TSL May 2019

Representing the Asset-Based Financing, Factoring & Supply Chain Finance Industries Worldwide May 19

NAVIGATING NEW TERRITORY P8 ARE GLOBAL TRADE WARS THE NEW NORMAL? P14

THE INTERNATIONAL ISSUE THE NEW FRONTIER: INDUSTRIAL ASSET RECOVERIES P20 DISCOVERING AND UNLEASHING FINANCING POTENTIAL P24 FINANCE PROFESSIONALS CAN BUILD ON BLOCKCHAIN FOR SUCCESS P30

CFA WICF CONFERENCE EXPLORES HOW WOMEN CAN STEP INTO THEIR POWER P32 TSL INTERVIEW

HONORABLE KEVIN J.

CAREY P 26

THOUGHTS FROM THE WICF CONFERENCE: “NOW THAT I’M HERE, WHAT’S NEXT?” P36 DEPARTMENTS

COLLATERAL // THE CFA BRIEF // // WHAT WOULD YOU DO?

The 2019 Secured Finance Market Sizing & Impact Study The Authoritative Tool for the Secured Finance Industry to Plan, Benchmark, & Raise Capital The CFA Education Foundation, in conjunction with Ernst & Young, has conducted the first of its kind Secured Finance Industry Market Sizing and Impact Study for the purpose of benchmarking, strategic planning, attracting capital and assisting in advocacy efforts on behalf of the industry.

Through primary and secondary research, the study dimensions the size and scope of the commercial marketplace for secured lending and its related products and services. Part primer, part data compilation and part analytical assessment, the study provides the reader with a detailed view into the highly interconnected segments of this network and their collective impact on capital deployment and economic development. The findings dimension an industry that is far-reaching, influential, thriving and presenting significant growth opportunities for its participants to expand their served and available markets.

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w w w.s t u c k y n e t.c o m

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

Volume 75, Issue 4

May 19

FEATURES

14

Navigating New Territory

Are Global Trade Wars the New Normal?

8 8 Navigating New Territory

Lenders are entering a brave new world in which U.S. tax law may no longer be an impediment to taking foreign guarantees and collateral and a pledge of 100% of the stock of a foreign subsidiary. New proposed regulations (the “Proposed Regulations”) issued on October 31, 2018 by the Internal Revenue Service (the “IRS”) and the Treasury Department will, if finalized, and subject to certain exceptions, eliminate the adverse tax consequences of the “956 Deemed Dividends Rule” for corporations under Section 956 of the Internal Revenue Code (“956”) . By Angela Batterson and Adela Woliansky

14 Are Global Trade Wars the New Normal?

24 Discovering and Unleashing The Financing Potential To Grow Supply Chains in CrossBorder Trade

26 Interview with Honorable Kevin J. Carey, Delaware Bankruptcy Judge

Geopolitical advisor David Chmiel considers recent changes in global trade policy and assesses whether the world is confronting a sustained period of tariff increases and trade wars. By David J. E. Chmiel

20 The New Frontier: Industrial Asset Recoveries Across International Markets Executives from Gordon Brothers offer tips for recovery in this complicated global environment. By Duncan Ainscough, Fenton Healy, and Rafael Klotz

20

The New Frontier: Industrial Asset Recoveries Across International Markets

Peter Nunes of Vayana Network explains both the challenges and opportunities surrounding cross-border trade. By Peter Nunes

Judge Kevin J. Carey (D. Del.; Wilmington) has served on the Bankruptcy Court for the District of Delaware since 2005 (serving as Chief Judge from 2008 to 2011), having first been appointed as a bankruptcy judge for the Eastern District of Pennsylvania in 2001. By Michele Ocejo

30 Finance Professionals Can Build on Blockchain for Success

Rick Burke of TD Bank discusses the results of TD’s recent blockchain survey. When it comes to the technology’s specific capabilities and implications, finance professionals are divided: blockchain will create stronger audit trails (29%), speed up payment processes (22%), improve efficiency of cross-border payments (21%) and reduce payments fraud (18%). TD’s survey also revealed a conundrum in the treasury world: Faster and real-time payments are coming soon, but organizations still have obstacles to implement them. By Rick Burke

32 CFA Women in Commercial Finance Conference Explores How Women Can Step into Their Power CFA’s Women in Commercial Finance Conference provided networking and insight for career development and how to navigate issues faced in today’s work environment. By Eileen Wubbe

36 Thoughts from the WICF Conference - “Now That I’m Here, What’s Next?” Insights, Tips and Tools to Navigate RealLife Career Challenges In light of the CFA’s Women in Commercial Finance Conference, held on March 14, we’ve decided to launch a mini-series to bring you more indepth information on how to successfully navigate issues faced in today’s work environment. You’ll hear from some of the industry’s leading female executives on how they have achieved success and made their mark. Here we hear from Cyntra Trani, director of credit management, Asset Based Lending at TD Bank. By Eileen Wubbe

DEPARTMENTS 6

Letter From Richard D. Gumbrecht, CEO of the Commercial Finance Association, discusses TSL’s international issue.

6

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

38

What Would You Do? In this edition of What Would You Do?, the Chief Credit Officer of Overadvance Bank is asked by the principal of a distressed borrower to conduct an “Article 9 secured party sale” of the borrower’s assets and finance the asset sale to another company owned by the same principal. By Dan Fiorillo and Jim Cretella

40

The CFA Brief 40 50 51 54 55

56

Among CFA Members Welcome new CFA Members Chapter Spotlight CFA Chapter News Calendar

Advertisers Index

STAFF & OFFICES Michele Ocejo Editor-in-Chief and 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.

letter from

d

THOUGHTS FROM CFA AND TSL STAFF

espite geopolitical and trade challenges, crossborder lending is a necessity in today’s ever-shrinking world. It’s an area rich with opportunity, as demonstrated in the content of this issue as well as CFA’s International Lending Conference being held in London, May 21-23 and our Cross-Border Summit in New York on September 18.

A couple of newsworthy items also come to mind which demonstrate the evolution of cross-border finance. You may recall a note from CFA General Counsel, Richard Kohn, in February, announcing that on January 2, 2019, the United States Senate gave its advice and consent to the United Nations Convention on the Assignment of Receivables in International Trade – slightly more than 15 years (to the day) after the Convention was signed by the United States. The CFA is proud to have played a role in the adoption process as well as in the drafting of the Convention, which, as Richard explained, is designed to facilitate the financing of receivables by exporters of goods and services. (The full text of the note can be found on cfa.com under Advocacy.)

Just this week, TSL Express, CFA’s daily e-news, published a link to an article

announcing that Jamaica’s government is exploring the feasibility of utilizing accounts receivables asset-based financing as a funding option for micro, small and medium-size enterprises.

Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke, said a team has been appointed to analyze the issue, “to enable receivables to be a more mainstream product in our financial space,” and pointed out that “in developed economies, receivables financing is a major component of the financing space.”

We continue to work with the World Bank in promoting such initiatives.

On page 20, executives from Gordon Brothers offer tips for recovery in this complicated global environment in The New Frontier: Industrial Asset Recoveries Across International Markets.

Lenders are entering a brave new world in which U.S. tax law may no longer be an impediment to taking foreign guarantees and collateral and a pledge of 100% of the stock of a foreign subsidiary. New proposed regulations issued in 2018 by the IRS and the Treasury Department will, if finalized, and subject to certain exceptions, eliminate the adverse tax consequences of the “956 Deemed Dividends Rule.” On page 8, Angela Batterson and Adela Woliansky of Jones Day explain what this means for lenders.

Geopolitical advisor David Chmiel considers recent changes in global trade policy and assesses whether the world is confronting a sustained period of tariff increases and trade wars in Are Global Trade Wars the New Normal? on page 14.

If you have ever wondered what

a bankruptcy judge considers when presented with a request to roll prepetition debt into a DIP facility, turn to page 26 for an interview with Honorable Kevin J. Carey, Delaware Bankruptcy Judge.

In Discovering and Unleashing the Financing Potential to Grow Supply Chains In Cross-Border Trade, on page 24, Peter Nunes of Vayana Network explains both the challenges and opportunities surrounding this space.

On page 30, Rick Burke of TD Bank discusses the results of TD’s recent blockchain survey, which revealed a conundrum in the treasury world: Faster and real-time payments are coming soon, but organizations still have obstacles to tackle before implementing them.

CFA’s Women in Commercial Finance Conference in March was a sold-out event.

If you weren’t able to attend, turn to page 32 for a recap and page 36 for Insights, Tips and Tools to Navigate Real-Life Career Challenges, by Cyntra Trani of TD Bank, a panelist at the event.

Thanks for being an active part of our community. I hope to see you soon at one of our upcoming events such as our new Mid-Year Executive Roundtable and Town Hall Meeting in NYC in June. As always, I welcome your feedback on this issue and any of our other initiatives.

“Thanks for being an active part of our community. I hope to see you soon at one of our upcoming events such as our new Mid-Year Executive Roundtable and Town Hall Meeting in NYC in June. As always, I welcome your feedback on this issue and any of our other initiatives.”

4

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Warm regards, Richard D. Gumbrecht CFA CEO

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collateral INDUSTRY NEWS

THE INDUSTRY IN BRIEF

6

CDPQ and Hilco Global Enter Into a Long-Term Partnership Agreement La Caisse de dépôt et placement du Québec (“CDPQ”) has acquired a minority stake in Hilco Trading, LLC (d/b/a “Hilco Global”), an independent financial services company. Following the transaction, CDPQ will own 27% of Hilco Global Through this new partnership, CDPQ will support the long-term strategy and continued growth of Hilco Global, a leading authority on asset valuation, monetization and advisory solutions across the world. Furthermore, CDPQ will target annual investments of approximately US$150 million, alongside Hilco Global, in distressed assets and other special situations.

Jeffrey B. Hecktman, Chairman, CEO and founder of Hilco Global, said, “Our new partnership with CDPQ is a perfect fit for us both strategically and culturally. Management at CDPQ understands that our goal was to find a financial partner that would support our long-term growth plans. CDPQ will serve as a key strategic investor in the capital-intensive deals that will fuel our continued expansion into several sectors including real estate, intellectual property, account receivables, and commercial and industrial asset transactions with both healthy and distressed companies.”

“Our investment is motivated by Hilco Global’s excellent reputation, track record, and strong management team,” commented Stéphane Etroy, executive vice president and head of private equity at CDPQ. “Hilco Global, whose role is to transition existing and often undervalued assets into profitable use, helps businesses to adopt new technologies and adjust to changing consumer habits. This is perfectly aligned with our long-term investment strategy.”

Hilco Global (www.hilcoglobal.com) is a leading diversified financial services company. The company offers a unique platform of more than twenty integrated business units located around the

world and focused on three core corporate solution areas: valuation, monetization, and advisory services. Each Hilco Global company is recognized as a leader in its respective field and is led by subject matter experts. Hilco Global has earned its reputation by helping both healthy and distressed companies identify and derive maximum value for their tangible and intangible assets for over thirty years. Hilco can also provide capital to help facilitate many transactions, demonstrating its willingness to back its valuations with its own capital.

Hilco Global worldwide headquarters is based in Northbrook, Illinois and has over 600 professionals located in 11 offices around the world.

Caisse de dépôt et placement du Québec (CDPQ) is a long-term institutional investor that manages funds primarily for public and parapublic pension and insurance plans. As of December 31, 2018, it held CA$309.5 billion in net assets. As one of Canada’s leading institutional fund managers, CDPQ invests globally in major financial markets, private equity, infrastructure, real estate and private debt. CDPQ is present in India through its subsidiary CDPQ India, located in New Delhi.

CIT Announces New Appointments in Commercial Services CIT Group Inc. (NYSE: CIT) announced that Neal Harm has joined the company’s Commercial Services business as managing director overseeing strategy, business development and project management. He will report to Commercial Services president Marc Heller.

Harm comes to CIT from BB&T Corporation, where he served in a variety of positions including director of international banking services, president of BB&T’s factoring division, and chief operating officer of the company’s

commercial finance business. He will be based in CIT’s New York City office.

“Neal is a proven leader and his wealth of experience in factoring and other forms of commercial finance make him an excellent addition as we pursue our growth objectives and support our clients,” Heller said. “We are excited to welcome him to the Commercial Services team.”

CIT also announced the appointment of Tom Fingleton as managing director and Northeast regional manager, responsible for new business development and client portfolio management.

“Tom has been a valuable member of the Commercial Services team for several years,” Heller said. “We look forward to deploying his skills, agility and leadership to serve clients throughout the Northeast region, which is the largest in our organization.”

Gordon Brothers Announces Promotions Gordon Brothers, the global advisory, restructuring, and investment firm, announced leadership promotions. Within the Commercial & Industrial team, Ulos Anderson will now assume the role of senior managing director and Jim Burke has been promoted to managing director. Within the Valuations group, Rick Wilichowski has been promoted to managing director, Midwest regional sales manager; Aaron Walton to managing director, Western regional sales manager; and Jerry Galaszewski to managing director, Machinery & Equipment Valuations.

“I’m thrilled to see these important contributors take on new roles in the firm. Each of these promotions recognizes the talent we have cultivated, and brings a significant depth of knowledge to our clients to help them understand and maximize asset values,” stated Ken

DON’T MISS CFA’S IDEACON EXECUTIVE ROUNDTABLE EVENT JUNE 18, 2019 TO REGISTER VISIT WWW.CFA.COM

Machinery and Equipment Valuation practice.

Walton is now responsible for overseeing sales activity for the Valuation practice across the entire Western region. Walton brings over 18 years’ experience in valuation and banking to the role, previously serving as vice president at AccuVal-LiquiTec. Galaszewski is responsible for overseeing the production of all machinery and equipment valuations as part of his new role. With 20 years’ experience in the industry, he has conducted and managed hundreds of machinery and equipment valuation projects across a wide range of industries. He is a candidate of the American Society of Appraisers.

“Our industrial valuation practice continues to grow, especially in our legacy AccuVal territory across the Midwest” said Frank Grimaldi, senior managing director, North American Sales. “These promotions are instrumental in bolstering and expanding those offerings to clients across North America,” he added.

Siena Lending Group LLC Hires Renee Singer as Senior Vice President Relationship Manager Siena Lending Group LLC (“Siena”) announced that Renee Singer has joined the firm in the role of senior vice president relationship manager. With over 30 years of experience in asset-based lending, she will add talent and credit expertise supporting the portfolio management team at Siena. Singer spent the past twenty years at CIT, most recently as managing director and portfolio manager for their Capital Equipment Finance Group. Prior to that, she held various leadership roles within CIT’s Commercial and Industrial Group, including portfolio manager for ABL and Retail, and team leader and account officer within CIT Business

Credit. Before joining CIT, Singer was a field examiner and account officer at Sterling National Bank and Finova. She began her career as a field examiner for the asset-based lending division of Chase Manhattan Bank.

Singer, said, “I am delighted to be joining the experienced ABL team at Siena Lending, and look forward to supporting the group in executing its business plan.”

Steve Sanicola, director of risk and management of Siena, said, “We are thrilled that Renee has joined the Siena team. Her wealth of experience in asset-based lending will enable her to mentor junior risk members in the organization while adding additional bench strength to our risk management professionals.”

Siena Lending Group is a leading independent asset-based lender.

Siena serves lower and middle-market companies nationwide that may have difficulty accessing traditional financing, offering asset-based loans from $2 million to $30 million. With deep lending experience and expertise in complex situations, Siena consistently finds creative ways to provide borrowers with maximum flexibility and liquidity. Clients can feel confident knowing Siena brings the patience and perspective to help them work through challenges and achieve their long-term visions.

INDUSTRY NEWS

Frieze, CEO of Gordon Brothers. “We are proud of our employees and congratulate them on their new roles.”

Anderson joined Gordon Brothers in 2002 and specializes in deploying capital to provide creative customer solutions in many sectors, with a particular focus on the wholesale inventory category. Prior to joining Gordon Brothers, Anderson held a variety of senior-level positions at Dollar General, Service Merchandise, the McCrory Stores, and TG&Y Stores.

Since joining Gordon Brothers in 2007, Burke has successfully led many complicated, multi-asset transactions that have required both capital and creativity in order to craft a solution for the client.

“Jim and Ulos have successfully led several major equity-based transactions over the years across a multitude of sectors, including consumer products, aerospace, energy, food and beverage, and construction. These transactions required the ability to source, structure, and execute a deal,” stated Bob Maroney, president, Commercial & Industrial. “I look forward to their continued significant contributions to the growth of our Commercial and Industrial practice.”

Gordon Brothers became the largest appraisal firm serving the asset-based lending industry in the world following its 2015 acquisition of AccuVal. Today it maintains the largest database of asset recoveries in the world. This data is complemented by hands-on asset liquidation expertise across the full supply chain, globally. “By elevating from within, Aaron, Rick, and Jerry bring detailed knowledge of the appraisal process to clients, having all served as former appraisers,” said Chris Carmosino, president, Valuations.

Wilichowski manages business development across the Midwest and Northwest regions of the U.S. Rick was formerly the head of Gordon Brothers’ Machinery & Equipment Valuation practice. Previously, he led AccuVal-LiquiTec’s

THE SECURED LENDER MAY 2019 7

Navigating New Territory Taking Cross-Border Guarantees, Collateral And Pledges Of Foreign Subsidiaries Post-956 Deemed Dividend Tax Reform

By Angela Batterson and Adela Woliansky Lenders are entering a brave new world in which U.S. tax law may no longer be an impediment to taking foreign guarantees and collateral and a pledge of 100% of the stock of a foreign subsidiary. New proposed regulations (the “Proposed Regulations”) issued on October 31, 2018 by the Internal Revenue Service (the “IRS”) and the Treasury Department will, if finalized, and subject to certain exceptions, eliminate the adverse tax consequences of the “956 Deemed Dividends Rule” for corporations under Section 956 of the Internal Revenue Code (“956”).

8

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Broadly, 956 was enacted as an antiavoidance measure to ensure that earnings and profits of controlled foreign corporations (“CFCs”) would be subject to U.S. tax when repatriated by way of a dividend, a direct loan to a U.S. parent, or foreign credit support in the form of pledges, guarantees and collateral. As a result, credit agreements of U.S. borrowers with foreign subsidiaries restricted CFCs from becoming guarantors or granting liens over their assets, and limited stock pledges to less than 66 2/3% of the voting stock of such CFCs to secure the loan, because the 956 Deemed Dividends Rule could otherwise be triggered and give rise to U.S. tax liability.

While the Proposed Regulations are not yet final, they will become applicable for taxable years of a CFC beginning on or after the date they are finalized.

Until then, taxpayers are permitted generally to rely on the Proposed Regulations prior to their becoming final for tax years after December 31, 2017. The Proposed Regulations may not eliminate all adverse U.S. tax consequences from a pledge of or guarantee by a foreign subsidiary, so taxpayers should still consult with their tax advisors before deciding to rely on the Proposed Regulations.

Favorable Effects of Proposed Regulations With the introduction of the Proposed Regulations, lenders can potentially expand the scope of their guarantee and collateral packages by including guarantees by, and 100% pledges over stock and assets of, CFCs or by incurring joint and several liability between U.S. parent and CFC subsidiaries. Lenders may also potentially reduce the risk of being structurally subordinated to creditors of foreign subsidiaries. Borrowers, in turn, may be able to achieve more favorable loan and credit terms, including greater covenant flexibility, lower interest rate margins, and better syndication prospects. Equally, the Proposed Regulations may expand borrowing capacity and limit the need for borrowers to obtain separate offshore financings for foreign subsidiaries.

Revisit Existing Loan Documents Some existing credit agreements limit foreign credit support to less than 66 2/3% of the foreign subsidiary with no provision for obtaining a greater pledge, guarantee or collateral if material adverse tax consequences are no longer present. These limiting provisions should be revisited when amending existing credit agreements.

Other existing credit agreements may contain “springing provisions” where, under certain collateral and guarantee requirements, borrowers may be required to add CFC guarantees and pledges, once there are no longer material adverse tax consequences or other material costs or impediments.

Existing loan documents should therefore be reviewed to determine whether such springing provisions will require additional credit support to become available as a result of the Proposed Regulations.

New Loan Documents: Good News and Caution While the Proposed Regulations are favorable to lenders lending to U.S. borrowers with foreign subsidiaries, documenting the deal presents various traps that a lender needs to avoid.

Certain foreign local law requirements may impose varying and, in some cases, costly regulatory hurdles, such as licensing and regulatory approvals, legal formalities, and perfection requirements, as well as possible withholding tax implications and enforcement risks. Here, we highlight a sampling of the issues that lenders and borrowers should consider when negotiating the scope of foreign collateral and guarantee requirements in a post-956 Deemed Dividends Rule market. While there may be similarities between certain jurisdictions, the differences can also be significant and therefore the costs and benefits of obtaining foreign guarantees and security should be assessed on a jurisdiction-by-jurisdiction basis, with advice from competent foreign local counsel.

