 Wholesale Banking services to some of the area’s largest and most-recognizable companies in agriculture, energy, manufacturing, wholesale, retail, distribution, and technology, among other industries.

“Jeff is passionate about helping middlemarket companies succeed financially,” said Jonathan Homeyer, South Texas division manager for Wells Fargo Middle Marking Banking. “He will lead this vital market with integrity, diligence, and commitment to serving our clients and community.”

Brouillard initially joined the bank as an intern in 2003, before graduating with an economics degree from Vanderbilt University. He served as a credit analyst in Dallas, and graduated at the top of his class from Wells Fargo Credit Management Training Program. He returned to San Antonio as a relationship manager in 2007. Brouillard most recently served as a Middle Market Banking loan team lead.

Born in San Antonio, Brouillard graduated from Alamo Heights High School, where he currently serves on the finance committee of the school’s foundation. He also serves on the San Antonio Children’s Museum dba The DoSeum and LiftFund boards.

Nearly 20,000 Wells Fargo team members live, work, and support customers in Texas.

They also volunteered 143,703 hours in 2016.

Wells Fargo donated more than $10,700,000

to 1,236 Texas nonprofits and schools that same year.

Wells Fargo is number 1 in total middlemarket banking share in the U.S. and has the most primary banking relationships with middle-market companies with $25 million to $500 million in annual sales.* With 140 offices in 38 states and four Canadian provinces, Wells Fargo Middle Market Banking provides local service and decision-making for businesses with $20 million to $500 million-plus in annual sales.

Asset-based lending, traditional secured loans, and capital markets provide access to working capital for day-to-day operations and growth. Expertise and services are available to specialty industries, including technology, food and agribusiness, healthcare, government, higher education, clean technology, and environmental services.

Watch stories about successful middl- mar-

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ket companies at Wells Fargo Commercial Banking Success Stories.

Wells Fargo & Company (NYSE: WFC) is a diversified, community-based financial services company with $2.0 trillion in assets.

Wells Fargo’s vision is to satisfy customers’ financial needs and help them succeed financially. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, investments, mortgage, and consumer and commercial finance through more than 8,300 locations, 13,000 ATMs, the internet (wellsfargo.com) and mobile banking, and has offices in 42 countries and territories to support customers who conduct business in the global economy. With approximately 263,000 team members, Wells Fargo serves one-in-three households in the United States. Wells Fargo & Company was ranked No. 25 on Fortune’s 2017 rankings of America’s largest corporations. News, insights and perspectives from Wells Fargo are also available at Wells Fargo Stories.

Barlow Research Middle Market Rolling 8 Quarter Data 1Q2016-4Q2017 showing Wells Fargo’s competitive market performance among companies with $25MM-<$500MM in sales for both primary bank market share and total market share (primary + up to 3 additional banks used). Deposit products offered by Wells Fargo Bank, N.A. Member FDIC. WNB Specialty Finance: Glenn Burroughs has joined as Western regional manager.

He will be responsible for all new business in Washington, Oregon, California and contiguous states. Glenn will assist in expanding WNB’s North American presence by originating senior secured debt facilities for companies in the Western US and will be based in Seattle, Washington.

Burroughs comes with significant lending experience in both cash flow and assetbased lending. He has worked for Key Bank, PNC and National Bank of Canada, all in a senior capacity to generate deal flow where he has seen tremendous success.

“We are happy to have Glenn join our

growing team and expand our product offerings to the western US,” said Tim Hanchett, managing director of business development for WNB. “We welcome Glenn and look forward to sharing his high energy and expertise in devising creative leveraged finance solutions to deploy capital to middle market borrowers in the west.”