1. Licensing for Lenders in Foreign Jurisdictions U.S. lenders may be required to hold licenses or authorizations prior to making loans or taking credit support in some foreign jurisdictions. In addition, local requirements may apply differently to bank and non-bank lenders, restricting cross-border loans in certain circumstances. For example, in certain EU countries, such as France and Italy, foreign banks must obtain licenses to carry out lending operations. In Italy, lending activities that are pursued without such authorization may result in sanctions and potential criminal liability. In Germany, the position is more nuanced.

If a U.S. lender specifically targets the German market, a license is required; however, not so, if loans are granted at the borrower client’s own initiative.

In Taiwan, in addition to obtaining the relevant regulatory authorizations, foreign lenders may also be required to establish a local branch in order to pursue lending operations on a repeat basis. In jurisdictions with no restrictions on making cross-border loans, U.S. lenders may, however, need to comply with other requirements such as hiring local employees, as is the case in the UAE. In China, a local borrower’s ability to access foreign loans may be subject to an approved foreign-debt quota, calculated under the supervision of the State Administration of Foreign Exchange.

China also distinguishes between bank and non-bank lenders. Certain non-bank institutions, such as asset management funds, trust and investment companies, may only engage in lending activities with approval from the China Banking Regulatory Commission. Given the nuanced licensing requirements between jurisdictions, lenders should consult regulatory counsel in the relevant jurisdiction.

2. Ability of a U.S. Lender to take Foreign Collateral In the U.S., lenders are accustomed to taking a blanket security over all current and future assets to secure outstanding and future indebtedness. However, in some countries, a lender’s security THE SECURED LENDER MAY 2019 9

10

interest is restricted to specific, assets or classes of assets, and a lenders ability to take security over future assets may be subject to certain conditions or notification requirements. In Germany, for example, it is typical to have a separate security agreement for each asset class.

The security agreement must describe the German collateral with specificity, although it is generally possible to grant security over future assets without ongoing amendments to the applicable security agreement to describe such assets.

Most foreign jurisdictions do not have a uniform scheme for taking security, such as the Uniform Commercial Code (“UCC”) or the Personal Property and Securities Act (“PPSA”) in Canada and Australia, where perfection and priority is achieved by filing. However, perfection and priority in other jurisdictions may be guided by numerous statutes and common law rules, with some security agreements requiring notarization to be effective. Under English law, no filing or registration is required to ensure the validity and enforceability of a lender’s security interests. Although registration is generally not a requirement for attachment of a security interest, a charge (i.e., security interest) will be void in the insolvency context unless it is registered within 21 days of creation with the Registrar of Companies. Priority, however, is governed by English common law rules, not by the order of registration. In Mexico, all security documents are subject to local notarization, with notary fees often based on the amount of the guaranteed obligations, adding procedural delays and significant transaction costs. In Australia, where a foreign entity takes security over local assets, approval of the Foreign Investment Review Board (“FIRB”) will be required where the value of the asset exceeds certain monetary thresholds.

lenders should be cognizant of local corporate benefit and financial assistance rules in the context of acquisition financings. The corporate benefit test is applied widely across jurisdictions, although different standards apply to such evaluation. In England and Australia, the board of directors, and in Italy, the board under the supervision of the statutory auditor, may make this determination, acting in good faith and in the best interests of the guaranteeing entity. In France, to avoid the guaranty being voided, market practice has been to limit upstream or cross-stream guarantees to the proceeds of the guaranteed debt that is directly or indirectly loaned to that guarantor via an intercompany loan.

In acquisition financings, financial assistance may be prohibited in some circumstances. France and Germany have very strict financial assistance rules, with limited exceptions. In France, there is a blanket prohibition on public and limited liability companies (société anonyme, or société par actions simplifiée, respectively) providing guarantees or security to finance the acquisition of their own shares or the shares of other group members who are either direct or indirect shareholders. In Germany, financial assistance is prohibited in the case of German stock corporations (Aktiengesellschaft), and when provided by a limited liability company (GmbH), is subject to capital maintenance rules which prohibit the company from distributing to shareholders any assets required to maintain the nominal share capital of the company. The granting of upstream or cross-stream guarantees or security can be qualified under German law as an undue distribution of assets.

Further, the German Supreme Court has yet to define the exact scope of the capital maintenance rules with sufficient legal certainty.

3. Ability of a U.S. Lender to Obtain a Foreign Guarantee The Proposed Regulations enable CFCs to guarantee the debt of a US parent, and, in taking such guarantees, US

4. Recognition of U.S. Choice of Law Provisions and Enforcement of U.S. Judgments Generally, as a matter of private international law, foreign courts will enforce a

choice of law provision, provided that it does not contradict mandatory rules of the relevant jurisdiction or is incompatible with public policy. However, this golden rule, established by the Rome Convention, may have a more limited application in the context of secured transactions. In China, a real property mortgage or pledge over certain rights created in China, can only be governed

by PRC law, as is the case in Mexico, where any action brought to enforce US law governed security over Mexican collateral will not be recognized. Furthermore, perfection of any US law security will not be enforceable against Mexican third parties. In France and Germany, security agreements must be submitted to French or German law and jurisdiction, if the assets are physically located there; a New York choice of law provision would therefore not be enforced. Accordingly, from an enforcement perspective, it may be necessary to obtain local foreign law-governed pledges, guarantees and other security in the relevant jurisdiction and local foreign counsel should be consulted on a case-by-case basis to determine the necessary documentation requirements, formalities and filings.

The judgment of a US court with respect to loan documents governed by N.Y. law may not necessarily be enforced in the local jurisdiction. In Australia, a judgment rendered by a U.S. court having jurisdiction recognized by an Australian court, for a readily calculable or fixed sum, would be recognized and enforced without a re-examination of the merits, subject to considerations of natural justice, public policy or fraud. In Belgium, prior to enforcing a foreign judgment, the courts will consider a multitude of factors, including whether the judgment violates public policy, is irreconcilable with a Belgian precedent or a prior foreign judgment that is amendable to recognition in Belgium, or if a claim in Belgium had been previously initiated between the same parties, and is still pending. In China, a judgment rendered by a U.S. court will neither be recognized nor enforced since there is no bilateral judicial assistance treaty in place, or

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precedents of reciprocity, whereas in England, a U.S. court judgment may be recognized according to common law principles, and enforced by methods generally available for enforcement of English judgments.

5. Agent or Trustee as the Secured Party In U.S. syndicated or club deals, lenders are accustomed to the administrative or collateral agent holding security of the loan parties for the benefit of the secured lender group, and having the power to enforce such security on their behalf. This is also the case in other common law jurisdictions such as England, Australia and Canada. However, under some foreign laws, the security holder must also be the creditor. In Germany and Belgium, it is common to create a parallel debt structure for certain types of security, whereby the security agent is owed a “parallel” and equal debt to that owed to the secured parties. In Italy, parallel debt structures are not recognized and therefore the debt must be held directly by the creditor. The French Civil Code expressly allows security to be held by a security agent; however, this mechanism was only recently introduced and therefore practitioners and French banks have not as yet adopted a unified standard for its application.

6. Withholding Tax Implications of Interest and Fees Payable by Borrower to U.S. Lender Many foreign jurisdictions impose withholding tax on interest and fees paid by a foreign subsidiary in the relevant jurisdiction to U.S. lenders. The amount of such withholding tax may be reduced or eliminated where tax treaties exist between the U.S. and the relevant jurisdiction. For example, in Canada, a treaty was signed in 2007 to eliminate withholding taxes on non-related party interest expense. Under the U.S.-Mexico tax treaty, such withholding taxes vary between 4.9%, 10% or 15%, depending on the nature of the lender, borrower and the loan. In England, the withholding tax rate is charged on annual interest, and may be as high as 20% where the loan is

provided by a non-UK bank to a UK resident, although certain exemptions may apply subject to the application of the applicable double tax treaty. US banks making loans to Italian subsidiaries may also give rise to withholding taxes of 26% and 10%, subject to the application of the Italy/US double tax treaty, although where such loan is made by a U.S. branch authorized in an EU Member State no withholding tax would apply, again, subject to Italian direct lending laws and the loan term. However, in order to claim any applicable tax treaty benefits, U.S. lenders will typically need to submit certain filings to the local foreign tax authorities, or provide certificates of tax residency issued by the IRS to the borrower or other withholding agent.

7. Thin Capitalization Rule Although not strictly an obstacle to granting upstream credit support, thin capitalization rules may limit the deductibility of tax on interest incurred on debt of a foreign borrower that is guaranteed by related parties. The rules are intended to discourage financing with debt as opposed to equity capital, if the increased debt leaves a company thinly capitalized. Thin-capitalization rules are complex and should be carefully considered in the context of any cross-border funding, with expert local tax advice. In France, for example, to the extent that the debt of a French company is guaranteed by its subsidiaries, that debt is subject to thin capitalization limitations on interest deductibility, capped at the highest of 30% of taxable income, and €3 million. Where the debt-to-equity ratio of the borrower is lower than 1.5:1.00, these thresholds are lowered to 10% and €1 million, respectively. In the UK, borrowers are subject to a corporate interest restriction, broadly limiting deductible interest to 30% of EBITDA, calculated in accordance with the UK tax code.

Any challenges to thin-capitalization brought by the UK revenue and customs department are based on transfer pricing rules. In Mexico, interest payments made by a Mexican resident company on a loan from a foreign related party are

non-deductible if the debt-equity ratio exceeds 3:1.

8. Bankruptcy and Creditors’ Rights The laws and proceedings of each foreign jurisdiction govern the types of enforcement actions and remedies that are available to lenders in an insolvency.

Since insolvency laws are not standard across borders, lenders need to be mindful of and assess such particularities with input from expert local counsel ahead of taking guarantees and security in the relevant foreign jurisdiction. In France, for example, the order of priority of claims of creditors can vary depending on the insolvency procedure and the type of claim. Certain privileged creditors, including salaried employees and the tax administration, rank ahead of secured creditors, and it is generally rare to see secured creditors recover significant portions of their claims.

Furthermore, there is no established French case law determining the validity of subordination and intercreditor agreements, which could be successfully challenged in an insolvency context.

9. Anti-Money Laundering Compliance with U.S. anti-money laundering (“AML”) and other financial crimes-compliance laws, including sanctions and anti-corruption laws, will not necessarily be sufficient to demonstrate compliance elsewhere. Satisfying these additional compliance requirements may be costly and burdensome, involving registration with foreign government agencies, implementation of AML policies, and ongoing filing requirements of red-flag activity with foreign regulators. Typically, where US lenders have a physical presence in the foreign jurisdiction, such as a branch, they will be subject to local AML and sanctions compliance. In Mexico, where a US bank customarily grants loans to Mexican parties, Mexican AML requirements will need to be observed, including registration with the Vulnerable Activities Registry and filings of such activity with the Financial Intelligence Unit. Similarly in Italy, local AML law applies to non-EU THE SECURED LENDER MAY 2019 11

banks authorized to operate in Italy without a branch.

10. Fair Lending and Anti-Discrimination Laws Fair lending statutes and usury laws in a foreign jurisdiction may also apply to lenders entering into secured transactions with local borrowers and guarantors. In addition to criminal sanctions in Belgium, anti-usury laws prohibit increases in interest rates of more than 0.5% per annum on outstanding principal in an event of default. Belgian smallto-medium sized businesses (“SMEs”), with under 250 employees also benefit from greater contractual protections in credit agreements, including restrictions on break-fees and flexible voluntary prepayment provisions. In Italy, borrowers may be able to prepay outstanding loans in whole or in part without any prepayment costs or penalties. In the UK, while corporate lending is generally unregulated, on and after April 1, 2019, SMEs, including entities with a balance sheet total of less than £5 million, will be able to refer complaints regarding commercial lending to a financial ombudsman, with the power to make determinations, set compensation and publish enforceable decisions.

11. Privacy and Data Protection Technology has facilitated the dissemination of information in international commerce. Consequently, privacy and data protection regulations have been reformed to tighten personal information protections. In the EU, the General Data Protection Regulation (“GDPR”) sets out detailed regulations governing collection and processing of personal data about individuals in the EU. These requirements are onerous, and noncompliance attracts significant fines; however, the circumstances under which the GDPR would apply in the US corporate loan market are rare, with the onus typically falling on European Economic Area (“EEA”) borrowers or lenders, including an EEA branch office or affiliate of a U.S. financial institution.

Similarly, in Australia, the onus falls on

12

corporate borrowers to ensure that any foreign entity with which they share personal information comply with the Australian Privacy Principles. In China, however, US lenders intending to transfer personal information collected in China will be subject to China’s cybersecurity laws, which impose prior consent rights and certain government security and clearance procedures. Otherwise, personal information collected in China can generally only be stored in the territory of China.

Conclusion Ultimately, the impact of the Proposed Regulations on the secured lending market in the U.S. and abroad remains to be seen. Although the Proposed Regulations may eliminate the U.S. tax impediment to lenders seeking to take CFC guarantees and security to secure U.S. obligations, experienced local foreign lawyers in the relevant jurisdiction and international tax counsel will need to consulted to adequately determine both the benefits, risks and costs for each transaction.

Please feel free to contact Angie Batterson at 212.326.3663 or abatterson@ jonesday.com if you would like to discuss further any cross-border lending issues noted above. TSL

communications, media, manufacturing, and energy, for 20 years. She represents financial institutions, sponsors, issuers, and mezzanine providers in private debt financings, including in connection with senior secured credit facilities, first lien/second lien credit facilities, unitranche facilities, and mezzanine financings. Angie also advises on intercreditor agreements and distressed debt financings, including debtor-in-possession (DIP) financings.

Adela Woliansky focuses on banking and finance transactions as an associate at Jones Day. She represents lenders, agents, financial institutions, and corporations on a variety of financing transactions with a focus on acquisition finance. Her transactional experience covers a wide range of industries including financial services, energy, media and communications, health care, and food and beverage. Prior to joining Jones Day, Adela practiced at a leading international law firm in Australia where she worked with the banking and finance practice group.

Jones Day is a global law firm with more than 2,500 lawyers in 43 offices across five continents. The Firm’s lawyers lead ABL deals in many of its foreign, as well as US offices, including cross-border deals in Europe, Latin America, Australia and Asia.

The views and opinions set forth herein are the personal views or opinions of the authors; they do not necessarily reflect the views or opinions of the law firm with which the authors are associated.

The authors, Angie Batterson and Adela Woliansky, would like to acknowledge the contributions of their Jones Day finance, tax and regulatory colleagues in the UK, Germany, Belgium, the Netherlands, France, Italy, Spain, Australia, Singapore, Hong Kong, China, Taiwan, Japan, Mexico and the UAE. Angie Batterson, a partner at Jones Day, has extensive experience in all areas of asset-based lending, with respect to both domestic and cross-border transactions. She has advised clients in leveraged financing transactions across a broad array of industries, including health care, tele-

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Are Global Trade Wars the New Normal?

DAVID J. E. CHMIEL Geopolitical advisor David Chmiel considers recent changes in global trade policy and assesses whether the world is confronting a sustained period of tariff increases and trade wars.

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Many people can recall where they were when they first heard about specific events or watched them on television. For some inexplicable reason, my personal panoply of such memories includes a Tuesday night in November 1993, when I can vividly remember watching then-Vice President Al Gore and Ross Perot debate the North American Free Trade Agreement on Larry King Live. I can even now picture Gore holding up a framed black-and-white photo of Senator Reed Smoot and Representative Willis Hawley. He argued that the tariff increases wrought by the eponymous Smoot-Hawley Tariff Act of 1930 contributed in no small measure to the Great Depression and he cautioned that failures to embrace free trade in the 1990s could have similarly dire consequences for the U.S. economy.

Gore was widely credited with winning that debate and, in doing so, helping to persuade the American public – and, through them, Congress – that ratification of NAFTA was a good thing. In some ways, that evening marked a key symbolic waypoint in the extended period of worldwide efforts to eliminate trade barriers that came to be known as “globalization.” For almost a quarter of a century thereafter, opposition to free trade was largely relegated to the fringes of politics in the U.S. and elsewhere and, despite setbacks along the way such as the collapse of the Doha Round of World Trade Organization negotiations, its pace seemed relentless.

Times have changed. In 2016, thencandidate Donald Trump made plain his distaste for many of the free trade agreements the U.S. had signed in previous decades, while both Hillary Clinton and Bernie Sanders joined him in promising to withdraw the U.S. from negotiations on the Trans-Pacific Partnership. Since taking office, rhetoric has become policy. President Trump ordered renegotiation of NAFTA and the KoreaU.S. agreement and imposed tariffs on a host of imported goods from China, the European Union, Canada and elsewhere.

The fact that many of those jurisdictions quickly retaliated led to fears that the global economy was descending into a sustained period of quid pro quo trade

wars reminiscent of Smoot and Hawley’s efforts in the 1930s and against which Al Gore railed 25 years ago.

For businesses that trade internationally and for those that lend to them, the principal question must be whether the world really is turning its back on trade or whether recent events are an aberration that will right itself in due course. The answer, unfortunately, is not altogether clear and this article sets out some of the key issues that will influence that debate.

U.S. and Global Attitudes to Trade Any discussion about the present and future course of global trade policy must be premised on the understanding that trade is still widely perceived around the world as a good thing.

In 2018, the Pew Research Center surveyed people in 27 different countries and found that a median of 83% of respondents thought that trade benefited their country. Support for trade in the U.S. was lower, at 74%, but that represented an increase from the results of a comparative survey conducted in 2014. Perhaps the intervening trade-related debates and policy changes actually helped to make the U.S. public more aware of its benefits?

However, the picture is not completely rosy. While people around the world might view trade as valuable at a macro level, their attitudes become decidedly more mixed when they are asked about its specific benefits.

For example, in that same 2018 Pew Research Center survey, only 36% of Americans saw trade as a job creator in the U.S., while only 31% felt it boosted wages in the country. By contrast, in other advanced economies where Pew conducted its polling, the median responses were 45% for job creation and an identical 31% for wage growth. Results were higher in emerging economies at 56% and 47%, respectively, but that is to be expected given recent patterns of manufacturing shifting to lower-cost, developing markets where the benefits of such

THE SECURED LENDER MAY 2019

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investment will consequently be more readily apparent.

At the very least, governments perhaps need to consider whether a better job can be done to convey the benefits of trade to a skeptical global public. However, it is also possible to see in this data the reasons why some political leaders have sought to take advantage of divided public opinion to revive the political debate on trade.

Appreciating the ebbs and flows of national and global attitudes to trade is an important component in understanding the future course of this debate and the particular direction in which momentum is swinging at any given point in time.

Nevertheless, it is equally important to recognize that this debate is not confined to the United States, despite the fact that many of the current anti-trade tremors emanate from Washington. Last year, the Indian government increased tariffs and customs duties on, among other things, agricultural products, solar panels and electronics – not in retaliation for U.S. actions, but to protect domestic producers. Furthermore, a number of resource-rich countries have introduced laws forbidding exports of raw resources, mandating that they must be processed in-country as a way of generating additional revenue and employment. For all countries, trade policy is ultimately driven by their own domestic political dynamics. If critical sectors are perceived to be at risk from trade, governments will often act accordingly, even if that runs counter to the globalization narrative. That dynamic will not disappear anytime soon.

A Trade War or a Trade Skirmish?

There is no doubt that businesses, workers and consumers have already been affected directly or indirectly by last year’s flurry of tariffs and related policy changes. However, a credible case can be made that there is still an opportunity to step back from the brink. Certainly, at present, many of

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President Trump’s grievances remain unresolved to his satisfaction, but some have apparently gone away.

Only time will tell whether events of the past two years constituted the opening salvoes of a long trade war or simply a skirmish which was ultimately quelled by cooler heads.

For instance, while a number of free trade agreements were renegotiated, the revised treaties are not hugely dissimilar from their predecessors. South Korea doubled the quota of imported U.S. automobiles permitted under the Korea-U.S. Free Trade Agreement, but the original quota was not yet even being met. Canada and Mexico conceded to some U.S. demands in the NAFTA renegotiations (now renamed the U.S.-Mexico-Canada Agreement), but certain key provisions which President Trump previously claimed were unfavorable to U.S. interests – such as the dispute resolution mechanisms – remain largely unchanged. The president has even suggested that the U.S. might recommence talks to enter the Trans-Pacific Partnership, despite having made withdrawal from that process one of his first executive acts.

Last year’s decisions have also sparked a debate about the level of Congressional oversight of future trade policy. The White House is encouraging Congress to pass the U.S. Reciprocal Trade Act, which would give the president greater unilateral authority to impose tariffs. However, other Republican legislators have introduced the Global Trade Accountability Act, which would give Congress a greater role in the process.