WNB Specialty Finance, headquartered in Southeast Michigan with a national platform, is the Asset-Based Lending and Equipment Finance division of Texas-based Woodforest National Bank, based in The Woodlands, TX. AMONG CFA EDUCATION FOUNDATION MEMBERS Clear Thinking Group LLC: Patrick Diercks was promoted to partner. Diercks has over 13 years of experience as a consultant in the turnaround and restructuring arena, focusing primarily on consumer product manufacturing/distribution and retail companies. He has been retained to assist clients with the preparation and analysis of business plans, financial statements, cash flow reporting and forecasting, collateral analysis and monitoring, out of court winddowns, refinancing, organizational restructuring, labor standards development, and POS implementation/training. Diercks has provided services to the debtor within the Chapter 11 bankruptcy process and has also been retained by multiple bankruptcy estate trustees post confirmation. Additionally, he has performed interim senior management roles including operations, finance, logistics, customer service, distribution, and inventory control. Diercks is a Certified Insolvency and Restructuring Advisor through AIRA, and has a bachelor degree in finance from Florida State University.

Sidley Austin LLP: Andrew Cardonick has joined the firm in Chicago as a partner in its Global Finance practice. Mr. Cardonick formerly co-chaired the finance practice at Greenberg Traurig, LLP. He focuses his practice primarily on the representation of

commercial banks, business development companies and other nonbank financial institutions, as well as select private equity funds.

Cardonick advises clients in connection with sponsored and non-sponsored asset-based, cash flow, split lien, unitranche, second lien, and unsecured syndicated, club and single bank credit facilities throughout the U.S. and internationally. He represents lending clients in restructurings and workouts throughout the country. Cardonick also possesses a broad knowledge of various finance and restructuring topics, including debtor-in-possession financings, cash collateral, substantive consolidation, fraudulent conveyance and other structuring issues.

“Due to significant competitive and regulatory developments within the global finance industry, both traditional and non-traditional lenders are looking for guidance in navigating complex transactions,” said Craig Griffith, member of Sidley’s Executive Committee and its Global Finance practice. “We are pleased to welcome Drew to the firm as his considerable experience, particularly in lending and restructuring, will expand Sidley’s finance capabilities to support our clients engaging in deals within this changing environment.”

CFA WELCOMES NEW MEMBERS AtlanticRMS LLC 55 E Monroe St, Suite 3300 Chicago, IL 60603 Richard Hawkins, CEO (312) 927-8865 Email: rhawkins@atlanticrms.com www.atlanticrms.com Atlantic is the leading provider of International risk management services to the commercial and corporate finance industry.

These services include field exams, diligence services, workouts, portfolio management and specialist advisory services. With operations in both London and Chicago, they work with many major financial institutions across the globe including banks, trade

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finance houses, factors, discounters, assetbased lenders, private equity companies, investment bankers. Atlantic has handles multi-jurisdictional assignments across continents and has developed a range of expertise to facilitate cross-border transactions. This capability has been strategically applied to cases in more than 25 countries.

Richard Hawkins will represent Atlantic on the CFA Board of Directors, is CEO and founder of Atlantic Risk Management Services, which he established in 1997. He has over 30 years of experience working with and for the asset-based lending industry and was at the forefront of developing asset-based lending techniques in the UK in the 1980s. Twenty years later, with teams in both London and Chicago, Atlantic continues to provide leading specialist risk management services across a wide range of situations. Richard is recognized

as one of the leading experts in his field and has lectured and moderated at several International Lending Seminars and Conferences. Additionally, Hawkins is sought after to provide high-level strategic consulting advice to commercial lending organizations worldwide. He was most recently appointed to the CFA Education Foundation Research Committee.

Cortland Capital Market Services 225 W Washington St., 9th Floor Chicago, IL 60606 www.cortlandglobal.com Main: (312) 564-5100 Cortland Capital Market Services LLC is a leading independent investment servicing company providing leveraged loan services including administrative agency and successor agency services, ABL servicing, loan administration, reporting, trade settlement,

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Why do financial institutions across the country trust Freed Maxick ABL Services? As the nation’s largest niche provider of ABL services, Freed Maxick offers the proactive scheduling, rapid deployment and industry experience that top lenders demand. Trust our extensive experience for your pre-loan surveys and rotational field exams.

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Howard A. Rein, CPA, CFE President

716.847.2651 FREEDMAXICK.COM

and a material non-public information (MNPI) firewall. For CLO managers, we add compliance and waterfall modeling to provide a full middle and back-office solution for CLO managers of any size. Cortland can also provide fund administration, commercial bank loan servicing, as well as comprehensive middle and back-office outsourcing for managers, issuer, and investors in credit and real estate assets. Combining experienced professionals and proven process technology, Cortland offers the services and technology leading issuers and investors need to run a scalable, efficient middle and back office.

Ellen Cook, who will represent Cortland Capital Markets on the CFA Board of Directors, is the director of ABL services at Cortland Capital Market Services LLC. Ellen has over 28 years’ experience in asset-based and cashflow lending. Prior to joining Cortland, Ellen was a senior vice president at MB Business Capital with responsibility for 0perations and business unit integration into MB Financial Bank during the 2014 merger with Cole Taylor Bank. Before the merger, Ellen was the underwriting manager for Cole Taylor Business Capital, managing the team of experienced underwriters at Cole Taylor Bank. Previously she worked with LaSalle Business Credit at LaSalle Bank, holding various progressive positions in Credit Analytics and Underwriting. Ellen is a CFA member and holds a B.S. in accounting from Florida A&M University.

Cost Reduction Solutions 44A Reynolds Avenue Parsippany, NJ 07054 Tel: (973) 887-8124 Denise A. Albanese, owner of Cost Reduction Solutions, an international due diligence firm, assumes the role of business development for the company. Prior to joining the commercial finance industry, Denise led a major account team in the office equipment solutions industry for a $5.2 billion publicly held company. Denise has helped grow Cost Reduction Solutions’

customer base by more than 75% in the past 10 years and helped CRS service more than 180 unique customers and commercial lenders.

Denise is active in the lending community. As a member firm of the national CFA, Denise will participate on the Women’s Committee, as well as a committee member on the “40 Under 40” recognition ceremony for the Commercial Finance Association. An active executive board member of the local NJ CFA Chapter, holding past positions of Chairman, President, Vice President, Treasurer and Secretary, Denise is a dedicated mentor for young professionals, actively encouraging networking growth, opportunities and promotions within the company and industry for the “Next-Gen/“YoPros.” In 2015, Denise founded a not-for-profit 501C3, Paulie & Pals, which offers financial assistance to families who have children affected by Autism. Denise has two children and is the proud grandmother of two granddaughters.

DLL Financial Services, Inc. 1111 Old Eagle School Rd. Wayne, PA 19087 United States of America (610) 386-5000 DLL is a global vendor finance company with €30 billion in assets. Founded in 1969 and headquartered in Eindhoven, The Netherlands, DLL provides asset-based financial solutions in the agriculture, food, healthcare, clean technology, construction, transportation, industrial and office technology industries. DLL partners with equipment manufacturers, dealers and distributors in more than 30 countries to support their distribution channels and help grow their businesses. DLL combines customer focus with deep industry knowledge to deliver sustainable solutions for the complete asset life cycle, including retail finance, commercial finance and

used equipment finance. DLL, believes in genuine partnerships with our customers, its the kind built on personal trust, not just numbers. By combining customer focus with deep industry knowledge, it looks beyond quick fixes to deliver sustainable solutions. It is more than a provider of capital.

It is a true strategic partner and collaborator. To that point, it has identified three global trends that will likely alter the way its customers do business and therefore change the expectations they have of their financial solutions provider. In response to these trends, it is continuously adapting its business to meet the evolving needs of our customers. To learn more about DLL, visit www.dllgroup.com.

Mark McGovern, who will represent DLL on the CFA Board of Directors, was named President of DLL’s Global Commercial Finance (CF) Business Unit in early 2017. He is responsible for a portfolio of €3B+ with a presence in 13 countries.

Since joining DLL in 1988, Mark has held several commercial leadership roles, including assignments in the United States and Europe. He most recently served as Senior Vice President of Commercial Finance, responsible for the global business strategy and new business development, where he delivered year-over-year new business development growth throughout his three-year tenure.

With more than 30 years of experience in the equipment finance industry, Mark has held leadership positions across a variety of functions, including asset management, pricing, sales, program management, new business development and general management.