Moreover, there are also court challenges to some of the tariff increases, particularly those made on grounds of national security. Legislative and judicial uncertainty offers no immediate respite for businesses, but it may help to create a more predictable policy framework in the longer term.

Of course, at the time of writing, significant issues remain unresolved.

In Europe, there is still no clarity as to if or when and on what terms the

United Kingdom will exit the European Union. This is creating considerable uncertainty for businesses that use the UK as their launchpad into European markets. In the U.S., while the President may have signed the USMCA, it remains subject to Congressional ratification – a process complicated by the change in control of the House of Representatives in last year’s midterm elections. President Trump has threatened to withdraw the U.S. unilaterally from NAFTA as a way of provoking Congress into action, but that might just create further regulatory uncertainty for business. Even more significant is whether the U.S. and China will reach a meaningful bilateral trade deal that will defuse tensions over tariffs, address underlying concerns such as intellectual property protection and currency manipulation and yet still not appear to constitute any form of climbdown by either government.

Even if a deal is reached, many observers are skeptical as to whether it will prove both verifiable and enforceable.

We are not out of the woods yet.

Trade Wars and Geopolitics Mention of U.S.-China bilateral trade relations serves as a useful point at which to note that the current debate on trade is inextricably linked to broader geopolitical circumstances.

While China remains an important economic and trading partner of the United States, it is also increasingly viewed as a strategic competitor.

These conflicting concepts might prove increasingly hard to reconcile.

Strong economic arguments favoring robust trade relations may always be outweighed by broader national security concerns and such arguments can often resonate with the general public.

It is no coincidence that President Trump has framed many of his actions on tariffs in terms of those national security interests and that he has availed himself of various legal provisions permitting protectionist behavior in circumstances where those in-

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terests are thought to be threatened.

To be fair, governments throughout history have used concerns about national security to justify economic policies that are otherwise protectionist or even autarkic. In this case, however, tariffs have also affected close military and political allies of the U.S., albeit with some exemptions subsequently introduced. This has caused some to question whether the national security argument is simply being used as cover for policies that could otherwise prove difficult to justify under global trading rules.

While the focus of this article has been on trade, it is worth noting that the conjoining of national security concerns to economic policy is equally as robust in cross-border investment regulation – and not just in the United States. Over the past few years, the European Union and some of its individual member states such as France, the UK and Germany have all introduced or enhanced laws allowing governments to limit foreign investment in the defense and high-technology sectors, in critical infrastructure, and even in companies controlling large volumes of sensitive personal data. The U.S. followed suit last year with the enactment of the Foreign Investment Risk Review Modernization Act, which significantly expanded the remit of the Committee on Foreign Investment in the United States to assess the national security implications of inbound foreign investment.

Much as the current trade policy environment seems a far cry from periods of relentless globalization, the geopolitical environment is no longer characterized by universal comity and trust between states. Suspicions are rising, strategic power is shifting and, at times, interests are clashing.

In those circumstances, it will prove increasingly hard to separate commercial and economic policies from those related to the political and security environment. That, in turn, will affect the conditions under which antagonism over trade might abate.

Managing Policy Risk and Uncertainty For trading businesses and their lenders, the challenge lies in trying to manage and mitigate risks over which they may have little control, other than lobbying for changes in policy.

For the reasons set out here, there are some grounds for cautious optimism.

The global public still largely supports trade, albeit with some skepticism about its direct benefits. Any evidence of an emerging economic slowdown related to tariff increases could also amplify political pressure to reverse them, particularly as the 2020 election cycle nears. And yet, many questions remain unanswered. What effect will Brexit have on global trade? Will the U.S. and China reach a meaningful deal to quell trade tensions? What new grievances could emerge that could cause President Trump to renew his calls for tariffs?

Many businesses are not waiting to mitigate their exposure. Some U.S. firms with large export markets are already shifting production offshore in order to avoid retaliatory tariffs, even if this means spending considerable time and money. Others are making use of a concept established in the 1930s to help U.S. businesses deal with the effects of the Smoot-Hawley Tariff Act – the foreign trade zone. These are areas within U.S. territory and under U.S. Customs & Border Protection supervision, but through which businesses can import goods from overseas at zero or lower tariff rates, provided they are subsequently re-exported out of the U.S. The Foreign-Trade Zone Board, the relevant government oversight body, estimated in 2017 that $669 billion in goods were shipped through these zones – and that was before the current bout of tariff raising began.

There is also increased interest in use of bonded warehouses and some businesses are adjusting product designs in order to get them reclassified under categories subject to lower U.S. or foreign tariff classifications (a process known as tariff engineering).

Of course, the simpler solution

would be for things to go back to the way they were. A U.S.-China trade deal would go a significant way in achieving this, albeit dependent on both the verification and enforcement provisions and the extent to which the trade relationship can operate independently from geopolitical uncertainties and tensions. All eyes will also be on the crowded field for the 2020 Democratic Party presidential primaries. Will candidates embrace a free trading United States or will some form of protectionism be the order of the day? It is worthwhile noting, as well, the potential for other economic policies of foreign governments to influence the debate on trade. France, for example, is proposing a digital tax on the revenues of large technology companies, most of which are American. To what extent will pursuit of those types of measures affect attitudes to trading relationships among the U.S. public and elected officials?

There was a time not too long ago when globalization seemed unstoppable. Barriers to trade fell. Goods and capital flowed across borders in ever greater numbers and that, in turn, was seen as a key driver of international cooperation. There are many reasons why that situation has changed and the current “trade wars” are but one of many components of a policy environment that is now much more volatile and unpredictable. Nevertheless, understanding the forces which will affect that debate going forward will serve as a useful indicator of whether businesses are confronting a new normal or whether we are simply in the midst of an aberration. TSL David Chmiel is managing director of Global Torchlight, where he advises businesses on how geopolitical events impact their strategies and operations.

He previously practiced as a corporate finance lawyer in the London and Chicago offices of a major global law firm.

He can be contacted at david.chmiel@ globaltorchlight.com and can be followed on Twitter @davidjchmiel.

THE SECURED LENDER MAY 2019 17

l

As the credit cycle turns, financial due diligence becomes increasingly important The market for alternative, more flexible, funding tools has expanded exponentially since the growth in mid-market finance in the 1960s. Of the techniques to emerge, asset based lending (ABL) has seen perhaps the greatest growth in both the US and the UK – and particularly since the global financial crisis.

Offering smaller businesses the space to grow in a lending industry previously focused on multi-national corporations (MNCs), ABL can help finance gaps in funding for mid-market corporations – perhaps when facing delayed payments from the MNCs they service.

Yet are we heading towards the top of the credit cycle again? And, if so, are we again suffering from the tendency to adopt riskier lending practices at this late stage – perhaps lending lower down the credit scale and with larger amounts at lower pricing and less security? If so, undertaking adequate due diligence will be more important than ever. Indeed, given that poor underwriting is the primary reason for losses in asset based lending, due diligence should be an increasing priority for anyone looking to invest in this space.

So what do lenders in this industry need to consider?

Whether the loan is supported by accounts receivable, inventory or fixed assets, a number of common areas must be thoroughly evaluated to minimise risk.

Verification checks, for instance, are common to all assets. While, with inventory and fixed assets, this can be as simple as checking the physical existence of the asset, requiring someone to be physically on the ground, with receivables, collecting verifiable information is more complex. Here, statutory auditors will generally only provide verifications on past transactions. Yet dilution risk assessment, customer concentration review, and paper documentation checks can all provide a strong indication of receivable asset quality and the likelihood a borrower will default on payments.

Importantly, it can also help spot fraudulent activity, something that also becomes more likely at this stage in the credit cycle.

In anticipation of a potential economic downtown, businesses are hoping to avoid a repeat of past mistakes which created lasting market turmoil. Any credit crunch will also impact asset based lenders, although – as Cory Ryan, Managing Director at RedRidge Diligence Services explains – specialist due diligence will help mitigate many of the problems previously experienced.

Certainly, companies are far more likely to default on payments as we enter a recession, which can be the result of both a squeezed marketplace and the fact that those desperate for cash are more likely to falsify the current status of their accounts and/or assets in order to receive financing. In the event of default, liquidation stipulation suddenly becomes an issue a lender may have not foreseen, and local regulation – such as employment legislation, insolvency laws and priority claims – could all affect the outcome for a lender forced to liquidate its client’s assets. The less liquid the asset, the more of a challenge this becomes, which could result in the lender waiting significant periods before being repaid.

Specialists such as RedRidge Diligence Services can, however, provide comfort for lenders. Through extensive field checks, and by taking into account collateral monitoring, performance and financial controls, such specialists go beyond the box-ticking process provided by statutory auditors – ensuring high response rates on samples and providing on-the-ground checks where relevant. Operating as a third-party, these specialist providers have experience working with a wide breadth of companies and industries, enabling them to often identify potential issues before a field exam is even carried out. Given the potential losses that can arise from oversight in this area, making sure due diligence is entrusted to experts with the right toolset is the key to mitigating the potential losses – especially in times of economic downturn.

MATTHEW REED Director /// RedRidge Diligence Services mreed@redridgefg.com

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BY DUNCAN AINSCOUGH, FENTON HEALY, AND RAFAEL KLOTZ EXECUTIVES FROM GORDON BROTHERS OFFER TIPS FOR RECOVERY IN THIS COMPLICATED GLOBAL ENVIRONMENT.

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As our economies become more and more global, we have entered a new era of cross-border transaction structuring. International lending and liquidation are becoming more prevalent and lucrative. Liquidation strategies are scoped across oceans and continents to maximize recovery values. As lenders, this is an important moment, where creative thinking about values and exit strategies can uncover a whole new realm of possibility to put capital to work. But in order to do so, it’s critical to understand the dynamics at play and how to recover in this complex, global environment when necessary to do so.

In 2019 the overall global economy continues to grow, despite a slowdown from advanced economies, trade skirmishes between the U.S. and China, looming European trade calamities theorized from a no-deal Brexit, and an increase in nationalism and populism in many countries. Within this tumultuous economic environment, how do lenders recover on assets within and across international borders with a reasonable degree of confidence? How do investors mitigate inherent risk in such ventures while finding the proverbial diamond in the rough? The answer can be found in another question: How do you capitalize on accelerating mining activity halfway across the world to recover on idle equipment sitting in the Amazonian rainforest?

To execute a deal like this one, investors may face a multitude of logistical pitfalls, jurisdictional headaches, legal roadblocks and operational quagmires. But it is possible, increasingly common and, at times, quite rewarding. However, it requires the alignment of a number of factors to realize untapped value. Below we detail the necessary conditions that can make complex, cross-border asset recovery a valuable opportunity, as well as the appropriate strategies to successfully underwrite and recover on industrial equipment assets.

In-Market Asset Recovery Limitations Buying assets, whether abroad or domestically, and transporting them to a seller is not ideal, especially when those assets require disassembly and reassembly. Typically, sellers inspect and purchase assets in situ and incur any transportation costs themselves.

Asset-relocation strategies are generally only pursued by owners who fear a future competitive threat from selling assets in-market. Disassembly and transportation processes intrinsically lower an asset’s value, so are only outweighed by mitigating a competitive risk, or outsized rewards from selling abroad. This second scenario is increasingly common today. With continued globalization, we are able to widen the scope of investment, and divergences in economic conditions and sale prospects are increasingly apparent, and often promising.

For example, in the Amazonian equipment deal, a perfect storm of economic conditions shaped the exit strategy. In the run-up to the 2014 FIFA World Cup football (soccer) competition and the 2016 Summer Olympics, Brazil embarked on a monumental building and spending spree. Just a few years later, the country is now left with unfinished projects, vacant stadiums in remote locations, large deficits, and a surplus of construction equipment. A deep recession has resulted from the overspending. This recession is largely unique to Brazil amongst other large, developing countries.

With dwindling public investment, many of Brazil’s large construction contracts have run dry, forcing many construction companies to suspend or abandon operations and mothball equipment. The country has a surplus of heavy equipment with limited prospects of large infrastructure projects to prompt operators to resume operations or capital to fuel purchasing. There is a very limited domestic market for many of these assets, and a lack of liquidity for those operators who are in need of equipment.

Opportunities in Foreign Markets On the other side of the world, in a vastly different domestic economy, Australia’s mining market is growing. In the remote region of Western Australia, Australia’s mining sector has played a significant role in fueling China’s economic engine. Mineral exports comprise 35% of Australia’s economy, and Australia has become the world’s largest exporter of iron ore and coal.

But Australia’s equipment supply has not recovered from the contraction that followed the latest decline in mining only a few years ago. After a mining downturn driven by depressed commodity prices and the completion of numerous infrastructure projects, the Australian mining and construction industry is enjoying a resurgence driven by government spending and rebounding commodity prices. In Western Australia this growth is highlighted by gold and lithium, the latter promoted by the rise in acceptance of electric vehicles. Additional major project investment in iron ore by BHP and Rio Tinto has further fueled economic stimulus in the region.

A lender looking to recover assets significant to mining and road construction today will find a market hungry for used equipment all but unavailable in Australia. This divergence in equipment demand held the key to recovering on the idle equipment from Brazil, unlocking significantly more value for the seller by transferring them to the buoyant Australian mining market.

While the stars aligned favorably for this transaction, similar scenarios are far more common today and, in the recent past, than many investors may appreciate. As business chases favorable manufacturing conditions to new markets, demand for equipment goes with it. For example, as the North American print industry wanes, unsaleable assets in-market achieve strong sale prices in India and other regions where print circulations are growing. The same goes for textile manufacturing assets, which were THE SECURED LENDER MAY 2019 21

sold out of the US into China and Vietnam in the 1990s, and construction assets following the global financial crisis being transferred out of the UK and sold in Australia. As new countries become developed and grow at different rates, manufacturing, and the equipment assets required to support it, move into those countries, supporting robust used equipment prices.

The Promise of Change International markets are in constant flux, perhaps never more so than today. Looking ahead, there are many existing factors that may drive divergences in asset recovery opportunities. Eurozone economic trends are slowing, with imports growing and exports falling. Italy has entered recession; Greece has never fully recovered from its economic collapse in 2008; France is roiled in political protests; and all of Europe is holding its breath over the ominous effects of an extended Brexit negotiation. In China, economic growth is likely to continue slowing as a result of multiple Chinese companies defaulting on domestic renminbi loans and bonds, as well as difficulties from U.S. tariffs.

The impact of all these factors is yet to be seen. As shown by Australia’s persistent growth following the global financial collapse, some markets may prosper and serve as favorable recovery environments for used equipment assets. On the other hand, pervasive uncertainty may buoy demand for domestic used equipment as companies hesitate to commit to expensive new investment and instead take a waitand-see approach supported by less costly, used assets. While the recovery strategies will vary and inevitably grow in complexity, it is important to keep watch on how asset values are trending in the lead up to whatever is next so investors are not caught flatfooted. As lenders continue to underwrite cross-border asset-based loans, the following exit strategies and considerations can serve as a guide to ensure maximum coverage and more

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predictable recoveries, if and when distress strikes.

Mitigating Risk When Importing and Exporting Assets There are a plethora of conditions and variables when attempting to buy, transport, and sell assets across multiple nations and geographical locales. From afar, the process appears daunting, an intricate orchestration that could succumb to any number of legal or logistical hang-ups. Amongst all these considerations, first is the question of viability: Is it worth it?

Transaction Modelling Modelling the costs and recoveries requires particular expertise with respect to the actual methodology to relocate the assets and understanding the selling market well enough that there are no surprises. In some case, scrapping or writing-off assets that are unsaleable locally may be the best course of action if the cost to transport them is too high and the likely recoveries too low. Appraisers should assess whether the demand for imported assets can hold up against similar domestic assets. Transactions of this kind can also take much longer than a domestic sale, so understanding the likely direction of values nearand-medium-term is equally critical.

Finally, lenders should understand the actual costs to disassemble, export, import, and reassemble the assets.

Without the proper cost-benefit analysis, the risks might be too high; that is an important question to have answered as part of the diligence, underwriting and monitoring processes.

Local Expertise Essential to successfully executing the international transfer of assets is a fundamental understanding of the political and business climate of the countries in which the transfer will take place. There is no better way to attain this understanding than to rely on trusted local partners with on-theground contacts in-country. Local con-

nections and trust can make or break a deal once the wheels are in motion.

While many domestic-only providers may have the local connections needed to facilitate in-country, they are often limited when it comes to the other side of the equation—selling the assets out of market. The ideal partner or assortment of partners requires deep expertise and relationships at each point in the transaction stage and in every market involved.

Insurance and Guarantees In addition to creating and promoting trusted local partnerships, businesses should take sensible security measures to ensure the proper transfer of assets once officially exported and received at the port of landing. In countries where purchasing the assets outright is required, the process of paying and then receiving goods can be a complex one, fraught with legal risks and numerous tax considerations. Additionally, making sure the assets meet the conditions and regulations upon arrival at the destination is crucial to keep unexpected costs to a minimum. Investors should rely on insurance policies or contract with vendors that can guarantee the exchange of goods or the delivery of the services necessary for successful import.

Market-Specific Legal Expertise Immense effort is needed in analyzing transaction structures, especially when importing or exporting assets.

Across countries where common law is in practice, such as the U.S., UK, Australia, Hong Kong, India, Canada, Israel, New Zealand, Ireland, and South Africa, transaction structuring is often more straightforward. Operating as agents of the seller and refined auction processes make this process fairly smooth in countries like the U.S. and the UK. Issues of transferring titles and transaction structuring take on a new level of complexity across differing legal systems, however.

Countries where civil law is practiced include Brazil, China, Denmark, France,

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Germany, Italy, Mexico, Russia, Spain and Sweden. When approaching crossborder deals, it is important to engage attorneys that specialize in the local legal system. Developing a workable structure is half the battle.

Additionally, many countries have government-imposed limitations or regulations on particular assets that need proper indemnification before they can be imported or exported. For example, importing machinery and equipment into Australia is regulated by strict biosecurity laws that help to protect indigenous plants and wildlife. These laws help to keep potentially harmful soil, seeds, plants, and animals out of Australia and require equipment to undergo a rigorous cleaning process before it can be imported. Such considerations require coordination with various domestic governmental agencies. Additionally, many materials are regulated internationally by NATO or European Union countries because of their dual-use status. These materials are civilian assets, such as lab equipment or products made with specialty metals and alloys, which may also have military or weapon applications, and therefore have export restrictions or bans. All of these considerations require lenders to consult specialized legal counsel when looking to recover and or transport assets internationally.

complex, global conditions, creativity, due diligence, and strong partnerships are the key to success. TSL

Conclusion Recovering assets in the manner described above is not routine for lenders, but recognizing opportunities to structure loans and ensure asset coverage in creative ways can yield unique profits. Lenders who find themselves in the midst of underwriting against or recovering on cross-border equipment assets should monitor logistical and economic trends globally. A golden opportunity may lapse because of uncertainties in the chain of delivery, or a lack of clarity on emerging recovery trends across different markets. When attempting to recover or lend against assets under

Fenton Healy is managing director, Australia, Gordon Brothers. He is responsible for developing liquidity and asset-based solutions for clients across Australia. Fenton brings over 20 years of experience in asset valuation and liquidation. He has deep knowledge and understanding of used equipment markets across Australia and applies this insight in developing capital solutions for clients. Prior to joining Gordon Brothers, Fenton held numerous sales, senior management, directorial and leadership roles at GraysOnline, where he was one of the original major shareholders. Throughout his career, Fenton has worked on some of the region’s

Rafael Klotz is senior managing director, international, Gordon Brothers. He is involved in all aspects of Gordon Brothers’ international business, including deal structuring and execution, global expansion, and business development. He is responsible for Gordon Brothers’ legal strategy outside of North America, and is leading the firm’s expansion into Latin America, where he oversees the Brazilian business. Rafael also continues to be very involved in brand acquisitions and valuations.

Between 2008 and 2015, he was responsible for all brand acquisitions and dispositions, day-to-day operations and joint ventures, as well as supporting the intellectual property valuation practice. Before joining Gordon Brothers in 2008, Rafael practiced law for over 10 years, specializing in corporate insolvency, finance law and mergers and acquisitions, with an emphasis on cross-border transactions. Rafael is a former board member of Polaroid, Ben Sherman, The Sharper Image, The Bombay Company and Linens ‘N Things.

Rafael holds a bachelor’s degree from Berklee College of Music and a law degree from Boston College Law School.

He is a native Spanish speaker and fluent in English and Portuguese.

largest disposition projects, including for Toyota, Procter & Gamble, Alcatel, Sunbeam Victa, Kirby Engineering, Huntsman Chemicals, Solectron, Email Metering, Colgate Palmolive, and Mitsubishi. He has targeted expertise in the mining and transportation sectors. He is based in Melbourne.

Duncan Ainscough is managing director, Valuations & Industrial, Gordon Brothers. He manages the Valuation and Industrial Division of Gordon Brothers in Europe. He has over 25 years’ experience in the disposition and valuation of commercial and industrial assets.

Throughout Duncan’s career, he has held senior management and leadership roles with leading global surplus asset management and valuation firms.

He has deep knowledge and understanding of used equipment markets across the Globe and has experience in the valuation and sale of industrial assets in over 30 countries across multiple sectors including: Oil & Gas, Pharmaceuticals, Semiconductor & Electronics, Automotive, Aerospace & Defence, Power Generation Renewable Energy, Mining & Construction, TV & Media, Plastics, Printing, Woodworking and Food & Beverage.

Prior to joining Gordon Brothers in 2018, Duncan served as vice president of global business development at liquidity services with responsibility for principal deal structuring.

THE SECURED LENDER MAY 2019 23

Discovering And Unleashing The Financing Potential To Grow Supply Chains In Cross-Border Trade

BY PETER NUNES Peter Nunes of Vayana Network explains both the challenges and opportunities surrounding cross-border trade.

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As Julie Andrews once famously sang: “Let’s start at the very beginning…” So, what exactly is trade? Merriam-Webster defines trade as “to engage in the exchange, purchase or sale of goods.” Sounds simple enough — I buy grapes from a California grower and sell them to Publix Supermarkets in Florida where I live. Now if I decided to diversify my business and sell wagyu beef from Nebraska to be sold to supermarket chains in China, I have now entered the inextricably more complicated world of cross-border trade. Both domestic and cross-border trade have common elements: there may not be synchronicity in supplier and buyer payment terms creating a cash crunch; goods have to be transported from supplier to buyer and be insured; there is the risk of product dispute and non-acceptance by the buyer and, of course, your buyer may not pay you. Now imagine having to deal with these very same issues — only now your Shanghaibased buyer is in a time zone that is 12 hours ahead of you and does not speak fluent English.

A lender also has to deal with a lot of cross-border inefficiencies due to buyerseller miscommunication, paper documents such as bills of lading and inspection certificates arriving by snail mail; and acceptance-of-goods issues by the buyer.

Many U.S. lenders factor foreign receivables, provided credit insurance can be raised on the buyers and, indeed, for some of these lenders, their foreign end-debtor portfolio can sometimes exceed 50% of their entire portfolio. But there is a market disrupter already afoot in the factoring space and one which can present a great opportunity for a lender to grow both its domestic and foreign assets under management. This is supply chain finance (SCF), also known as reverse factoring.

Depending on whom you talk to, the definition for SCF varies. From a bank perspective, the most likely answer will be: financing provided to suppliers by a financial institution based on confirmed invoices by a creditworthy buyer. From a corporate buyer’s perspective, it is a means to extend payment terms with their suppliers to reduce their company’s working capital challenges. What they both refer to

is reverse factoring (RF)/supplier finance.

If you zoom out a little, SCF is about instruments to finance the supply chain. From an even broader perspective, it can be interpreted as optimizing cash flows and capital allocation in the supply chain via supply chain integration (processes) and collaboration (relationship) to create value for the entire chain, as well as for all the individual partners.

This seamless integration of processes (secure payment processing, connecting global suppliers for U.S. buyers and factors, onboarding) and relationships (buyer, seller and lender) can only be facilitated by an SCF platform. Working together in a more transparent way by using platform technology will eliminate the information asymmetry that exists today and the associated costs and risks.

The basis for SCF is the underlying transaction between the buyer and the supplier. The invoice for the transaction is submitted along with all those snail mail documents (which are now digitized) on the SCF platform to the buyer by the supplier. Electronic communication between the supplier and buyer is supported by the platform. As soon as the buyer has approved the invoice/account payable, the approval is communicated via the SCF platform allowing the supplier and lender to see it. The buyer approves the invoice and requests finance from the lender. The lender receives this request via the SCF platform and pays the supplier for the invoice, withholding the agreed discount.

When the agreed payment term expires, the buyer makes a payment to the lender, after which all obligations have been met.

Reverse factoring reduces costs across the supply chain by letting suppliers “borrow” against their customers’ creditworthiness instead of their own. On average, 80% of the resulting value is shared between the suppliers and the buyer, with varying degrees of allocation depending on whether the buyer wants to facilitate its key suppliers’ financials (i.e. the largest share goes to supplier) or, instead, take all the benefits by extending payment terms.

Typically, the buyer will capture 35% to 50% of all savings, while suppliers will get 25% to 45%. Another 15% goes to the

financial intermediary while the remaining 5% is for the service provider.

Growth in assets under management for the lender derives from the fact that their current factoring workflow can also be used for SCF with minimal workflow changes for the lender and increased scalability. In a closed user group ecosystem, a lender can layer on more business by engaging and enabling many suppliers to a single credit worthy buyer. This creates many cross-selling opportunities for the lender up and down the various nodes of the supply chain. TSL Contributing References: ACCA – A study of the Business Case for Supply Chain Finance The Paypers – B2B Payments, Supply Chain Finance & E-Invoicing market Guide 2015 The Vayana Network.

Peter Nunes is a seasoned and entrepreneurial finance executive with over 25 years of trade finance experience working for banks, factoring companies, hedge funds and his own companies in New York and Miami. As SVP- Sales at Vayana, he spearheads business development in the US for its Supply Chain Finance Platform. Nunes is a creative outside-the-box financier who has successfully structured off balance-sheet solutions for complex deals including $10M in funding for a US exporter in the aerospace industry selling to Brazilian state governments utilizing both international factoring & supply chain finance (SCF). He has also structured SCF solutions for maintenance, repair & overhaul (MRO) companies in Florida and for a Latin American apparel exporter to US box store buyers. He holds an MBA in management from Dowling College in New York and a BBA in finance from Baruch College, City University of New York.

He’s married, has three sons and lives in Weston, Florida.

THE SECURED LENDER MAY 2019 25

Interview with Honorable Kevin J. Carey, Delaware Bankruptcy Judge

BY MICHELE OCEJO Judge Kevin J. Carey (D. Del.; Wilmington) has served on the Bankruptcy Court for the District of Delaware since 2005 (serving as Chief Judge from 2008 to 2011), having first been appointed as a bankruptcy judge for the Eastern District of Pennsylvania in 2001. He is a fellow of the American College of Bankruptcy. Judge Carey is the vice president-membership of the American Bankruptcy Institute and is a past Global Chairman of the Turnaround Management Association. He is a member of the National Conference of Bankruptcy Judges and a contributing author to Collier on Bankruptcy and Collier Forms Manual.

Judge Carey is also a part-time adjunct professor at Temple University’s Beasley School of Law and in the LL.M. in Bankruptcy program at St. John’s University School of Law.

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The Commission had recommended that an SME be defined as a company that had assets or liabilities of $10 million or less and recommended that an option be given to companies with assets or liabilities as much as $50 million be permitted to opt in to the SME provisions.

Now the current bill has a much lower number, $2.5 million, tied more to the current very low threshold in the current Bankruptcy Code for small business. But I think the hope is that either by an amendment to this bill or a separate bill that the number will look more like the ABI Chapter 11 Commission has recommended.

Judge Kevin J. Carey Bankruptcy Court for the District of Delaware He began his legal career in 1979 as law clerk to Bankruptcy Judge Thomas M. Twardowski, then served as Clerk of Court of the Bankruptcy Court for the Eastern District of Pennsylvania. Judge Carey received his J.D. in 1979 from the Villanova University School of Law and his B.A. in 1976 from The Pennsylvania State University.

Judge Carey will be retiring August 31, 2019.

Senator Grassley has introduced legislation which would change how SMEs are treated in bankruptcy. Do you have an opinion on what the threshold size of an SME should be?

I go to the ABI Chapter 11 Commission report with which you might be familiar.

A few years ago, ABI undertook a study of Chapter 11 and created a commission to study the reform of Chapter 11 and issued a report in 2014 or so. And there was a lot of effort given to examining small businesses. At the time, most Chapter 11s were companies that had assets or liabilities in the $86 to $95 million and lower range. So most of the Chapter 11 cases that are filed in the country are not like the ones I see in Delaware or the ones you’d see in New York or some other places.

As it stands now, given the numerous professionals required in Chapter 11 cases, and that the cost of such professionals is usually paid out of the debtor’s estate, is there some lower limit on the size of companies seeking to reorganize below which Chapter 11 just isn’t a realistic option?

The only way I can answer that question is by saying there are some companies that are so large or have problems that are of the nature that they can’t be solved except in a Chapter 11 proceeding. So that with those companies that will always be needed, no matter what the cost is.

But for the small and medium-sized enterprises, the word has been out for a number of years now that it’s just too expensive for many of them, which makes the SME effort in Congress so important to try to streamline and make it much more economically feasible for companies to go through Chapter 11 because the Chapter 11 has so many benefits for a company, if it can afford it.

It has become harder and harder, because of the capital structures these days, for a company to get to a confirmed Chapter 11 plan. Because the companies come in now so over-leveraged that there just isn’t enough time or money to do much else often than just get through a 363-sale process. And the elegant exit from a Chapter 11 has always been a confirmed plan. The Bankruptcy Code also provides for conversion to Chapter 11 or dismissal of the case.

But reorganization still is the preferred end result of a Chapter 11. Now I think

one of the things that happened is that because so many of the cases, at least the ones I see, are 363-sale cases, the industry has kind of redefined success. And a good 363 sale of a going- concern business for a going-concern price, which preserves the enterprise, preserves jobs, is viewed a success, even without ending up with a confirmed Chapter 11 plan.

Do you have any thoughts on what changes could be implemented in order to make it more likely that companies reorganize rather than go to 363 sales?

Well, again, the ABI Chapter 11 Commission imagined a sale which they call a 363X sale, and, in part at least, is meant to eliminate structured dismissals. Now the Supreme Court, in its decision, has pretty much already done that and that came after the issuance of the Commission’s report. But I think the notion is to try to build in some more protections to the 363 sales for creditors who may stand to get nothing and make sure the process is open and fair in such a way that as many of the stakeholders can get some value from the estate as possible.

The real problem isn’t so much the Bankruptcy Code; the real problem, as I said, is the way capital structures are today. They weren’t like that when the Code was first passed. Typically, you had a secured lender, which was almost always a financial institution. Maybe, even if there was a junior lienholder, there was still equity left from which the company could make distribution to unsecured creditors.

But again, companies are so highly leveraged now that there is just no equity left for the unsecureds unless they can make an agreement in which the secured creditors carve out a little bit of their collateral so that something’s available for distribution to the unsecured creditors.

One of the things the Commission recommended was in order to approve a 363 sale, the Court had to find that all administrative expenses were paid including 503(B) (9) expenses, which were those creditors who delivered goods to the debtor within 20 days before the filing. Those are some of the things that might be done, but really it’s just the way financing structures occur THE SECURED LENDER MAY 2019 27

now that has made it very difficult for companies to get confirmed plans and to make distributions to unsecured creditors.

You mentioned equity being a big difference that you’re seeing. What other big differences have you’ve seen in bankruptcy over your career?

Equity almost always gets nothing. The Supreme Court hasn’t decided whether, in fact, there’s a new value corollary to the absolute-priority rule so that old equity can buy in to whatever, whoever and whatever the reorganized debtor is.

As you mentioned, the cost of the 11s has grown enormously. The complexity has also grown enormously. In terms of industries, we see them all. Sometimes we see more than others. A few years ago it was the oil and gas cases. We just recently had two asbestos-related cases.

We see more pre-packs today, I guess that would be another change, than we did, say, 10 years ago or longer ago than that.

It seems like the retail ones are the ones that always make the headlines.

Yeah, retail right now is just in a freefall, I don’t know what the outcome will be except that it’s just going to continue, I think, until just the last of the big retail chains are either gone or broken up. I mean we just got Things Remembered, it’s not my case, but we’ve had Radio Shack, Brookstone, tons of retail.

Do you think the bankruptcy system is a balance between debtor and creditor rights or is it too creditor-oriented?

The Code is written to bring a balance that didn’t exist under the former Bankruptcy Act. But, as I’ve said, because of the way capital structures are, it may seem to be more creditor-friendly these days, although the debtors still have lots of weapons. The Code provides the automatic stay, which is really both a creditor and a debtor protection. You can still sell assets free and clear of liens, a very valuable tool for the debtor to have. You can assume or reject contract, which is another valuable tool for the debtor to have, and you can get a cram-down plan

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confirmed.

There’s still lots of advantages for the debtors but, again, given the overleverage, it’s very difficult for the debtor to have enough time or money to, say, correct operational issues, or to react to trends in the industry. There just isn’t enough time.

What factors do you consider when presented with a request to roll prepetition debt into a DIP facility and do you focus on the status of the case, on collateral, valuation or other points?

I saw that question and I wondered to myself whether the person who posed it was involved in the case I have, ATD, a very large tire distributor. I approved a very large rollup, $600 or $700 million, on the first day, which I had never done before. But why did I do it there? I’ll give you some factors. It was a pre-pack; unsecured creditors are getting 100 percent under the plan. All the major stakeholders had signed on. It was a situation in which the unsecured bondholders were going to end up owning 95 percent of the company and they consented. There was consideration given to how exit financing would work.

There was new money given. So those were the things I looked at.

The financing is typically approved on an interim basis and then sometime within the next 30 days on a final basis, and a final order is entered consensually. No one objected. So it was one of those situations where all the stakeholders agreed that was what was best for the company and it played out well.

But, rollups are things that bankruptcy judges look at with a pretty close eye. I don’t mind usually what’s called a “creeping rollup”, which is when the debt is rolled up a little bit as receivables come in and new money is disbursed, so that often by the final hearing not very much of the prepetition debt has been rolled up. If there’s a rollup, I tend to lean more in favor of those than an entire rollup on the first day. But we do permit them, although we look closely at them, and make sure that it’s not harming anybody, but rather helping the company and giving the company a better chance to reorganize.

You obviously recognize the importance of trade associations, as demonstrated by your involvement with TMA and ABI, so I’m wondering how you view the role of these organizations, in general, and do you have any insight into how they can remain relevant and necessary?

Well, the first part’s easy, the second part everyone’s trying to figure out. Yes, I am a big fan. I think professional associations, especially in our industry, are great opportunities for networking, for education and they’re a great structure for cultivating the next generation of leadership. Not to be too Pollyannaish about it, but associations undertake activities that can make the world a better place. And I think that’s a good thing.

A lot of associations are facing a drop in membership. Conferences cost more; competition for conference attendance has increased. I’m trying not to blame the millennials, which everyone likes to do, but the younger professionals network and do things a little bit differently than old timers like me. And so it’s a matter of trying to capture that group and give them the services that they need for their own professional development. When I was at TMA, we went through a strategic planning process. ABI is doing the same thing now, so hopefully we’ll come up with the right answer for how to stay relevant now and in the future. It’s a challenge. TSL Michele Ocejo is director of communications for CFA and editor-in-chief of The Secured Lender.

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Finance Professionals Can Build on Blockchain for Success

BY RICK BURKE Rick Burke of TD Bank discusses the results of TD’s recent blockchain survey.

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When blockchain was introduced in 2008, it sounded more like something from science fiction than a practical application.

More than a decade later, companies are testing blockchain-use cases and ubiquitous adoption across financial networks in the near future seems more probable.

Although some organizations have been early adopters of distributed ledger technologies including blockchain, there is still disagreement – and confusion – about the best use cases for this technology. The terminology alone can be confusing. While all blockchains qualify as a distributed ledger technology, not every distributed ledger is a blockchain.

This ambiguity surfaced in a survey conducted by TD Bank at the most recent Association for Financial Professionals Conference. The survey results showed that treasury and finance professionals are nearly evenly split on the top impacts of blockchain, although an overwhelming majority (90%) believes this technology will have some type of positive effect on the payments industry. When it comes to the technology’s specific capabilities and implications, finance professionals are divided: Blockchain will create stronger audit trails (29%), speed up payment processes (22%), improve efficiency of cross-border payments (21%) and reduce payments fraud (18%).

Blockchain has several applications in the corporate world, from communicating with financial institutions to negotiating contracts with vendors or customers. Today, these operations are done in a manual and time-consuming way that means parties have to sign paperwork, send it back and forth between parties and, ultimately, have that contract recorded by all involved parties. This process leaves room for lost or deleted files and copies along with delays from slow mail delivery or scheduling in-person meetings for signatures. Because blockchains adds new data as blocks that are secured by cryptography, each entry or change during a contract negotiation done via blockchain would leave a “breadcrumb” of information that must be validated by all parties. This process creates a visible and chronological record of activities and adds process efficiency because partici-

pants in the blockchain can work on the contract simultaneously.

Reducing Risks, Faster Transactions TD’s survey also revealed a conundrum in the treasury world: Faster and real-time payments are coming soon, but organizations still have obstacles to implement them. One is not having the technology resources to support these transactions or capital to spend on applications. While changes in the payments landscape present challenges for treasury practitioners, concerns about payments fraud/cybercrime tops that. In fact, 44% of corporate finance professionals named fraud as their top operational challenge, a 14% year-overyear increase.

As more companies increasingly rely on electronic financial records and transactions, it is no surprise that fraud and cybercrime are growing concerns.

Organizations need to remain vigilant and “own” cybersecurity along with their financial institutions. Preventing fraud is an area where distributed ledger technologies and blockchain could benefit treasury and commercial finance. While no financial transaction (paper or electronic) is ironclad, blockchain leverages cryptography and requires many parties to agree to something before it occurs – say, moving money out of a bank account to pay a vendor or to fund foreign trade transaction.

The requirement for multiple approvers and the cryptographically secured result can make it more difficult for “bad actors” to socially engineer fraud because they would need to impersonate several parties, while the technology itself can limit the ability of hackers.

have value outside of that particular institution. As a result, corporate treasury professionals, who already typically use multiple types of payment methods for vendors and customers, are unlikely to rush to use two, three or more bank-specific cryptocurrencies. In all likelihood, these bank-specific options will help finance professionals understand the value of employing blockchain or other distributed ledgers, but likely won’t influence mass distribution.

Over time, central governments may develop “fiat cryptocurrencies,” meaning they would be government-backed. This is a bit of an oxymoron for many as the idea of a cryptocurrency is that the network provides the trust between parties instead of a central player. The pro of a fiat currency is strength of the backing entity, but the downside is that the cryptocurrency may be limited by the central agency’s jurisdictional authority, limiting it to domestic transactions. Once this oversight is in place, sending currency via blockchain could create operating efficiencies for corporate and speed up the transfer of funds.

Technology undeniably is influencing the way treasury departments operate and move money; and, whether used for data collection and distribution, tracking contracts or sending payments, blockchain’s biggest benefit is that it provides a single source of truth. With more time and a deeper knowledge base, finance professionals could find that this “techie” concept offers a tangible benefit to business. TSL Rick Burke is head of Corporate Products & Services, TD Bank.

Cryptocurrency Cryptocurrencies have been viewed with some suspicion by corporate practitioners because they do not have a set value backed by a legal tender. Their inherent volatility makes it difficult to use for large-dollar payments between trading partners. The recently launched bank-specific coin forces a “dollar-fordollar” value that alleviates some of that concern, although the coin does not

THE SECURED LENDER MAY 2019 31

CFA Women in Commercial Finance Conference Explores How Women Can Step into TheirPower

BY EILEEN WUBBE CFA’s Women in Commercial Finance Conference provided networking and insight for career development and how to navigate issues faced in today’s work environment.

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The CFA Women in Commercial Finance Committee presented an in-depth conference offering a dynamic combination of networking and professional development on March 14 at the Wells Fargo Capital Finance Conference Center in New York. This half-day conference brought together some of the industry’s leading female executives and other professionals to provide women in commercial finance with the tools to “make their mark.” A welcome reception was held at Paul Hastings the evening of March 13.

“The CFA Women in Commercial Finance conference provided a wonderful opportunity to meet many extraordinary women shaping the commercial finance world. It was a unique opportunity for women in our industry to learn from each other and to cultivate relationships and networks of support,” said Conference attendee Meredith L. Carter, president and CEO of Context Business Lending, LLC. The event kicked off with keynote speaker Dr. Sharon Melnick, a global authority on women’s next-level success and founder of the Next Level Leader initiative. Informed by ten years of psychology research at Harvard Medical School, Dr. Melnick’s methods have transformed 25,000 trainees at 30 Fortune 500 companies (including eight in the financial services sector). The author of Success Under Stress and Confidence When It Counts discussed strategies for how women can step “into their power” and communicate with confidence.

“When you are in your power, you can create that rock-star year,” Dr. Melnick said.

“There are three skillsets to help you stay in your power: confidence, resilience and influence.”

The first strategy Dr. Melnick discussed was to immediately sort out what aspects of a situation are within your control in any given challenging situation and to distinguish that from aspects of the situation that aren’t within your control.

“You want to focus on what you can control. That’s where you’re in your power.

Focusing on what you can’t control stresses you and leaks your power,” said Dr. Melnick.