Mark holds a bachelor of science degree in business administration from Albright College and a masters of business administration from Saint Joseph’s University. He lives in Wayne, Pennsylvania with his wife and two daughters. Mark is an avid fan of live music, enjoys visiting his family in Louisiana and spending time at the Jersey Shore.

Summit Investment Management Wells Fargo Center 1700 Lincoln Street, Suite 2150 Denver, CO 80203 Summit Investment Management LLC is a private investment firm headquartered in Denver, Colorado that acquires and resolves distressed commercial and operating business loans. Summit also provides flexible capital for bankruptcy situations and businesses in need of turnarounds. Summit has invested more than $1.5 billion in distressed debt acquisitions, balance sheet restructures, special situation capital, bridge lending and joint ventures. Typical investments range between $1 million and $75 million with the flexibility to execute larger transactions. Summit is a leading resource and partner for banks, financial institutions, middle-market companies, turnaround and restructuring professionals, law firms and private equity firms, among others.

Representing Summit on the CFA Board of Directors is Jonathan Bloom, who joined Summit in January 2018. His responsibilities include business development and marketing, deal sourcing and underwriting. Jonathan has had various roles in the restructuring and asset monetization space during the last 16 years with organizations such as The Huntington Bank, Loeb Equipment and Appraisal and The Hilco Organization. Jonathan holds a bachelor degree in marketing and management from Indiana University and is an active member of the Turnaround Management Association, Commercial Finance Association and the American Bankruptcy Institute.

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Atlanta Save the dates for the following events the Chapter has planned in 2018: May 17, Atlanta Braves vs Chicago Cubs outing at SunTrust Park in Atlanta; May 18 for a tennis outing, (location TBD as of press time) and October 8 for a golf outing at Pinetree Country Club.

For more information visit community.cfa.com/atlantachapter California The Chapter has many events slated for 2018 including a Presidents Panel at City Club in downtown Los Angeles on April 11; a Summer Party at The Standard Rooftop on July 11; a Hot Topic Panel Discussion at the Luxe Summit Hotel on October 3; the Annual Fall Golf Classic at Coyote Hills Golf Course in October; a Women of CFCC event on October 18 (location TBD); a sponsor panel or networking event at Center Club – Orange County on November 15 and the Holiday Party at the Sheraton Universal on December 12.

For more information visit community.cfa.com/californiachapter Europe The Chapter will hold an event at BOZAR Centre for Fine Arts Brussels in Brussels Belgium on April 18. Jan Smets, Governor of the National Bank of Belgium and VicePresident of the European Central Bank’s Governing Council and General Council, will provide the opening keynote, speaking on “Finalisation of the regulatory agenda for banks-salient features and impact for assetbased financing”.

This fascinating talk will be followed by two expert panels, the first exploring the appetite for ABL in Belgium, Germany and

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CFA’s MidWest Chapter’s Young Professional’s Committee hosted an educational event titled “Stock Market Sustainability, Crypto Currencies Fact & Fiction, 2018 Outlook” at Faegre Baker Daniels, LLP on March 6. The panel featured expert panelists Christopher Gersch and Wulf Kaal.

the UK from a debt advisory and lending perspective and the second a legal panel discussing trends and regulatory issues impacting the region.

This insightful event will kick off with a welcome from Werner Van Lembergen of Laga, a full service business law firm, and Jeremy Harrison of Bank of America Merrill Lynch, followed by Smets’ keynote, followed by the two panels.

For more information visit community.cfa.com/cfaeurope Florida The Chapter’s Orlando division held a Speed-Networking Social on March 27 at Burr & Forman in Orlando. The event offered the opportunity to meet the members of the CFA Orlando Chapter. Multiple areas were set-up where each attendee had an opportunity to network with one another in a round robin setting.

On April 18, the Chapter will host Mark Vitner, senior economist, Wells Fargo Securities LLC, who will discuss the economy at the Lauderdale Yacht Club in Ft. Lauderdale, FL. For more information visit community.cfa.com/floridachapter Michigan On March 15, the Chapter held its March Madness Networking Event at Tequila Blue in Royal Oak along with RMA East Michigan and ACG Detroit groups. Food and two premium drink tickets were included with registration. Guests also had the opportunity to participate in a friendly March Madness bracket competition for a chance to win various prizes throughout the event.