“Because there are so many things that are within your control (your communications, reactions, thoughts and influencing), all you have to remember is one simple rule—the 50% rule: Be Impeccable for your 50%. That means take 100% responsibility for what

you can control and be effective at that before you allow your energy to be drained by matters you can’t control.”

Shifting from being reactive and surviving your to-do list to being more intentional was another strategy offered. With the average human being having about 60,000 thoughts a day, each one of these thoughts is an opportunity to be in your power. You can channel all those thoughts into ‘who you want to show up as’ (which Dr. Melnick calls your “Horizon Point”).

Who you show up as determines how others experience you and determines the influence and impact you will have.

The sweet spot is the combination of your strength and aspirations and who your organization needs you to be.

Attendees also learned how to balance their on/off button by doing a breathing exercise to take a “mental vacation” during busy days, and a strategy to overcome the “prove it again” bias women often face by painting a mental movie for job interviewers so they “see” you doing a next-level role.

Following Dr. Melnick, attendees had the option of attending two panels: “How to Get Ahead,” an interactive panel discussion about mentoring, networking, visibility, and making your voice heard, and “Now That I Am Here, What Is Next?”, which offered insights on real life challenges faced by women in senior roles and tools to leverage success to a top leadership position.

“How to Get Ahead” featured moderator Bhav Singh, associate, Paul Hastings LLP and panelists Andrea Bernard, managing director, Wells Fargo Capital Finance; Cheryl Carner, senior managing director, Crystal Financial; Jennifer Ezring, partner, Cahill Gordon & Reindel; and Betsy Ratto, managing director - head of Retail Finance (BABC), Bank of America Merrill Lynch. The panel focused on four main topics: networking, mentorship, visibility and making your voice heard.

The interactive panel kicked off discussing networking.

“Whether you’re introverted or extroverted, putting yourself out there can be challenging,” said Carner. “I’m guessing there are people in this room who will say that they don’t like networking or don’t spend enough time doing it. But there is no question that doing so is critically important since a majority of jobs are found from

THANK YOU Thank you to our sponsors: Bank of America Merrill Lynch Cahill Gordon & Reindel LLP CSC Paul Hastings Goldberg Kohn Otterbourg P.C. Gordon Brothers Chiron Financial LLC Conference Host: Wells Fargo Thank you to the CFA’s Women in Commercial Finance Conference Planning Committee: Katherine E. Bell, Paul Hastings Gayle Berne, Jones Day Paula Currie, PNC Business Credit Sandra Evans, US Bank Laura Glass, Bank of America Business Capital Stacy Hopkins, Wells Fargo Capital Finance Licia Jacques, North Mill Capital Janet Z. Jarrett, WICF Committee Chair SunTrust Robinson Humphrey Valerie S. Mason, Otterbourg P.C. Guelay Mese, BNP Paribas Susanna Profis, Bank of America Business Capital Debra Putzer, CIT Deborah Reperowitz, Stradley Ronon Sabrina Singh, BMO Harris Bank Jessica Staheli, Scherzer International Lynn Tanner, Winston & Strawn

networking. Besides my first role in specialty finance focused on retailers, which I got through a recruiter, every role I’ve had came through someone who knew me or knew of me from the industry. Certainly in my day-to-day role where I am responsible for business development and sourcing new transaction opportunities, networking is absolutely critical. But it’s not just about deals. It’s about relationships where I help other people who are looking for information and resources and asking others to help me.”

“I would suggest to never think you are too junior to start networking,” said Ezring.

“For someone who is at a more junior level in their institution, that networking starts the day you have the job. For example, as a lawyer, when you’re the first-year associate on a transaction, there’s a first-year analyst at your client who’s working on that same transaction with you. Someday you’re going to be the partner, and they are going to be THE SECURED LENDER MAY 2019 33

the managing director, or they’re going to have moved on to something else, but you’re all going to become more senior together. You never know where life is going to take those people, and the fact that you made that connection could be useful from a business perspective,” said Carner.

“You need to think of your career as an ongoing job interview,” said Bernard. “You don’t know how the relationships you have are going to impact you in the future.

I’ve always been a firm believer in taking advantage of good opportunities when they present, whether it’s building skills or a broader network of relationships.”

Singh asked the panelists how much time should be devoted to networking.

“Some days you just want to go home and spend an hour thinking about going to the gym (and then not go) or watch Netflix,” she joked. “How much time do you devote to networking, and does that change at certain times during your career or certain times of the year? How do you find motivation to go to an event or dinner when you are exhausted?” she asked panelists.

“If you think about it as a critical part of your job, no matter what your specific role is, it won’t be a choice per se,” Carner said.

“But let’s be clear; there are absolutely days and times when you don’t feel like it. So you have to cut yourself a little bit of slack.

Set some parameters or goals for yourself, like staying for an event for 45 minutes so it doesn’t have to be a whole night, or take five business cards and once they are handed out, you can leave.”

Mentorship According to SAP Success Factors, 30% of research indicates that employees who are mentored receive higher compensation, a greater number of promotions, and have lower intentions of leaving their organization. When polled and asked about their mentorship experience, 19% of WICF attendees attending the panel said they couldn’t have done it without their mentor while 44% said it was somewhat helpful for their career. No one in the room indicated that mentorship wasn’t helpful.

Singh asked what criteria and characteristics do panelists look for in a mentor and how can you ask someone to be your mentor.

“I personally have found that the most important mentoring relationships that I

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have had the benefit of, were those that grew informally. Sort of an organic sense you get from a senior person that ‘this is someone who thinks I will be helpful to their career or thinks that I have some diamond-in-the-rough quality’,” said Ezring.

“The people I chose to be my mentors generally had something I wanted. They had the job I wanted or the clients I wanted or some skill that I needed. I think the goal in seeking a mentoring relationship from the mentee’s perspective should be to find things about a mentor that you can incorporate into your own work persona.”

“If you’re one of the people in the room who says ‘I don’t have a mentor,’ you have to get out from living under a rock,” Ratto explained. “Get your head out of the cubicle.

Don’t be that person who just does the work, hands it in and doesn’t talk about it.

You have to develop the relationship.”

Staying Visible and Relevant in Your Organization In order to be successful, people need to know who you are. How do you stand out when there are 100 people in the room?

“I think the single most important thing you can do to increase your visibility in your organization is to build a very strong personal brand,” said Bernard. “Your brand is what people say about you when you leave the room, and it’s so important to control that.”

“I also think there are opportunities to build or enhance your visibility in a non-specific deal context,” added Carner.

“I work in a really small organization, but we’ve done some non-profit work as an organization that I’ve tried to spearhead. It’s also about creating other opportunities to engage and interact.”

Ezring offered volunteering to work on projects in order to get your name and face out in front of senior staff.

Ratto mentioned how confidence grows throughout your career using an anecdotal story about her experience becoming a certified yoga instructor.

“When I went through yoga teacher training, I went through 500 hours of training,” Ratto explained. “Teaching one pose in front of a group of teachers in the program had me so nervous, I wrote everything down, and read all the words. I taught my first class in a community center. It was for a group of older immigrant women. I was ex-

cited, but nervous and overthinking it. I had my script prepared, but realized reading and referring to it wasn’t going to work. I had a big language and skill hurdle to cross. I had to adapt to a more in-the-moment approach of show and tell them what to do, and it was fine. I had done the work and knew the material. The message is: Don’t be shy to just do it. You know that you know all of the information. Jump in when you feel you know the answer. Be confident in yourself.

Find that inner confidence.”

Now That I Am Here, What Is Next?

“Now That I Am Here, What Is Next?” featured Moderator Guelay Mese, head of ABL, BNP Paribas and panelists Penny Fine, managing director, CIT Asset Management, investment advisor to CIT Northbridge Credit, LLC; Joye Lynn, head of Corporate Asset-Based Lending, Wells Fargo Capital Finance; Jan Naifeh, senior managing director, FTI Consulting; and Cyntra Trani, director of Credit Management, Asset-Based Lending, TD Bank.

The panel began discussing the amount of time spent thinking strategically. Fine said she thought strategically nearly all the time, given the start-up nature of her group and role in business development.

Over time as roles and careers change, the amount of time spent thinking strategically will shift and fluctuate, but panelists agreed it’s extremely important to make time for strategy and it’s needed to stay relevant and keep business moving forward.

“In setting up our new Corporate AssetBased Lending platform, I had the opportunity to create a business plan, team structure, support system, and achievable goals so the first few months were all strategydriven and now it’s shifted into execution and implementation mode where finding time to be strategic is frankly a struggle, but a necessity,” said Lynn.

If an important part of someone’s job is related to leading a team, then it’s essential to make sure they each have, or ask for, the resources so time can be dedicated for strategy.

Building Influence and Managing Up Lynn discussed understanding what goals and priorities are important to a firm and its leadership team and then ensure a business is aligned with that.

“Once it’s aligned and those goals have

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been clearly communicated to your team members, then highlight/reinforce their successes in achieving those wins, big and small, from winning a new deal, developing a process improvement, recruiting a new talented team member, or community support involvement,” Lynn said. “Sharing those successes across your team and then with senior management also enables the leadership team to be aware of these accomplishments but then further pass them on and gain support for the business.”

Panelists agreed jumping out of your comfort zone can help provide new opportunities.

Fine recalled her riskiest career move came in the midst of the credit crisis when she learned her employer was shutting down the lending unit she managed. While the finance company wanted to keep her employed in another role, Fine decided to make the leap into consulting instead. She later returned to lending when she took a job at a bank – another big risk, but one that helped her become much more knowledgeable about the industry.

Lynn recalled when she first became a manager and was unsure how to “define” or “create” her management style.

“My boss, Barry Bobrow, gave me great advice: ‘That’s easy, think of the best managers that you’ve had and what you really admired — do that. Then think of the worst ones — don’t do that.’ It was simple advice, but really effective,” added Lynn.

Trani discussed the importance of being an advocate.

“Being an advocate for yourself and your team is extremely important, especially as a woman,” added Trani. “As a leader, publicly recognizing the contributions of others – over a team email or during a group meeting – helps to create an inclusive environment where people feel comfortable sharing their voice and expressing their ideas.”

Lynn agreed, adding, “While being a mentor or sponsor is a large investment, be an advocate for other women — in meetings don’t interrupt others, echo good ideas and attribute them, invite others to speak up, and intervene if you observe inappropriate behavior.”

Lynn and Trani agreed on having informal lunches with staff to get to know each other on a personal level.

The panel also discussed some of the

personal trade-offs women will often make in the work world.

“Be open to all possibilities,” said Naifeh.

“When an opportunity knocks, think about what you might contribute and what you might get out of it. We all have a great deal going on, but there are times we have to just say yes!”

“I often find it challenging to manage work-life balance and meet the demanding expectations I impose on myself and that I sometimes feel others impose on me; I’m sure many professional women can relate,” said Trani. “I find myself trying to give 100% to everything and everyone – striving for perfection at work, being a dedicated and involved mother, being present for my husband as an engaging and supportive wife, and participating in my community.

It’s a lot of pressure and there are a lot of moving pieces, and sometimes it seems like I can’t keep up. But what has helped me is to identify things that are important that I just won’t budge on. I then set parameters around those.”

“I Got This”: Women Negotiating Dr. Beth Fisher-Yoshida closed out the Conference with a discussion titled “I Got This”: Women Negotiating. Dr. Fisher-Yoshida is vice chair of the faculty of Professional Studies and the academic director of the Negotiation and Conflict Resolution program at Columbia University. As professor of Professional Practice, she teaches classes in negotiation, conflict resolution and conflict analysis.

Her presentation focused on preparing for negotiation, staying grounded and confident and being agile during critical moments.

“At first women didn’t even really pay attention to what was going on during negotiations,” Dr. Fisher-Yoshida said, describing how workplace culture has shifted over the last 25 years. “During negotiations, women tend to advocate for others more acceptably. Men self-advocate more comfortably and acceptably. Women are also socialized to be likeable. A lot of research has shown that women put their heads down and say ‘I will just continue to do good work because somebody will notice.’ Maybe. But they may not notice in the time frame that you were hoping. So you may be in the same position for quite a long time because you’re not being noticed, and you’re not being assertive

because you weren’t socialized to assert. So we have mixed messages.”

Dr. Fisher-Yoshida led attendees in a self-awareness activity where they had to brainstorm the significant people, events and influences that have shaped their stories in their minds that then have been carried with them everywhere and affect how these have influenced negotiation strategies.

For salary increases, women were encouraged to think about what the needs were to make the demands they are making, rather than simply asking for a raise repeatedly, and the needs of the other party.

With this in mind, she said, there is more creativity to work with.

“When you work at the level of needs, then you have potential solutions,” Dr. Fisher-Yoshida said. “If I’m looking for recognition and want to be acknowledged that I’ve really worked hard and have been a good contributing member of the team, I may think of it in a certain way, but there may be other ways. The negotiation is very short-term event and you want to think about how the negotiation fits into the long-term strategy. Otherwise everything is just a one-off. And you don’t want it to be a one-off, you want it to be a continuation.

Even if I don’t ‘win’ this negotiation, am I moving closer to my longer-term goals? If I don’t know what my longer-term goal is, I’m not going to recognize what I may be gaining in this particular negotiation. You also have to really know whom you’re dealing with—what’s important to them and what is your relationship with that person.”

CFA’s Women in Commercial Finance Committee was formed in 2013 in order to support women involved in asset-based lending and factoring. The mission of the Committee is to promote the advancement of women in leadership in the commercial finance industry through networking, education, and advocacy. This year marked the 4th Women in Commercial Finance Conference which sold out for the first time with more than 200 attendees. For information on becoming a part of the Committee or helping to plan future WICF events, please contact Michele Ocejo at mocejo@ cfa.com. TSL Eileen Wubbe is senior editor of The Secured Lender.

THE SECURED LENDER MAY 2019 35

THOUGHTS FROM THE WICF CONFERENCE

“Now That I’m Here, What’s Next?”

Insights, Tips and Tools to Navigate Real-Life Career Challenges

By Eileen Wubbe In light of the CFA’s Women in Commercial Finance Conference, held on March 14, we’ve decided to launch a mini-series to bring you more in-depth information on how to successfully navigate issues faced in today’s work environment. You’ll hear from some of the industry’s leading female executives on how they have achieved success and made their mark.

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and really helped position me for success. They have also been my sounding board — providing me not only with feedback and constructive criticism, but giving me the opportunity to confidentially discuss career opportunities and challenges. I’m incredibly thankful for my sponsors because they have really pushed me to grow and be my best self.

Cyntra Trani director of credit management, Asset Based Lending at TD Bank We sat down with Cyntra Trani, director of credit management, Asset Based Lending at TD Bank, to discuss how she tackles real-life career challenges.

As you think of your career progression, what factor has been most critical?

Navigating career growth is not easy. It takes hard work, persistence, subjectmatter expertise and a willingness to take risks. But I cannot emphasize enough the importance of sponsorship, which is often not possible without dedication and a strong work ethic. Through sponsorship, people are able to achieve things that aren’t necessarily possible otherwise.

Sponsors can recommend people for stretch assignments or challenging projects that may help demonstrate a skillset, make connections to other influential people in the company and advocate for promotions or other growth opportunities when opportunities arise.

In my career, I have been fortunate to have some really great sponsors that I gained as a result of various special assignments that I participated in early on in my career. These sponsors introduced me to new people and helped to open doors for me that I would never have been able to open myself. They have advocated for me throughout my career,

The ability to influence others is often critical to affect change and accomplish results. How have you built influence across your organization? What has worked and what hasn’t worked?

I think this really boils down to one key thing: forming allies with colleagues across the business by effectively communicating how an initiative or project aligns towards a common goal and then collaborating to achieve it.

To do this requires relationship development and instilling confidence in colleagues and leaders that you’re consistently focused on doing what’s best for the greater good of the organization.

Often times, in order to see the holistic picture, specific business objectives need to be put into perspective, which is challenging. It takes negotiation and flexibility. I’ve found that by having an understanding of the bigger picture and how the intricate businesses impact the end goal, we’ve been able to work effectively to produce outcomes that otherwise wouldn’t be possible.

The importance of advocacy is something that comes up frequently. How do you spotlight the talent on your team so that others across the organization recognize it? What informal activities can we all do to create a more inclusive environment?

As a leader, it is part of my responsibility to advocate for my team and make sure they are properly recognized for their contributions, as my sponsors and previous leaders have done for me. This is something I’ve strived to do throughout my career, especially as I have grown into new leadership roles and obtained more influence.

For my team, I ensure that senior leaders and fellow colleagues are aware

of the impact of an individual’s contribution. I find that it also helps my team to understand how their work ladders up to the larger purpose of the organization and business. I encourage people to take stretch opportunities and volunteer for projects that expose them to various people at all levels of the organization.

This enables them to showcase a particular skillset, and supports non-traditional training to hone in on specific development areas.

I strive to highlight people’s accomplishments inside and outside of work, which creates a more inclusive environment. Celebrating success in community or charity initiatives is just as important as celebrating someone’s success on a project, and I often find that those skills are transferrable.

What is the next logical step in your career? How are you preparing yourself?

How do you identify or create opportunities?

Part of successful advancement is having a development plan. It’s important to visualize where you want to be and how you’re going to get there so that you are always working towards your next role. To do that, requires knowledge of what’s important to you and is individual to everyone. A strong network, sponsors, and the ability to leverage relationships are invaluable.

For me, it’s incredibly important that my career continually challenges me and provides me with a sense of fulfillment.

Without that, I lose passion. And when the passion is gone, I know it’s time for me to make a change. Having a plan helps me to focus on what that change is and how I am going to effectuate it. TSL Eileen Wubbe is senior editor of The Secured Lender.

THE SECURED LENDER MAY 2019 37

what

i

WOULD YOU DO?

n this edition of What Would You Do?, the Chief Credit Officer of Overadvance Bank is asked by the principal of a distressed borrower to conduct an “Article 9 secured party sale” of the borrower’s assets and finance the asset sale to another company owned by the same principal.

Too Close for Comfort?

Overadvance Bank provides a $20,000,000 senior secured revolving credit facility to Mighty Mailer Inc., a direct mail business. Mighty Mailer, like many others in the direct mail businesses, realized that the direct mail market was shrinking, as customers increasingly shifted their marketing budget to digital marketing.

However, rather than invest in digital marketing when it first saw this trend, Mighty Mailer bet that that it could capitalize on the shrinking market for traditional direct mailers and doubled down on the traditional mail model.

Initially, this strategy actually increased Mighty Mailer’s revenues and profits through strategic acquisitions and realization of the resulting economies of scale. As such, in the year before it closed its credit facility with Overadvance Bank, Mighty Mailer secured a new leased facility that was twice the size of its old facility and heavily invested in new equipment that it financed through several equipment lenders.

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Unfortunately, Mighty Mailer’s bet did not pay off. Eventually, the benefits it realized from strategic acquisitions were overtaken by the increased fixed equipment and rent costs, as well as declining revenues suffered by all direct mailers in the industry. Stuck with millions of dollars of past due trade debt, operating losses, an above-market facility lease and millions of dollars of equipment lease obligations, the owner of Mighty Mailer, Shady McMailer, thought that Mighty Mailer would be profitable if the company could somehow shed most or all of its trade debt liabilities, and move to a smaller, less expensive location.

Shady McMailer reached out to the Chief Credit Officer of Overadvance Bank to discuss a possible solution. Shady advised the Chief Credit Officer that filing for Chapter 11 bankruptcy was not an option, as he deemed the bankruptcy costs prohibitive, and it would not allow him to continue as the sole owner of Mighty Mailer without a substantial capital contribution to exit bankruptcy. Instead, Shady McMailer proposed that the Bank consider conducting a secured party sale of Mighty Mailer’s assets under Article 9 of the Uniform Commercial Code to sell the assets to a newly formed company (“NewCo”). Shady advised the Bank that he will be the sole owner of NewCo, and the Bank would finance the sale, so the Bank would have new, senior liens on the same collateral, but with a new borrower with a cleaned-up balance sheet. Following the sale, Shady explained he would move the business into a new, smaller, location from which he will continue to operate the business using essentially the same assets (minus the unfavorable equipment leases), management and workforce of Mighty Mailer.

The Chief Credit Officer is concerned.

The Bank’s financial advisor has painted a bleak liquidation scenario of Mighty Mailer, likely resulting in a substantial shortfall. Accordingly, continuing to finance the Mighty Mailer collateral with a better balance sheet is an appealing alter-

native. The Chief Credit Officer is familiar with secured party sales under Article 9 of the Uniform Commercial Code, both as a means to liquidate collateral of a defaulting borrower, as well as a means for a borrower to consummate an acquisition of another company’s assets. Here, however, Shady McMailer is an insider who wants to use the Article 9 sale as means to transfer his business from one company he owns (Mighty Mailer) to another company he owns (NewCo) in an effort to avoid certain liabilities of Mighty Mailer. So the Chief Credit Officer is nervous that this transaction might create more problems for the Bank than it’s worth.

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

Article 9 of the UCC allows a secured creditor to sell all, right, title and interest of the debtor (i.e., borrower) in and to collateral covered by Article 9 (e.g., inventory, equipment, contract rights, receivables, but not items such as real estate or deposit accounts). This type of sale is commonly referred to as an “Article 9 secured party sale”. The Article 9 sale is also free and clear of liens junior in priority to the liens of the secured party selling the collateral.

While Article 9 does not expressly prohibit or limit a secured party from conducting an Article 9 secured party sale to an insider or affiliate of the borrower whose assets are subject to the sale, Article 9 requires that “every aspect of the disposition, including the method, manner, time, place and other terms, must be commercially reasonable.”

Article 9 also provides that a secured party sale may be conducted as either a private sale or a public sale (i.e., a sale that is advertised and open to the public). Both Article 9 sales have to be “commercially reasonable”, but in a public auction sale, the requirements of notice and affording the public an opportunity to purchase the collateral mitigates the potential for a successful challenge to the commercial reasonableness of a sale to an insider. As

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what would you do?

such, the Chief Credit Officer figures that, if the Bank agrees to move forward with the proposed secured party sale to Shady’s NewCo, the Bank would likely conduct a public sale rather than private sale.

Of course, the Chief Credit Officer also knows that the analysis does not stop with whether the sale is commercially reasonable under Article 9. While as a general rule, an asset purchase, even an asset purchase of an entire business or business line consummated via a secured party sale, will not by itself result in the buyer becoming liable for the seller’s liabilities, an exception to this general rule is the doctrine of successor liability.

In determining whether to impose successor liability, often under the theory that the buyer is a “mere continuation” of the debtor (borrower) or that there was a “de facto merger” between buyer and debtor, courts typically focus on whether the debtor and the buyer have the same owners and management, whether the debtor ceased business following the sale, and whether the buyer assumed liabilities of the debtor necessary to the continued operation of the debtor’s business. The majority of cases where courts have found successor liability in the context of a secured party sale involve common ownership between the debtor and buyer or sales to insiders of the debtor.

Here, both the debtor and buyer are 100% owned by Shady McMailer. Further, Shady McMailer seeks to run virtually the exact same business following the sale that Mighty Mailer operated prior to the sale. For example, Shady McMailer will (a) continue to operate under the Mighty Mailer brand, (b) employ almost all of Mighty Mailer’s workforce, including the management, (c) assume the trade debt of Mighty Mailer owed to key suppliers of the business, (d) solicit the same vendors as Mighty Mailer and (e) service the same customers as Mighty Mailer. Finally, following the sale, Shady McMailer intends to dissolve or at least discontinue Mighty

Mailer as a legal entity.

Clearly, Shady McMailer’s proposal carries a risk of successor liability. However, assuming the sale satisfies the commercial reasonableness standard of Article 9, which the Chief Credit Officer believes it would as the Bank would conduct a secured party public auction sale (rather than a private sale) and follow all notice and other requirements under Article 9, the Chief Credit Officer views successor liability risk as more of a direct risk for Shady McMailer and NewCo than the Bank’s risk. Specifically, the Chief Credit Officer reasons that, even if NewCo is found to be responsible for the debt of Mighty Mailer under a successor liability theory, the claims would not prime the Bank’s senior lien position on the transferred assets. Of course, other causes of action could be asserted against the Bank by disgruntled creditors of Mighty Mailer, such as equitable subordination, but again, conducting a secured party public auction sale in accordance with Article 9 of the UCC substantially mitigates claims of lender misconduct.

In the event a successor liability claim is brought against NewCo, the Chief Credit Officer is well aware that the Bank would almost certainly incur time and expense in the litigation even if the Bank would be unlikely to incur any direct liability. However, he reasons that the time and expense the Bank would incur in the litigation would be far less than the loss the Bank would likely suffer it if had to liquidate Shady McMailer today.

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

“Of course, the Chief Credit Officer also knows that the analysis does not stop with whether the sale is commercially reasonable under Article 9. While as a general rule, an asset purchase, even an asset purchase of an entire business or business line consummated via a secured party sale, will not by itself result in the buyer becoming liable for the seller’s liabilities, an exception to this general rule is the doctrine of successor liability.”

Dan Fiorillo and Jim Cretella are Members of the law firm Otterbourg P.C.

THE SECURED LENDER MAY 2019 39

the cfa brief AMONG CFA MEMBERS

CFA NEWS IN PRINT

BBVA Compass: James Ligman was named Orange County City president, bolstering the bank’s California presence by promoting from within. Ligman has been in the industry for more than two decades and will be tasked with managing the bank’s commercial and Global Wealth operations in the Orange County area. His most recent role with BBVA Compass was as the Orange County area’s commercial banking manager.

Before his role as City president, Ligman joined BBVA Compass in 2013 as a mid-corporate relationship manager, tasked with developing relationships with business clients with revenues from $500M to $3 billion. He has more than 20 years of experience in the banking industry, with a focus on commercial and healthcare lending.

Before joining BBVA Compass, Ligman worked in corporate lending, leverage lending, as well as technology banking.

He earned a bachelor degree from the University of California at Irvine, and an M.B.A from California State University at Fullerton. He also was selected to attend the BBVA Compass Executive Education Program at the University of Texas in 2018.

BBVA Compass has been in the California markets for over 10 years since its parent group’s foray into the United States, but has been vigorously expanding its presence recently. Ligman is the bank’s seventh market president for the state of California.

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BMO Harris is making the following strategic changes to the Midwestern U.S. personal and business banking leadership team: Chris Michalski, regional president, Minnesota, Kansas, Missouri and Indiana; Bernard Narine, regional president, Chicago south region; Tony Tintinalli, regional president, Chicago north region and Steve Zandpour, head, U.S. retail specialty sales.

As regional president of the Midwest region, which includes Minnesota, Kansas, Missouri and Indiana, Michalski will focus on customer experience and mentoring teams to deliver a unified, integrated offering for customers. Michalski is a seasoned industry veteran with over 25 years of experience. He most recently led U.S. mortgage sales and previously served as regional president for Southeast Wisconsin.

In his new appointment as regional president, Narine will be responsible for overseeing Chicago’s south region for all BMO locations and teams. Previously, Narine served as regional president for Arizona and Florida in addition to overseeing Minnesota, Kansas, Missouri and Indiana on an interim basis. As an industry veteran with over 25 years of financial services leadership experience, Narine has led teams in large metropolitan markets and has a proven record of delivering results and developing high-performing teams.

Tintinalli will serve as regional president for Chicago’s north region, helping drive his team’s success with personalized BMO customer interactions. Most recently he served as head of U.S. premier sales, with accountability for driving customer experience and growth for the business.

Prior to that, Tintinalli served as regional vice president for Toronto Downtown, one of the largest personal banking markets in Canada.

These leaders will oversee branch banking teams in their respective markets, advancing BMO’s seamless in-person and digital experience that allows customers to get convenient, reliable banking service

however they prefer.

In a newly created role as head of U.S. retail specialty sales, Zandpour will drive sales, service and financial results for U.S. premier sales, business banking and mortgage sales. He will collaborate with partners across the U.S. businesses to maximize productivity and contribute to growth goals. Zandpour brings over 20 years of banking experience to his role, and most recently served as regional president for Chicago’s north region.

Bridge Bank announced the opening of a new office in Seattle, along with the hiring of technology banking veteran Tom Reimer as senior vice president. This expansion will enable Bridge Bank to strengthen its existing relationships in the Pacific Northwest while accelerating the growth of its technology banking group portfolio in the region.

“Although our office is new to the Pacific Northwest, we are not,” added Mike Lederman, senior vice president and western region director of Bridge Bank’s technology banking group. “Our technology banking team has had a longstanding presence and solid relationships with clients in this region going back more than a decade. We’re excited to have an official presence here and look forward to building deeper networks and relationships in the community.”

Reimer has over 20 years of experience in technology banking, including working with venture capitalists, attorneys, and CPAs. Prior to joining Bridge Bank, he served as senior vice president in the technology banking group at Square 1 Bank where he managed the Northwest region.

He holds a bachelor of arts in business administration and finance from Washington State University.

CIT Group Inc.: James R. Hubbard has been named the company’s general counsel and corporate secretary, effective March 18, 2019. Hubbard will join CIT’s Executive

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Management Committee and report to chairwoman and chief executive officer Ellen R. Alemany.

“Jim is a seasoned lawyer with deep expertise in both commercial and consumer banking,” said Alemany. “His leadership and background will be a strong addition to CIT as we advance the next phase of our strategic plan.”

Hubbard will have oversight over the legal function and all outside counsel relationships, as well as responsibility for all business and corporate legal matters.

Hubbard joins CIT from TIAA Bank where he was the general counsel and secretary.

Prior to that role, he served as the general counsel and secretary for Everbank Financial Corp. Hubbard spent 23 years in various legal roles at Fifth Third Bancorp, including as the chief legal officer. Earlier in his career he was with the Kaye, Scholer,

Fierman, Hays & Handler law firm, as well as the Front & Jacobs law firm.

Crossroads Financial: Kristen (Kris) Palmer has joined its team. She will be assisting the underwriting department. Palmer has over eight years of experience working in the asset-based lending industry. She started working in New York in the back office of a factoring company specializing in the fashion industry. Shortly thereafter Palmer relocated to south Florida to be a compliance officer, contributing to the immediate growth in underwriting in both factoring and asset-based lending accounts. Palmer holds a bachelor of science in interdisciplinary studies with a concentration in business administration from the Virginia Commonwealth University. Palmer can be reached at: kpalmer@ crossroadsfinancial.com.

Encina Business Credit, LLC (EBC): Bond Harberts has been appointed senior managing director and head of underwriting with responsibility for leading the firm’s underwriting function. Based out of EBC’s headquarters in Chicago, he will report to Marty Battaglia, CEO, and work closely with Tom Sullivan, chief risk officer, who is responsible for managing the company’s fast-growing portfolio.

Harberts is a 25-year industry veteran who joins EBC from Fifth Third Bank, where he spent the past two years as a senior risk manager in the bank’s Asset-Based Lending Group. He previously spent 17 years at GE Capital, where he held a number of risk management roles with increasing levels of responsibility across various assetbased and cash flow lending businesses.

Prior thereto, Harberts worked at Fremont Financial Corporation (which was

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eventually acquired by FINOVA Capital) and The CIT Group.

Fifth Third Bancorp: Scott Silvas was hired as Texas market president. Based in Houston, Silvas will be responsible for building teams in Houston and Dallas to support the needs of middle-market companies across the state. He brings more than 15 years of banking experience to the role and will report to Tom Heiks, executive vice president and head of middle-market banking for Fifth Third.

This expands Fifth Third’s capabilities in Texas. The bank currently has nearly 30 employees in Dallas and Houston who provide corporate banking services to clients nationwide. The position also builds upon Fifth Third’s well-established commercial vertical and market expansion strategy.

The bank most recently announced Joe Yurosek as its market president for California.

“Establishing a market president in Texas is a continuation of Fifth Third’s commitment to expand its broad range of commercial solutions in high-potential markets,” said Lars Anderson, executive vice president and chief operating officer of Fifth Third Bank. “We’ve seen success in California and believe we can deliver value in Texas, a market I am very familiar with.”

Silvas joins Fifth Third from JP Morgan Chase, where he served as executive director and managing market executive for the Houston Middle Market Group since 2014.

Prior to that, he held various roles with JP Morgan since 2010. Silvas began his career in 2003 with Bank of Texas, part of BOK Financial.

Goldberg Kohn announced new 2019 principal and associates. Prisca M. Kim has become a principal in the firm’s Bankruptcy and Creditor’s Rights Group. Kim is a principal in the firm’s Bankruptcy & Creditors’ Rights Group. Kim focuses on representing lenders in the protection and enforcement of creditors’ rights in commercial workouts

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and bankruptcies, including restructurings, reorganizations, sales, liquidations, receiverships, assignments for the benefit of creditors and out-of-court workouts.

Her bankruptcy experience includes the representation of creditors and purchasers in connection with the negotiation and documentation of debtor-in-possession financing orders, cash collateral orders, sale orders and plans of reorganization. She also has extensive experience structuring, drafting, negotiating and enforcing intercreditor agreements, subordination agreements and agreements among lenders in multi-lien and unitranche arrangements.

In addition, Kim has experience representing financial institutions in structuring, negotiating and documenting debt finance transactions, including asset-based and cash-flow secured loan transactions, split collateral secured loan transactions, unitranche financing transactions, second lien loan transactions and mezzanine loan transactions.

Christopher M. Swartout has become a principal in the firm’s Commercial Finance Group. Swartout is a principal in the firm’s Commercial Finance Group. Swartout’s practice focuses on the representation of banks and non-bank financial institutions in structuring, negotiating, and documenting a broad range of commercial finance transactions, including acquisition and working capital financings, recapitalizations, refinancings and other complex financial transactions. His experience includes secured asset-based and cash-flow loan transactions, first-lien/second-lien, split-lien and unitranche structures, and mezzanine and hybrid lending products.

He frequently represents lenders in international financings involving multiple jurisdictions and has dealt with borrowers in numerous industries, including manufacturing, technology, software, business services, healthcare and agriculture business.

Emily E. Edsenga has become a principal in the firm’s Commercial Finance Group.

She represents lenders and financial institutions in documenting, negotiating and performing due diligence for asset-based and cash-flow commercial finance transactions. She also has experience representing corporate borrowers and private equity sponsors in connection with acquisition financings and other commercial finance transactions.

Goldberg Kohn would also like to welcome the following new attorneys to the firm: Danielle Johnson is an associate in the firm’s Intellectual Property Group. As a former trademark examining attorney at the U.S. Patent & Trademark Office, Johnson provides a unique perspective on trademark clearance, prosecution, enforcement, and litigation, including representing clients in federal court and before the Trademark Trial and Appeal Board.

She also assists clients with copyright and trade secrets matters and provides counseling on issues related to marketing and advertising. Johnson is admitted to practice in Illinois, and serves as Chair of the Women’s Bar Association of Illinois’ Intellectual Property Committee. She is a member of the International Trademark Association and the Intellectual Property Law Association of Chicago. She received her law degree from Indiana University in 2013, where she served as an editor of the Indiana Law Journal. Prior to her legal career, Johnson completed a Fulbright Scholarship in Spain. She received her B.A., summa cum laude, in English and Spanish from Hope College in 2009.

Hana Damore is an associate in the firm’s Commercial Finance Group. Damore is admitted to practice law in Illinois. She received her law degree from the University of Michigan Law School in 2016.

While in law school, Damore served on the Michigan Journal of International Law, and helped to start the school’s international summer internship program. She was awarded the FLAS scholarship in Vietnamese in 2015 and 2016. Damore received her

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B.A., magna cum laude, from Washington University in St. Louis in 2010.

Juan Arguello is an associate in the firm’s Litigation Group. Arguello is admitted to practice law in Illinois, the U.S. District Court for the Northern District of Illinois, and the U.S. District Court for the Eastern District of Wisconsin. Arguello received his law degree from Harvard University in 2015. He received his B.A. in philosophy, magna cum laude, in 2012 from DePaul University. Prior to joining Goldberg Kohn, Arguello worked at a Chicago non-profit organization where he provided removal defense to detained immigrants before the Chicago Immigration Court and the Board of Immigration Appeals. He also worked at a large international firm, where he represented clients in a range of complex matters, including commercial disputes, government regulation, and advised clients throughout the contract formation process. Prior to law school, Arguello served in the United States Army and the Illinois National Guard as an infantry non-commissioned officer. During his six years of service, he performed a variety of command, training, and administrative roles, including leading combat patrols in support of Operation Enduring Freedom.

Kara Ervin practices in the firm’s Commercial Finance Group. She represents financial institutions in documenting, negotiating and performing due diligence for asset-based and cash-flow commercial finance transactions. She has experience with a variety of transactions, including acquisition and working capital financings, senior secured transactions, mezzanine financing, split lien transactions, syndicated deals and cross-border transactions.

She also has experience representing corporate borrowers in connection with acquisition and working capital financings. Prior to joining Goldberg Kohn, Ervin served as a judicial clerk to the Honorable Marcus R. Salone of the Illinois Appellate Court and the Honorable Robert D. Rucker of the Indiana Supreme Court.

Ervin received her law degree from New York University School of Law. During law school, she was an extern with the Legal Action Center, where she developed guidance materials to assist juveniles with criminal histories in navigating various employment barriers. She also served as executive editor on the Journal of Legislation and Public Policy. Ervin graduated magna cum laude from Florida A&M University with a B.A. in business administration.

Karim Popatia is an associate in the firm’s Commercial Finance Group. He represents financial institutions in documenting, negotiating, and performing due diligence for asset-based and cash-flow commercial finance transactions.

He received his law degree from Northwestern University Pritzker School of Law in 2018. While attending law school, Popatia represented individual novice financial investors in cases of fraud and other related matters and also served as the managing editor of the Journal of International Law and Business from 2017-2018.

Maebetty Kirby is an associate in the firm’s Litigation Group. She is admitted to practice law in Illinois and is admitted to the U.S. District Court for the Northern District of Illinois. Prior to joining Goldberg Kohn, she worked for a Chicago law firm where she represented plaintiffs and defendants in general civil and commercial litigation matters.

Kirby received her law degree, cum laude, from Washington University School of Law in St. Louis. While in law school, Kirby was awarded the John W. Calhoun Trial Practice Award after serving as Captain of the National Trial Team, where she was named national and regional champion of several trial competitions. She also served as an editor of the Washington University Journal of Law and Policy. Kirby received her B.A., summa cum laude, from Tulane University, where she was elected to the Phi Beta Kappa honor society, as well as the Wallace Peery Society, an honor reserved for the top 20 undergraduates in

Tulane University’s graduating class.

Ming Russell is an associate in the firm’s Commercial Finance Group. Russell concentrates her practice on the representation of banks and non-bank financial institutions in structuring, negotiating, and documenting commercial finance transactions, including first and second lien credit facilities, asset-based loans, acquisition and working capital financings, recapitalizations, refinancings, inter-creditor and subordination agreements, international multi-jurisdictional and multi-currency facilities, and other complex financial transactions. She also has experience representing corporate borrowers in a variety of financing transactions.

Russell is committed to serving her local and global communities through pro bono service with a focus on international human rights. She has worked on international human rights legal proposals for presentation to the Human Rights Committee of the United Nations in cooperation with The Heartland Alliance, Alma-TQ, and The Initiative for Equal Rights, performed international fieldwork in Malawi with The Governance and Justice Group, acted as Pro Bono Intern for DLA Piper France LLP during her study of international law at the Institut d’études politiques de Paris (Sciences Po), and served as pro bono counsel to the Susan G. Komen Foundation with respect to corporate matters, the United Nations Human Rights Office of the High Commissioner doing legal research with respect to immigration law in the United States, and the International Justice Mission in service of the mission to end human trafficking.

Patrick Cronin is an associate in the firm’s Commercial Finance Group. He represents financial institutions in documenting, negotiating and performing due diligence for asset-based and cash-flow commercial finance transactions. He also has experience representing buyers and sellers in mergers, acquisitions and leveraged buy-out transactions. Cronin has also

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worked on various pro bono matters with a focus on representing artists and arts institutions.

Prior to joining Goldberg Kohn, he was an associate at Kirkland & Ellis, where he represented private equity clients and their portfolio companies in merger and acquisition transactions.

Petar Radujkovich is an associate in the firm’s Commercial Finance Group.

He represents financial institutions in documenting, negotiating and performing due diligence for asset-based and cashflow commercial finance transactions.

Radujkovich received his law degree with honors from Emory University School of Law in 2016. He received his B.A. from Rhodes College in 2013.

Rebecca Michael is an associate in the firm’s Commercial Finance Group. Michael represents financial institutions in docu-

menting, negotiating, and performing due diligence for asset-based and cash-flow commercial finance transactions. Michael is admitted to practice law in Illinois. She received her law degree from the University of Michigan Law School in 2018. While attending law school, Michael was the president of Wolverine Street Law and an associate editor of the Michigan Business & Entrepreneurial Law Review from 2016-2017. Prior to attending law school, Michael worked for a legal and education focused startup company in Chicago, IL. She received her B.A. in political science from the University of Michigan in 2013.

Ruth Neuman is an associate in the firm’s Commercial Finance Group. Neuman represents banks and other financial institutions in structuring, documenting and negotiating a broad range of commercial finance transactions, including single lender

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and syndicated asset-based and cash-flow loans. Neuman is admitted to practice law in Illinois and Massachusetts. She received her law degree from Boston University School of Law in 2014, where she was the managing editor of the Boston University International Law Journal. While attending law school, Neuman also served as a judicial intern for the Honorable Patrick J. Duggan of the U.S. District Court for the Eastern District of Michigan. She received her B.A., with distinction, from the University of Michigan in 2009.