For more information visit

community.cfa.com/michiganchapter MidSouth The Chapter held an event at Top Golf Nashville on March 15. On June 26, the Chapter will hold a golf outing at the Gaylord Springs Golf Links in Nashville, TN. For more information visit community.cfa.com/midsouthchapter Midwest On March 6, the Midwest Chapter’s YoPro Committee hosted their annual Educational Event at Faegre Baker Daniels LLP. Titled “Stock Market Sustainability, Crypto Currencies Fact & Fiction, 2018 Outlook,” the event included a lively panel discussion among moderator Nora Schweighart, partner, Faegre Baker Daniels LLP, the audience, and expert panelists Christopher Gersch and Wulf Kaal. Gersch shared his insights on private equity investment in renewable energy, including two of his portfolio companies, Verde Solutions and Blox Capital, and discussed investing in cryptocurrencies. Kaal enlightened the audience with a discussion of cryptocurrency basics followed by commentary on topical matters affecting the crypto industry.

The Chapter held its YoPro 6th Annual Championship Monday event at the Game Room at the Chicago Athletic Association Hotel in Chicago, IL on April 2. The NCAA Championship viewing party was open to all members and guests. Attendees enjoyed unlimited food and drinks while challenging colleagues to games of pool and shuffleboard.

The Chapter’s Inaugural Sporting Clays Classic will be held April 12 at Northbrook Sports Club in Hainesville, IL. The North-

brook Sports Club is situated on over 700 acres of rolling countryside in Hainesville.

The club is one of the finest clay target facilities in the U.S., throwing over three million targets annually. As of 2016, it is one of the top three Sporting Clays Clubs in the nation.

With $600 of prizes at stake, participants will venture out on to the club’s green course in groups of four, moving from stand to stand attempting to break all 75 clays.

Professionals from the club will be on-hand to provide safety instruction and the event administrators will make sure that group pairings are fair. All skill levels are welcome.

Plan to stay for lunch and enjoy a bourbon tasting. Prizes will also be awarded to the top performers, both male and female, but you need to be present to win.

The Chapter will hold a Women’s Networking Icebreaker event on April 26 at The Standard Club, Chicago Room in Chicago. The icebreaker starts one hour before the Spring Educational Panel, held that same day and location. Attendees will have the chance to enjoy a glass of wine while networking with other women in the lending community and learning about the Chapter’s 2018 plans.

The Chapter will hold a Women’s Speed Networking Luncheon on May 2 at the Columbia Yacht Club in Chicago, IL. This fun, unique networking experience will offer an opportunity to meet fellow women professionals on a new level, whether you’re a seasoned networker or new to the industry. The “Speed Networking” format is simple; the event will be hosted over a threecourse lunch where attendees will sit with a different group of women at each course in order to maximize their networking efforts.

Save the date for the 24th Annual Cubs Outing on May 23 at the Wrigley Rooftop Deck and the 29th Annual Golf Invitational on July 19 at The Harborside International Golf Center.

For more information, visit community. cfa.com/midwestchapte

Minnesota The Chapter will hold a Credit Market Update Panel on April 18 at IDS Center in Minneapolis. Local experts have been invited to share their insight into the latest trends and discuss the current state of the credit market. The Chapter will host a Lunch and Learn on May 16 at Lake Monster Brewing in St. Paul, MN. The Chapter’s Summer Social will be held on August 15 at The Minneapolis Club in Minneapolis. The Chapter will host a Lunch and Learn Series, titled “LIBOR in Loan Transaction,” and sponsored by Helllmuth & Johnson, PLLC, on November 14. The panel will discuss the future of LIBOR. More than one hundred trillion dollars of financial products use LIBOR as a reference rate. But after 2021 the UK will no longer require banks to submit LIBOR quotes. Avoid disputes/litigation by transitioning from reliance on LIBOR now. Presenters include Karl Johnson and Michael Howard of Hellmuth & Johnson, PLLC. For more information, visit community.cfa.com/minnesotachapter New England The New England Chapter held its March Mania Networking Event at Bell in Hand in Boston on March 15. Save the date for the Chapter’s Annual Golf Outing, which benefits the Ron Burton Training Village, held on June 4 at Blue Hills Country Club in Canton, MA. For more information, visit community.cfa.com/newenglandchapter New Jersey On March 28 the Chapter held an event at TopGolf in Edison, NJ. Save the dates for the Joint NJCFA/NJTMA 2018 Golf & Tennis Outing on May 29 at the Essex County Country Club in West Orange, NJ and the 8th Annual Beach Party at the newly rebuilt Donovan’s Reef on July 19.