Sara Sager is an associate in the firm’s Commercial Finance Group. She represents a variety of financial institutions in connection with the structuring, documentation, negotiation and closing of commercial lending transactions. Her experience includes a wide range of both asset-based and cash-flow lending transactions, including senior, second lien and mezzanine financings; split-lien transactions; acquisition financings; working capital financings; and workouts and restructurings. In addition, she regularly works on cross-border lending transactions, primarily focusing on North America and Europe. Sager is admitted to practice law in Illinois. She received her law degree, With High Distinction, from the University Of Iowa College Of Law in 2005, where she was admitted to the Order of the Coif. While attending law school, Sager served as an editor on the Journal of Corporation Law. She received her B.A. in psychology from the University of Iowa in 2002.

Great Rock Capital: Tom Keefe has joined the firm as vice president of portfolio.

Keefe will be based in Westport, CT, and will be responsible for managing customer relationships and analyzing the performance of the firm’s growing portfolio.

“We are excited to have Tom join the team,” said Gerard Hanabergh, chief risk officer of Great Rock Capital. “His extensive experience and credit knowledge will be instrumental in supporting the continued

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growth initiatives of the Great Rock Capital platform.”

Keefe joins Great Rock Capital with over 18 years of risk management and lending experience. Prior to joining, Keefe spent over eight years at CIT Group where he served in various roles. Most recently, Keefe was a director in the portfolio group where he served as a team leader, overseeing a diverse portfolio of middle-market loans. Keefe earned his B.A. from Fairfield University and was a dual major in economics and international studies.

Hitachi Capital America Corp. has signed a definitive agreement to purchase the assets of Ohio-based Global Technology Finance, a supply chain financing provider to value added resellers (VARs) in the technology industry.

The decision to acquire Global Technology Finance’s business platform is supported by the firm’s strong expertise in technology reseller financing and their depth of relationships across the IT supply chain. “We are excited by the opportunity to add the highly experienced Global Technology Finance team to Hitachi,” said Mark Duncan, executive vice president and GM, Commercial Finance and Corporate Development. “We expect their platform to complement our strategy of delivering innovative financing solutions in the technology space. As a non-bank alternative finance company, we have the means to expand their solutions and offer enhanced certainty and flexibility.”

Paul Stemler, Global Technology Finance president, stated “Joining the Hitachi family of companies represents a significant opportunity for our company, our customers, and our employees. Adding Hitachi’s scale, industry expertise, and deep resources to our unique financing platform will allow us to broaden our supply chain financing solutions to include term loans, XaaS contract financing, and end-user financing.”

The transaction closed and funded

February 22, 2019. Stemler will remain president of the new entity, which will be named Hitachi Capital America Technology Finance. He will report to Chris Pagano, general manager of Hitachi Capital America’s Structured Finance business. Stemler will continue to be supported by COO/CFO Steve Weislogel, who oversees business operations in Ohio.

Global Technology Finance is a national finance company specializing in technology reseller finance and revenue cycle services. The company was established in 1998 and is headquartered in Columbus, OH. Since its inception, GTF has funded over $11 billion in transaction volume.

The Company provides a unique financing solution for technology integrators/ resellers which can support 100 percent of the reseller/integrator’s working capital needs. Global Technology Finance’s deep industry knowledge and extensive vendor relationships enables it to provide customized financing solutions and services to meet specific reseller/integrator needs.

Hitachi Capital America also announced Christopher Norrito has joined the organization as director, Structured Credit and Operations. He reports to Jim Giaimo, vice president and chief credit officer, Commercial Finance.

In his new role, Norrito is responsible for reviewing, underwriting, and processing new asset-based lending, enterprise value, and corporate finance transactions in the range of $250,000 to $25MM. He will also assist in formulating and strengthening credit procedures and implementing additional underwriting and portfolio management policies.

Norrito brings more than 30 years of financial expertise in credit and risk analysis, portfolio management, collateral/asset valuation, loan structuring, and documentation. He has strong experience in assetbased lending, DIP financing, workouts, syndications, and more. Prior to joining Hitachi Capital America, he held positions with increasing roles of responsibility at

Transamerica Business Capital Corporation and Keltic Financial Services. He most recently held positions at HVB Capital Credit and as credit leader at EverBank.

Hovde Group, a leading full-service investment bank and broker dealer that provides investment banking, capital markets, equity research, and sales and trading services focused on the financial services sector, announced that it has formed a new practice to provide financial strategy advisory services to regional and community banks. To head this new effort, the firm has hired industry veteran Ray Chandonnet, who joins Hovde following a distinguished 30-year career working extensively with banking clients in the areas of asset-liability management, corporate finance, fixed income sales, and FinTech.

Chandonnet, who holds degrees in computer science and finance, has been involved in the banking sector since 1986. He launched his career as a banking software designer and financial modeler for the Malden Trust Company in Massachusetts; he spent the next 20 years of his career working with banks as head of bank strategy for the Federal Home Loan Bank of Boston, First Union Capital Markets, Lehman Brothers, and JPMorgan, and more recently, as Partner and Chief Balance Sheet Strategist at Sandler O’Neill & Partners. For the past several years, Chandonnet has operated his own consulting firm, BankStrategies.net, providing consulting, training and business development services to banking regulators, investment banks/broker dealers, the FHLB system, and FinTech companies that are focused on depositories. Chandonnet also serves as a member of the board of directors of Kearny Bank and Kearny Financial Corp., a publicly-traded $6.5 billion banking company in New Jersey, where he chairs the board’s asset-liability management committee and serves on the Enterprise Risk management committee.

Chandonnet’s expertise in using accounting, regulatory and tax knowledge

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to develop new financial management strategies and successfully introduce them to the community and regional bank space has made him a household name in banking. His pioneering techniques around bank balance sheet optimization, wholesale funding restructuring, post-M&A balance sheet repositioning, and use of derivatives to reduce funding costs have been widely adopted across the industry. More recently, he has also built a reputation for understanding the importance of technological transformation in the banking system and has fostered collaboration between FinTech companies and banks to improve bank financial performance via reduced efficiency ratios and increased avenues for non-interest income.

At Hovde, Chandonnet will spearhead the build-out of the new financial strategy advisory practice, and work extensively with the firm’s clients on balance sheet, funding, liquidity, capital, portfolio and interest rate risk management strategy.

In addition, Chandonnet will work closely with Hovde’s senior management team to pursue other new opportunities for the firm, particularly in the area of FinTech, and its evolving relationship with the banking sector. Chandonnet and his team will be based in the New York metro area.

JPMorgan Chase & Co said it is combining its middle-market technology and emerging growth commercial banking teams to better position the bank to handle start-ups that rapidly grow to be big companies.

The technology and disruptive commerce industry group will be led by James Millar and Alton McDowell and will focus on promising start-ups that specialize in software, semiconductors, food, health and wellness, lifestyle and pet products.

JPMorgan, the largest U.S. bank by assets, will use this group to sell these small to mid-market companies everything from handling their treasury, payments, credit and financing, to mergers and acquisitions advice.

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KeyBank Business Capital: David Quon has joined the bank as a senior business development executive. He will be responsible for originating, structuring and growing the group’s asset-based lending portfolio for institutional and commercial clients. Quon is based in Chicago and will report to Paul Cronin, head of KeyBank Business Capital.

Quon brings more than 25 years of experience as a strategic advisor and financial capital partner for publicly traded and privately held middle-market businesses throughout the US and Canada.

Most recently, he was a managing director at White Oak Global, a multi-billion private credit investment asset management firm, responsible for originating and structuring new alternative direct lending middle-market financing and investment opportunities for the Chicago Midwest region and Canada.

Previously, Quon held various senior leadership roles, with Congress Financial Corp. (nka Wells Fargo Capital Finance), FirstMerit Business Credit (nka Huntington Bank), CIBC World Markets, Orchard First Source Capital, and DN Partners. He has completed more than 150 transactions with an aggregate value greater than $10 billion, serving as an advisor, lender, borrower and investor. Quon has extensive experience with mergers and acquisitions, restructurings and recapitalizations, as well as transactions related to growth, cross-border (US and Canada), specialty finance, capital markets and private equity.

Quon received his master of arts degree in economics from the University of Southern California and his bachelor of commerce in finance from the University of Saskatchewan in Canada. He is president of the Christopher Quon Foundation, as well as a member of the Association for Corporate Growth and Turnaround Management Association. He has previously served as a board of director for several private entities.

Monroe Capital LLC: Carey Davidson and Karina Stahl have been elected partners in the firm. With a long tenure in middle-

market investing, Davidson has played an instrumental role in expanding Monroe’s capital markets activities since joining the firm in 2015. She leads a group responsible for the firm’s buy side club originations, sell side syndications, lender relationship management, and marketing. She is also a member of the firm’s investment committee.

Since joining Monroe in 2013, Stahl has been integral to the growth of the firm’s finance and operations team. She oversees financial reporting, accounting, tax, direct loan operations, treasury management, valuation and regulatory financial compliance. Stahl also assists with new fund product development and investor reporting.

Moritt Hock & Hamroff: Robert M. Finkel was appointed as the partner-in-charge of the firm’s New York City office. Finkel, who joined Moritt Hock & Hamroff’s NYC office in 2017 and serves as co-chair of the firm’s Tax Practice Group, said: “The energetic team of accomplished and talented attorneys in our New York City office have done a wonderful job developing our City-based practice over the past several years. I look forward to working with them as we continue to expand our core practices.”

“With his impressive range of legal experience and dynamic leadership skills, Bob is an excellent choice to lead our firm’s ongoing development in New York City,” said Marc Hamroff, managing partner at Moritt Hock & Hamroff. “Bob is a highly accomplished lawyer who has served in several leadership capacities both within and outside our firm. I am confident that his tenure will be results-driven and filled with success.”

Finkel concentrates his practice in all aspects of complex tax law. The scope of his practice is diversified and includes tax planning with respect to real estate, corporate and securities transactions, in addition to supporting the firm’s litigation, intellectual property and trusts and estates

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planning groups. In addition, Finkel advises Israel-based high tech companies on US operations and financings, and advises not-for-profit and charitable organizations on a variety of issues. He also represents clients in audits and other controversies before the Internal Revenue Service, state and other taxing authorities, as well as in all phases of the litigation before the United States Tax Court. Finkel has been an adjunct professor of taxation at Boston University School of Law’s Graduate Tax Program since 1995. Finkel earned his LL.M. in Taxation and his Juris Doctorate from the law school. Prior to private practice, Finkel was a senior trial attorney with the Office of the Chief Counsel of the Internal Revenue Service.

North Mill Capital: Kevin Pearce has become a part of the North Mill team as senior vice president. Pearce resides in Chandler, AZ, and will be responsible for business development.

Pearce brings over 30 years of experience in asset-based lending, commercial finance and specialty lending to North Mill Capital. He has covered the Southwest region for over a decade. He is a member of the Association for Corporate Growth (ACG), Commercial Finance Association (CFA) and the Turnaround Management Association (TMA).

Dan Tortoriello, EVP of North Mill Capital, stated, “We believe Kevin will be a great addition and look forward to working with him to develop a region which we feel has much potential.”

Pearce can be reached at: 6381 W. Linda Lane; Chandler, AZ 85226; (602) 751-4410; KPearce@NorthMillCapital.com.

Santander Bank: Robert Cerminaro has been promoted to Commercial Banking market director for New England. He is responsible for managing and growing the Bank’s commercial business and delivering Santander’s distinct value proposition and international expertise to clients and

prospects throughout Connecticut, Rhode Island, Massachusetts, New Hampshire, Maine and Vermont. He reports to David Harnisch, Santander Bank’s head of Commercial Banking.

Cerminaro joined Santander in 2018 as the regional executive of Commercial Banking for Connecticut. He has more than 25 years of commercial, corporate and investment banking experience. Before joining Santander, Cerminaro served as senior vice president and market executive at KeyBank where he led the overall corporate and commercial banking business effort for the Tri-State Region. Cerminaro, who began his career at Bank of America Merrill Lynch, brings extensive global banking experience and coverage expertise, including assignments at the regional, national and international levels.

“Robert is a proven leader and his extensive experience in both the large corporate and middle-market sectors will serve us well as his responsibilities expand to assist clients throughout New England,” said Harnisch. “We continue to make significant investments to accelerate our commercial business, promote and recruit top talent, and provide our clients with the knowledge and expertise to help them build and grow their companies.”

Cerminaro holds a B.A. in economics from the University of Pittsburgh, a certificate in finance from the London School of Economics and a master degree from St. John’s University.

Siena Capital Finance LLC: Business Development Corporation of America (BDCA), an affiliate of Benefit Street Partners L.L.C., announced the acquisition of a controlling interest in Siena Capital Finance LLC (Siena) from Solaia Capital Advisors LLC (Solaia).

Siena is a leader in the asset-based lending (ABL) business, and offers asset- based loans to middle-market businesses across the United States. Siena was founded in 2012 by an ABL team backed by Solaia.

The team consisted of professionals from

Burdale Capital Finance, a wholly owned ABL subsidiary of Bank of Ireland. Since it was established, Siena has underwritten more than 100 transactions totaling over $1 billion in total credit facilities. Siena has an experienced team of 27 professionals, located in Connecticut, New York, Los Angeles, and Chicago. Siena will operate independently as a portfolio company of BDCA. “We look forward to the next stage in our firm’s growth and to collaborating with BDCA to continue providing critical ABL solutions to our clients,” said Siena CEO David Grende. “BDCA’s disciplined underwriting and attractive capital base make them the ideal partner for Siena.”

“Siena represents a compelling investment opportunity for BDCA. We are excited to partner with David Grende and Siena’s seasoned management team,” noted BDCA CEO Richard Byrne. “Siena will complement our core private debt business and will broaden the suite of financing solutions that we can provide to clients.”

Affiliates of Solaia will retain a minority ownership interest in Siena. In addition, Solaia and BDCA intend to collaborate on future projects together. Solaia CEO Michael Carrazza commented, “We’ve fulfilled our role in supporting the development of Siena into a highly regarded and national ABL lender. Siena represents one of the top ABL lenders in the industry, and as part of BDCA, Siena is poised for its next phase of growth.”

Dechert LLP provided legal counsel to BDCA. Blank Rome LLP provided legal counsel and Hovde Group served as financial advisor to Siena.

BDCA is a non-traded business development company with a $2.5 billion investment portfolio, which primarily consists of loans to middle-market companies, as of September 30, 2018. BDCA operates under the Investment Company Act of 1940. BDCA is managed by its investment adviser, BDCA Adviser, LLC, an affiliate of Benefit Street Partners

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L.L.C. www.bdcofamerica.com Benefit Street Partners L.L.C. is a leading credit-focused alternative asset management firm with approximately $26 billion in assets under management. BSP manages assets across a broad range of complementary credit strategies, including private/ opportunistic debt, structured credit, high yield, special situations, long-short liquid credit and commercial real estate debt.

Based in New York, the BSP platform was established in 2008. BSP is a wholly owned subsidiary of Franklin Resources, Inc. www. benefitstreetpartners.com Siena is an independent commercial finance company offering asset based loans typically between $3-and $30-million to small and middle-market businesses across the United States. Siena offers a broad set of ABL solutions to its borrowers, including: working capital loans, leveraged and management buyout solutions, turnaround and restructuring solutions, growth financing, DIP financing, exit financing, seasonal or cyclical requirements, and dividend recapitalization solutions.

Siena was founded in 2012, and is headquartered in Stamford, Connecticut. www. sienalending.com Solaia Capital is an execution-based investment management firm that invests in middle-market companies to create longterm value. Capital resources, combined with value-enhancing expertise, are used to complement experienced management teams in the execution of business plans, operational improvement strategies, growth initiatives, industry consolidation and select turnaround and recapitalization plans. www.solaiacapital.com.

Siena Lending Group LLC: Larry Swinney has joined the firm as director of Southeast Originations in Atlanta, GA. In his new role, Swinney will be responsible for originating, structuring, and funding asset-based financing solutions with commitment amounts up to $30 million for middlemarket businesses in the southeastern

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United States.

Swinney brings over 30 years of experience to Siena, including commercial credit and business development experience in the asset-based lending industry. Throughout his career, Larry has covered the southeastern region of the United States as a business development officer, most recently as senior vice president at Presidential Financial Corporation. Prior to that, he held various business development positions at Huntington National Bank and Wells Fargo Capital Finance.

Swinney earned a bachelor of business administration degree with a concentration in management from Georgia State University. He is a past board member of both the Alabama and Atlanta chapters of the Turnaround Management Association and an active member of the Association for Corporate Growth.

Scott Elliotto, director of Siena, said, “Larry is an outstanding addition to our team and we are very excited to have his experience and knowledge as we continue our growth and expand our business in the southeast regional market.”

Swinney can be reached at (678) 8500787 or lswinney@sienalending.com.

Signature Bank announced the appointment of two professionals to new business origination roles and the promotion of several senior officers within its specialty equipment finance subsidiary, Signature Financial LLC. With this initiative, Signature Financial solidifies and strengthens its team of veteran finance professionals to better serve its growing national specialty finance business and clients.

Keith Connors was appointed vice president, Capital Markets, creating additional capacity within Signature Financial’s Capital Markets team. In this role, Connors will contribute to the growth of Signature Financial’s Capital Markets business line and expanding new origination opportunities from current institutional account relationships. Connors, with eight years

of specialty financing experience from GE Company and GE Capital, most recently was assistant vice president, Originations & Commercial Operations at GE Capital. He established its Industrial Finance segment, a finance organization focused on delivering incremental equipment and services revenue for GE Company’s Industrial businesses.

Nick Cremonese was named account officer – National Third-Party Intermediaries, a newly created position in which he will manage existing third-party intermediary relationships. Prior to joining Signature Financial, Cremonese was vice president in the Global Liquidity Program at Credit Suisse. In this capacity, he managed a team of business analysts and was product lead for unsecured and wholesale funding, cash products as well as loans and deposits products globally. During his 11-year tenure at Credit Suisse, Cremonese also served as project manager for key investment bank stakeholders across Treasury, Liquidity and Front Office teams. In addition, he worked on the Fixed Income Treasury Trading Desk and earlier, in product control in equity capital markets.

Signature Financial also announced that six professionals were promoted into new roles. Robert (Bobby) Campbell was promoted to director - Capital Markets.

Campbell will continue to focus on driving portfolio growth and leading Signature Financial’s Capital Markets Buy Desk, Marine Finance Product as well as a Lender Finance Origination initiative. An 18-year finance veteran, Campbell joined Signature Financial in 2012 as account officer before being promoted to vice president, and has contributed significantly to both Capital Markets Buy and Sell desk activity since joining the company.

Michael Ash originally joined Signature Financial in 2013 as capital markets director and is now being promoted to group director, regional originations and syndications. Ash will be responsible for direct regional business development, managing

DON’T MISS CFA’S IDEACON EXECUTIVE ROUNDTABLE EVENT JUNE 18, 2019 TO REGISTER VISIT WWW.CFA.COM

seven executive sales officers, located in Signature Bank’s metro-New York area footprint. He will also continue to head all syndication activity for Signature Financial, including equipment and franchise finance. Ash has spent nearly 30 years in the finance industry, most recently at U.S. Bank in equipment finance before joining Signature Financial.

Steven Robbins was promoted to the post of senior vice president, director of asset management, overseeing asset and portfolio management. Robbins joined Signature Financial in 2012 as director of Asset Management, from Capital One Equipment Leasing & Finance. Robbins’ equipment finance/leasing career spans 30-plus years, which includes stints at GE Capital & AT&T Capital. Robbins is a current member and past Chairman of the ELFA Equipment Management Committee.

Steve Ratner was appointed to the post of senior vice president, deputy chief risk officer. Since joining Signature Financial in 2016, Ratner has contributed in multiple senior roles in risk mitigation and underwriting. Ratner will help grow the specialty finance portfolio while appropriately managing Signature Financial’s risk profile, leading process automation and improving process efficiency as well as reviewing and editing credit policy. He also worked at Capital One in underwriting for 11 of the 40 years of his finance career.

Steve Jason was named group director of Vehicle Finance where he will be responsible for strategic planning, budgeting, business development and client servicing across the vehicle funding channel. Jason came to Signature Financial in 2012 as director of Vehicle Finance, focusing on building client relationships and originations. He too was previously at Capital One Bank, as director of business development and previously served on the Board of Directors of the National Auto Finance Association and the NY Chapter of the National Vehicle Leasing Association.

Michael Jones was appointed an execu-

tive sales manager for the National Direct Equipment business channel, and will be leading a sales team that serves the Gulf Coast states. Jones, based in Magnolia, Texas, joined Signature Financial in 2015 as executive sales officer from BancorpSouth Equipment Finance in Hattiesburg MS, where he was vice president, Finance Sales, overseeing direct origination sales.