For more information, visit community.cfa.com/newjerseychapter

New York The Chapter held its Annual Bowl-A-Thon on March 22 at Frames Bowling Lounge in Port Authority in New York. Attendees enjoyed a fun night of dinner, drinks and bowling as well as catching the live broadcasts of NCAA tournament basketball games on Frames’ large screen TVs. All proceeds benefitted the Chapter’s ongoing education program, charitable contributions and support of fund raising activities, as well as future events.

For more information, visit community.cfa.com/newyorkhapter Philadelphia The Chapter hosted the 11th Annual Philadelphia Credit & Restructuring Summit, on March 22. The joint event was held with the ABF Journal, the New York Institute of Credit, and the Philadelphia Chapter of the Commercial Finance Association. The halfday conference provided an exceptional opportunity to network with industry leaders including corporate restructuring and turnaround practitioners, lenders and other capital providers, attorneys, investment bankers and other intermediaries.

The Chapter’s Day One at the Masters Networking Event was held on April 5 at Tavern on Broad in Philadelphia. The Chapter’s 24th Annual Golf Outing will be held at the Cedarbrook Country Club in Blue Bell, PA on May 14.

For more information, visit community.cfa.com/philadelphiachapter Southwest The Chapter will hold a networking event on April 9 at Coal Vines in Dallas, TX. A Middle Market Update event will be held on May 16 and a clay shoot at Elm Fork on August 30.

For more information, visit www.cfasw.org.

For more information on CFA Chapters, please visit community.cfa.com/ch/chaptersmain

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CALENDAR

the cfa brief

AD INDEX Freed Maxick . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.freedmaxick.com. . . . . . . . . . . . . . . . . . Page 54 Hilco Global. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.hilcoglobal.com. . . . . . . . . . . . . . . . . . . . BC HPD Software, LLC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.hpdsoftware. . . . . . . . . . . . . . . . . . . . . . . IBC Katten Muchin Rosenman LLP. . . . . . . . . . . . . . . . www.kattenlaw.com. . . . . . . . . . . . . . . . . . . . . IFC MB Financial Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.mbfinancial.com/healthcare . . . . . Page 7 Phoenix Management Services. . . . . . . . . . . . . . . . www.phoenixmanagement.com. . . . . . . . Page 3 Provident Bank. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.provident.bank . . . . . . . . . . . . . . . . . . . . Page 15 Spine LLC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.spinellc.com. . . . . . . . . . . . . . . . . . . . . . . . Page 52 Utica Leaseco, LLC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.uticaleaseco.com. . . . . . . . . . . . . . . . . . Page 59 Webster Business Credit Corp.. . . . . . . . . . . . . . . . . www.websterbank.com . . . . . . . . . . . . . . . . . Page 50

April 3 - 19 2018 CFA’s Factoring Fundamentals Virtual Workshop

April 24 – 26, 2018 CFA’s Workouts & Bankruptcy Workshop Venue location TBD Los Angeles, CA

April 11, 2018 CFA’s California -Presidents Panel City Club Downtown Los Angeles, CA

April 26, 2018 CFA Midwest Women’s Networking Icebreaker – (held one hour prior to the Educational Panel) The Standard Club, Chicago Room Chicago, IL

April 18, 2018 CFA’s Europe Chapter – Panel Event BOZAR, Centre for Fine Arts Brussels Brussels, Belgium April 18, 2018 Vitner Talks Economy – Florida Chapter Event With Mark Vitner, Sr. Economist, Wells Fargo Securities LLC Lauderdale Yacht Club Ft. Lauderdale, FL

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William Stucky & Associates, Inc.. . . . . . . . . . . . . . www.stuckynet.com. . . . . . . . . . . . . . . . . . . . . Page 1

April 9, 2018 CFA’s Southwest Chapter Networking event Coal Vines

April 13, 2018 CFA Midwest Chapter’s Inaugural Sporting Clays Classic Northbrook Sports Club Hainesville, IL

Wells Fargo Capital Finance. . . . . . . . . . . . . . . . . . . www.wellsfargocapitalfinance.com. . . . Page 2

April 26, 2018 CFA Midwest Educational Panel (Save the Date) The Standard Club Chicago, IL May 2, 2018 CFA Midwest Chapter’s Women in Commercial Finance Group - Speed Networking Luncheon Columbia Yacht Club Chicago, IL May 1 – 17, 2018 CFA’s Spring Operations Fundamentals Virtual Workshops

April 18, 2018 CFA’s Minnesota Chapter Credit Market Update Panel IDS Center Minneapolis, MN

May 14, 2018 CFA’s Philadelphia Chapter 24th Annual Golf Outing Cedarbrook Country Club Blue Bell, PA

April 24 – 26, 2018 CFA’s Spring Advanced Field Examiner School Venue location TBD Los Angeles, CA

May 15 – 17, 2018 CFA’s Operations Bootcamp Venue location TBD Chicago, IL

DON’T MISS CFA’S 2018 EVENTS! WWW.CFA.COM

May 15 – 17, 2018 CFA’s 12th Annual International Lending Conference Mayer Brown Offices London May 15 – 18, 2018 CFA’s Field Examiner School Venue Location TBD Chicago, IL May 16, 2018 CFA’s Minnesota Chapter - Lunch and Learn Lake Monster Brewing St Paul, MN May 17, 2018 CFA’s Atlanta Chapter Atlanta Braves vs Chicago Cubs Outing SunTrust Park Atlanta, GA May 18, 2018 CFA’s Atlanta Chapter – Tennis Event Bridgemill Tennis Center Canton, GA May 23 - 25, 2018 CFA’s Independent Finance and Factoring Roundtable Windsor Court Hotel New Orleans, LA May 23, 2018 CFA’s Midwest Chapter 24th Annual Cubs Outing Wrigley Rooftop Deck Chicago, IL

May 29, 2018 CFA’s New Jersey Chapter – Golf & Tennis Outing Essex County Country Club West Orange, NJ

July 19, 2018 CFA’s Midwest Chapter 29th Annual Golf Invitational Harborside International Golf Center Chicago, IL

June 4, 2018 CFA’s New England Chapter – Annual Golf Outing, benefitting the Ron Burton Training Village Blue Hills Country Club Canton, MA

July 19, 2018 CFA’s New Jersey Chapter – Annual Beach Party Donovan’s Reef Sea Bright, NJ

June 5 – 7, 2018 CFA’s ABL & Factoring Basics Workshop Virtual Workshop June 5 – 7, 2018 CFA’s Summer Loan Documentation Workshop Hahn & Hessen LLP New York, NY June 18 - 19, 2018 CFA’s Idea Exchange: Crucial Conversations in Secured Lending New York Marriott Downtown New York, NY June 19 - 20, 2018 CFA’s Foundations of Account Management Holland & Knight LLP Dallas, TX June 19 - 21, 2018 CFA’s What’s it Worth? All You Need to Know About Inventory Holland & Knight LLP Dallas, TX July 10 – 26, 2018 CFA’s Summer Underwriting Fundamentals Virtual workshops July 11, 2018 CFA’s California Chapter - Summer Party The Standard Rooftop Los Angeles, CA

September 5 – 7, 2018 CFA’s Operations Bootcamp Greenberg Traurig LLP Atlanta, GA October 3, 2018 CFA’s California Chapter Hot Topic Panel Discussion Luxe Summit Hotel Los Angeles, CA

August 15, 2018 CFA’s Minnesota Chapter – Summer Social The Minneapolis Club Minneapolis, MN September 5 – 7, 2018 CFA’s Fall Advanced Field Examiner School Greenberg Traurig LLP Atlanta, GA

November 7 - 9, 2018 CFA’s 74th Annual Convention Hotel info to Follow San Diego, CA November 14, 2018 CFA’s Minnesota Chapter – Lunch and Learn Hellmuth & Johnson, PLLC Edina, MN

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THE SECURED LENDER APRIL 2018 59

legal notes

f

or this issue we have selected a recent case addressing whether a borrower’s claim against its prior lender for damages, allegedly arising from the negligent impairment of the collateral and fraud, provides a basis in a separate action for defeating the lender’s summary judgment motion to enforce its personal guaranties. This case is currently on appeal and is pending before the Court of Appeals of the State of New York which is New York’s highest appellate court.

JONATHAN HELFAT AND RICHARD KOHN, CFA CO-GENERAL COUNSEL Capital One Taxi Medallion Finance v.

Patton R. Corrigan, et al. 147 A.D. 3d 677 (1st Dept. 2017) Lender entered into a loan and security agreement with the Borrower who was in the business of financing taxi medallions. The loan was secured by, inter alia, the medallions.

The Borrower defaulted on its loan and the Lender moved for summary judgment against the guarantors. The guaranties provided by their terms, in relevant part, as follows: 1. “[The] Guarantor hereby absolutely, irrevocably and unconditionally guarantees to the Lender the full

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DON’T MISS CFA’S 2018 EVENTS! WWW.CFA.COM

THE LEGAL SIDE OF ABL & FACTORING

and prompt payment by the Borrower of all … Borrower’s Liabilities when and as the same shall become due.”

2. [t]he obligations of the Guarantor under this Guarantee…shall not be affected, modified or impaired by any state of facts or the happening from time to time of any event, including…[t]o the extent permitted by law, any other circumstances which might constitute a legal or equitable discharge or defense of a surety or a guarantor.”

3. “Guarantor’s liability hereunder shall in no way be limited or impaired by...the invalidity, irregularity or unenforceability, in whole or in part, of any of the Loan Documents, this Guaranty or any other instrument or agreement executed or delivered to Lender in connection with the Loan, except to the extent that there is a final adjudication by a court of competent jurisdiction of a valid defense to Borrower’s obligations under the Loan Documents to payment of its liabilities.”

Lender moved for summary judgment on the guaranties establishing a prima facia case evidenced by, among other things, the loan agreement, the guaranties and proof of the Borrower’s failure to pay the indebtedness. In opposition to the motion, the guarantors raised various issues of fact brought in a separate action by the Borrower against the Lender arising out of the same transaction wherein it was alleged that the Lender breached the loan agreement by ceasing to approve any loan advances months before the expiration of the loan agreement, negligently impairing the collateral by abruptly withdrawing from the Chicago medallion financing market and refusing to release its lien on certain

medallions subject to the Lender’s security interest. The guarantors took the position that these “defenses”, albeit in a separate action, defeated the Lender’s motion for summary judgment pending a “final adjudication by court of competent jurisdiction.”

The court found that the claims of breach of contract and negligent interference with collateral were not “defenses” to the Borrower’s liability under the loan agreement as alleged in the separate action but counterclaims and therefore there was no issue of fact regarding the Lender’s summary judgment motion. The court concluded that “Because the breach of contract and negligent interference with collateral claims are separate from the borrower’s unequivocal and unconditional obligation to repay the monies it was loaned, defendants are still liable under the guaranties and promissory notes.”

It now remains for the Court of the Appeals to determine where the language of a guarantee is unambiguous as to liability can enforcement be delayed pending a final determination of what the lower Court determined to be a counterclaim. TSL Jonathan N. Helfat, partner, Otterbourg P.C., and Richard M. Kohn, principal, Goldberg Kohn are CFA co-general counsel.

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