Jones is equipped to assume this leadership sales role, based on his 22-year finance sales career.

TCF National Bank: TCF Middle Market, a division of TCF National Bank which is a subsidiary of TCF Financial Corporation (TCF) (NYSE: TCF), announced it hired Russell Nelsen as vice president. Nelsen brings eight years of commercial banking experience to TCF. Prior to joining TCF Middle Market, he was a vice president with Bank of America and prior to that a middle-market relationship manager with GE Capital. Nelsen has a BS in biology from University of Kansas in Lawrence, KS and a master of science from Champlain College in Burlington, VT. Utica Equipment Finance, a leading provider of equipment-based term loans and leases to companies throughout North America, recently announced two new hires to support their growth. Marc Parauka has joined as director of credit and underwriting, and Matt Worman has joined as business development officer covering the Midwestern and Central U.S. markets.

“Marc and Matt are extraordinary finance professionals and are an important part of our future,” said Ed Stolarski, cofounder and president of Utica Equipment Finance. “Both are well respected in the industry, have a strong track record of helping clients, and bring a vast network of industry connections. I look forward to their contribution as we build out our equipment finance platform.”

Marc Parauka is a seasoned credit pro-

fessional with strengths in financial analysis and managing customer relationships.

Before joining Utica Equipment Finance, he was vice president, business banking credit analyst at Wells Fargo. Previously, Parauka was responsible for underwriting complex equipment lease and loan transactions with EverBank and GE Capital with a focus on the marine, energy, oil and gas, and construction industries. Parauka earned his BS in business administration from Bryant University.

Matt Worman is responsible for the company’s sales efforts and overseeing business development activities. Dedicated to serving clients, Worman has an innate ability to understand a company’s specific needs and structure finance products to support clients’ growth efforts.

He brings 15 years’ experience in the equipment leasing industry. Before joining UEF, he held senior sales positions with Nations Equipment Finance, NewStar Financial, and Radius Bank, and started his career at First National Corporation. He earned his BS in business communications from Kent State University where he graduated cum laude.

White Oak Business Capital, Inc. (WOBC or White Oak), an affiliate of White Oak Global Advisors, LLC, has announced that Carol Apicella has joined the firm as senior vice president and senior business development officer. Apicella will be responsible for expanding the firm’s markets in the Northeast and Mid-Atlantic markets.

“With over 25 years in the commercial banking and government contractor finance industry vertical, Carol brings considerable knowledge and experience to White Oak,” said Kwesi Rogers, WOBC’s CEO and president. “I am confident that she will be a valuable asset to our team and grow our financing platform and capabilities in the Northeast and Mid-Atlantic region.”

Most recently, Apicella was a vice president with Triumph Business Capital, a wholly owned subsidiary of Triumph Ban-

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corp. Prior to that she held varying positions of responsibility in management and sales, including serving as vice president, managing director with Sterling National Bank; vice president with Wells Fargo Bank-Trade Capital Finance; Commercial Lender with PNC Bank; finance marketing manager with GE Capital Corporation; and Commercial Client Services representative with Exxon-Mobil Corporation.

“It has been rewarding to become a trusted business finance partner aiding in the resolution of turnaround and/ or growth success for my clients,” said Apicella. Apicella attended the University of Maryland and has earned certifications in SELCOM and Lean Six Sigma. She has held positions in the Commercial Finance Association (CFA) and been active in the Turnaround Management Association (TMA) Chesapeake Chapter, National Contract Management Association (NCMA) Woodlawn Chapter, National Veteran Small Business Coalition (NVSBC) and American Staffing Association (ASA).

In February 2018, White Oak Global Advisors’ institutional clients expanded its asset-based lending platform and capabilities to serve new government and factoring clients through the acquisition of Federal National Commercial Credit, Inc. (originally established in 1992 and renamed White Oak Business Capital, Inc. or WOBC following the acquisition). WOBC is an industry leader in providing financing solutions to companies that are doing work for the federal government by providing government receivable financing, commercial factoring and asset-based loans to small and middle-market companies.

WOBC’s expertise in meeting the rigorous requirements demanded by the federal government has translated into WOBC being recognized as a leader in the financing of Federal Government contractors.

The senior leadership team of WOBC comprises Kwesi Rogers and Kysha PierreLouis; together with their team, WOBC provides scale to White Oak’s asset-based

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lending platform to serve companies that require debt financing in the U.S. and globally that are currently under-served by traditional capital sources.

THE COMMERCIAL FINANCE ASSOCIATION IS PLEASED TO WELCOME THE FOLLOWING NEW MEMBERS. Moritt Hock & Hamroff LLP 400 Garden City Plaza Garden City, NY 11530 (516) 873-2000 1407 Broadway, 39th Floor New York, NY 10018 (212) 239-2000 Moritt Hock & Hamroff LLP is a full-service, AV- rated commercial firm with 19 areas of practice and 75-plus attorneys based in New York with offices on Long Island and in Manhattan. It has attained a national reputation over the past 40 years, representing members of the finance industry including asset-based lenders, finance and leasing companies, banks and independent companies of varying size and specialty. Some of the largest, most well-known companies in the industry rely on it for services that include drafting, negotiation and structuring of loan and lease agreements, creating and documenting specialized programs, transactions and portfolio sales, capital markets, formation, purchase and sale of finance companies, as well as workouts, litigation, creditors’ rights and bankruptcy representation.

as head of the Financial Services Group, he has spearheaded the representation of secured lenders, banks and lessors in a wide range of transactions. These include the closing of asset-based lending transactions, the formation of captive finance companies for new and developing finance companies together with the creation of the core loan and finance documentation package, the purchase and sale of loan and lease portfolios and preparation of funding and dealer finance transactions. Very often, Mr. Hamroff is thought of as outside general counsel to the companies and institutions he represents.

Mr. Hamroff serves as an adjunct professor of law at Hofstra University School of Law where he currently teaches Secured Transactions. He is also a past Board Chair of the American Heart Association and member of its local and regional board.

Marc L. Hamroff managing partner Marc L. Hamroff, who will represent Moritt Hock & Hamroff LLP on CFA’s Board of Directors, serves as the managing partner of Moritt Hock & Hamroff LLP. He also Chairs the firm’s Financial Services Practice which includes the Bankruptcy, Equipment Leasing, Secured Lending and Creditors’ Rights Groups. Mr. Hamroff provides special concentration in litigation, workout and bankruptcy matters nationwide. In his capacity

DON’T MISS CFA’S IDEACON EXECUTIVE ROUNDTABLE EVENT JUNE 18, 2019 TO REGISTER VISIT WWW.CFA.COM

CHAPTER SPOTLIGHT CFA Europe Chapter Hosts “World Trade Under Fire/How Brexit may Impact Your Asset-Based Borrower” The conference was held on April 3 at NautaDutilh in Amsterdam, The Netherlands, and explored the challenges of the economic landscape and its impact on international trade, together with how lenders can brace their asset-based borrowers for impact.

The event explored and debated the economic landscape, current market opportunities, the effect of Brexit on business and ABL specifically from lender, legal and advisor perspectives. Attendees enjoyed a networking lunch, followed by a keynote address by renowned Dutch economist and journalist, Mathijs Bouman.

Following lunch, Jeremy Harrison, president of CFA’s Europe Chapter, provided a Chapter update, covering rebranding and other initiatives, such as the Heads of Terms project and the threat of a change in the crown right of preference. Harrison then outlined the value proposition of the Chapter and its next events, including the CFA’s 12th Annual International Lending Conference in London on May 21. This annual event will be preceded by a Chapter event that same day, focusing on U.S. and UK markets with representatives from the UK Clearing Banks and Wells Fargo at Squire Patton Boggs.

A reception at NautaDutilh in Amsterdam, The Netherlands, was held for attendees following CFA’s Europe Chapter’s “World Trade Under Fire/How Brexit may Impact Your Asset-Based borrower” event on April 3.

On October 3, the Chapter will head to Paris for an event at ABN’s impressive new offices. There will be a keynote speaker and a panel together with a private art tour. The final event of the year will be a cocktail reception, held on November 20, co-partnered with the TMA at AON’s London headquarters.

Harrison introduced Bouman, a regular contributor to TV programs on RTL Z, a Dutch business and financial news television channel, and De Wereld Draait Door, an early-evening talk show on Dutch television. Bouman also writes columns for Het Financieele Dagblad and the business website Z24.nl. Bouman gave a riveting speech followed by a questionand- answer session. Key points from Bouman’s speech included: ◗ This is more than Brexit and Trump — the world is moving from multilateral trade agreements to bilateral arrangements, which is effecting growth. ◗ So far the UK economy is holding up, but UK PMI is at a higher level than Netherlands and Germany is concealing higher inventory levels, which in

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turn is due to stockpiling. Whatever happens (Brexit), KPIs will take some time to regularize.

Germany is facing the brunt of volatility and its industry powerhouse is more vulnerable to downturn as a result of movement away from global multilateralism.

There is little upside to this change and volatility, and it needs to be managed.

Netherlands has been and will probably always be a key trader and stopping-off point for trade supply chains with a high percentage of goods landing in Rotterdam for onward transit to the UK and Germany.

Companies have very global supply chains and Boeing was cited with constituent parts coming from global plants and a move to bilateral trade will adversely affect this.

Trump is a mercantilist which harps back to traditional economic trade systems of the 16th to 18th centuries where exports are maximised and imports minimised through tariffs; however, as is likely now, there will be retaliatory measures or tit-for-tat responses owing to the

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CFA’s Europe Chapter’s “World Trade Under Fire/How Brexit may Impact Your Asset-Based borrower” event explored the challenges of the economic landscape and its impact on international trade together with how lenders can brace their asset-based borrowers for impact.

reliance of almost every country on a mixture of exports and imports to satisfy its needs.

After a Q&A session, the panel joined the debate “How Brexit May Impact Your Asset Based Borrower - How Can a Lender Prepare?” Panelists consisted of Prof Walter de Wit, partner, Indirect Tax Global Trade, EY; Mike Roth, director, head product specialists, Large Corporates, Deutsche Bank AG; Shanan Dunstan, partner, Bryan Cave Leighton Paisner LLP; and Tom Kinmonth CFA, Senior Fixed Income Strategist, European Financials, ABN AMRO Bank N.V. Teun Struycken, partner, NautaDutilh and Jeremy Harrison, president, CFA Europe, served as moderators.

With continuing uncertainty around Brexit and its implications on cross-border deals, the panel will explore the key factors influencing ABL borrowers and how lenders can best prepare and brace their clients for a positive outcome, including: Some of the key points debated included: ◗ The Bank of England and ECB have ensured there will be no changes for

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banks wishing to lend into the UK until 2020 at least. The Bank of England is very accommodating to branches of EU banks in the UK. ECB forced UK banks to obtain licences for lending in EU. UK banks are well placed to lend.

There currently is no Brexit premium in the markets.

There aren’t any capital requirement changes in respect of ABL as a result of Brexit.

The U.S. is expecting to introduce a 25% tariff on cars in May, thus provoking a trade war with Europe?

UK HMRC has made arrangements that duty is deferred, i.e., not payable on entry, which could have had disastrous delaying consequences at ports and entry points.

The UK government has announced 80% duty-free imports, excluding food.

Stockpiling is a feature in the UK. An area potentially overlooked is the supply chains from UK into Ireland.

UK businesses must register for customs and taxes.

ABL financiers have been considering for some time the possible effect

of Brexit and engaging with their clients. Borrowers have set up sales offices in the UK and so far there is no change to eligibility criteria. ◗ The UK remains a good place to lend and while there has been some volatility in regard to M&A and capex projects, it will still be a key player in Europe whatever happens. ◗ From a legal perspective, there have been various initiatives and considerations with documentation changes to include effects of Brexit and enforcement of judgements. ◗ On shoring legislation - replicating EU regulations into UK law.

For further details on upcoming events and membership please visit: https://community.cfa.com/cfaeurope/

DON’T MISS CFA’S IDEACON EXECUTIVE ROUNDTABLE EVENT JUNE 18, 2019 TO REGISTER VISIT WWW.CFA.COM

CHAPTER NEWS Atlanta The Chapter held a YoPro! Networking Event on April 24 at New Realm Brewing in Atlanta. The Chapter will hold its 16th Annual Atlanta CFA Baseball Outing Annual Braves Outing to watch the Atlanta Braves vs. St. Louis Cardinals on May 16 with a pregame gathering at 5:30 p.m. at Terrapin Tap Room & Fox Bros. Bar-B-Q in Atlanta.

The Chapter also has the following events scheduled in 2019 (please check the website for updates): May 2019 - Annual Tennis Outing; June 2019 - Educational Event; June/July 2019 - CFA/TMA Summer Social; October 2019 - Annual Golf Outing; and December 2019 - CFA/TMA Joint Holiday Party.

For more information visit community.cfa.com/atalntachapter California The Chapter will host a summer party at The Standard-Rooftop on July 10; a Hot Topic Panel Discussion at the Luxe Summit Hotel in Los Angeles on October 2; the Annual Fall Golf Classic in October at Coyote Hills Golf Course (Date TBD); and a Women of CFCC event on October 23, (location TBD); a Chapter networking event at Center Club-Orange County on November 13 and a holiday party at Mr. C’s in Beverly Hills on December 11.

For more information visit community.cfa.com/californiachapter.

Charlotte The Chapter held an Economic Update by Nathaniel Karp, BBVA, Chief U.S. Economist, on April 4 at The Palm in Charlotte, NC. For more information visit community.cfa.com/charlottechapter.

Europe The Chapter will host a Pre-ILC Event in London on May 21 at Squire Patton Boggs.

This event will be held prior to the CFA’s 12th Annual International Lending Conference. Please note separate registration is required for the International Lending Conference. There will be networking, a keynote speaker, a panel and a closing networking reception at the Pre-ILC event.

For more information visit community.cfa.com/europechapter.

Florida The Chapter held a Women in Commercial Finance Evening Reception at the Kendra Scott store in Boca Raton, FL on April 9.

The Chapter will host Restaurant, Retail and Entrepreneurs - Concepts, Location, Leadership, Technology, Marketing and Scalability on May 14 at the Lauderdale Yacht Club in Ft. Lauderdale, FL. The CFA - TMA Networking Night with the Miami Marlins will be held on July 30 at The Clevelander at Marlins Park in Miami, FL. The Chapter will hold a happy hour at 5:30 prior to the start of the game at 7:10.

CFA South Florida will hold a Wine Tasting on August 13 at The Best Cellar in Wilton Manor.

For more information visit community.cfa.com/floridachapter.

Michigan The Chapter held a panel discussion, How Deals Get Done: M&A and Various Alternatives, in April 25 at Kerr Russell & Weber Plc in Detroit, MI on the different financing options available during a deal. The evening began at Kerr Russell’s office in Detroit and concluded at BESA across the street, for cocktails, appetizers, and more networking. Panelists included: Kevin Block, member, Kerr Russell; Chas Chandler, partner, Amherst Partners; Eric Lark, member, Kerr Russell; David Phillips, managing director head of originations, AloStar Capital Finance and moderator Sheldon Stone, partner, Amherst Partners.

The Chapter will hold a Euler Hermes 2019 Economic Update with RMA East Michigan Chapter on May 16, 2019.

For more information visit community.cfa.com/michiganchapter Midwest The Chapter’s Spring Educational Event was held April 11 at The University Club, Front Grill, in Chicago, IL. The event featured a panel on “A Chicago Retail Success Story, The RoomPlace”. Paul Adams, CEO, of The RoomPlace, offered a thought-provoking and entertaining “fireside chat.” Adams presented his, and the RoomPlace’s, remarkable story of success starting in 2012 when he was entrusted with a 102-year-old family-owned business. Topics included: A brief history of The RoomPlace, “The Berman family American dream”; 2004 and 2011 sale transactions, “The Comeback”, as well as various stories from Adams, such as the 2017 distribution center fire, digital initiatives and an omni channel approach.

The RoomPlace’s growth and further successes and other rarely afforded insights from behind the C-suite and boardroom doors were shared.

Adams is the chief executive officer of The RoomPlace, (TRP) where he oversees more than 600 employees and is responsible for creating the organizational strategy and vision to drive revenue, profitability and growth across TRP acquisitions. He was appointed in May 2012. In addition to his commitment to The RoomPlace, he continues to support the community through his work with Big Brothers Big Sisters of Lake County and Good Shepherd Manor.

His passion to help the homeless has led to his involvement with several homeless shelters and veteran organizations throughout the Chicagoland area.

Brent Kugman was the interviewer for the event and is a trusted advisor of The RoomPlace. Kugman acted as CRO and sole board manager prior to Adams’ appointment as CEO. He also acted as exclusive advisor to The RoomPlace relating to the 2011

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code sale, ensuring the process obtained the highest and best offer in a competitive sale process. Kugman is an accomplished financial and operational consultant with 30 years of experience leading stressed and distressed as well as robust businesses to improved performance and profitability.

His proficiencies range from corporate governance to development of corporate renewal strategies and stability initiatives to providing investment capital and sourcing transactions. His expertise includes C-Suite management, operations and operations management, transactional matters, and complex informal and formal financial restructurings and proceedings. A cocktail reception followed the presentation.

The Chapter’s inaugural CFA Cares Spring Gala will be held May 10 at Ivy Room in Chicago’s River North neighborhood.

This not-to-miss event will feature a threecourse meal, program, live band, live and silent auction, and much more. Formal wear and significant others are highly encouraged. Do not miss this unique opportunity to celebrate with industry peers, clients, and significant others all for an amazingly worthy cause. Proceeds from the evening will benefit Imerman Angels, a Chicago based non-profit providing free one-on-one cancer support.

The Brewers Outing will be held May 22 at the Miller Lite Deck in Miller Park in Milwaukee, WI. Attendees will watch the Cincinnati Reds take on the Milwaukee Brewers. The 25th Annual Cubs Outing will be held June 24 and the 30th Annual Gold Invitational will be held July 18 at Harborside Intentional Golf Center in Chicago, IL. For more information, visit community.cfa.com/midwestchapter.

Minnesota The Chapter held a Credit Market Update Panel on April 24 at the IDS Tower in Minneapolis. Benjamin Doran, senior vice president, Marquette, served as moderator.

The panel consisted of: Christopher Schaaf, senior vice president, US Bank; Mar-

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garet Murphy, region chief culture & credit officer, EVP, Region Old National Bank; Todd Williams, senior vice president, Fidelity and Matthew Howe, director of credit, Marquette Transportation and Commercial Finance-Immediately following the panel, a networking social was held downstairs at Mission American Kitchen.

The Chapter will host its Annual Golf/ Networking Event with TMA on July 25 at Crystal Lake Golf Course in Lakeville, MN and a Summer Wine Social with ACG on August 14 at the Minneapolis Club in Minneapolis, MN. For more information, visit community.cfa.com/minnesotachapter.

New England The Chapter held a speaker event with Boston native Paul Stewart at Greenberg Traurig in Boston, MA on April 18. Stewart discussed his new book Ya Wanna Go? Stewart is a former professional hockey player, National Hockey League Referee, discipline consultant to Russian’s top professional league and recent inductee to the United States Hockey Hall of Fame.

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

New Jersey The Chapter’s Golf & Tennis Outing will be held May 28 at Essex County Country Club in West Orange, NJ. Essex County Country Club (ECCC), established in 1887, is New Jersey’s oldest country club and is the sixth oldest in the country.

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

New York The Chapter held its Annual Bowl-A-Thon at Frames Bowling Lounge in Port Authority in New York, NY on May 2. Attendees enjoyed a fun night filled with dinner, drinks and bowling. The Chapter encouraged the participation of younger professionals to become active in its networking events. All proceeds benefitted the Chapter’s ongoing

education program, charitable contributions and support of fundraising activities, as well as future events.

For more information, visit community.cfa.com/newyorkchapter Ohio The Chapter will host a golf outing on June 6 at Quail Hollow Resort in Painesville, OH. The Chapter’s Annual CFA/TMA Joint Shuffleboard Event will be held August 29 at Forest City Shuffleboard in Cleveland, OH. The venue features indoor and outdoor shuffleboard courts, regulation shuffleboard tables and a patio.

For more information, visit: community.cfa.com/ohiochapter Philadelphia The Chapter’s Annual Golf Outing will be held May 13 at Philmont Country Club in Huntingdon Valley, PA. For more information, visit community.cfa.com/philadelphiachapter.

Southwest Save the dates for the Chapter’s 2019 events: Joint Summer Networker With WFE on July 11 at Community Beer Company in Dallas; Clay Shoot at the Elm Fork Shooting Range Dallas, TX on August 29; the Eighth Annual Energy Summit on September 17 at the Belo Pavilion in Dallas; the Holiday Party with TMA and TFF at Dallas Country Club, Dallas, TX on November 21; and PEGapalooza 2020 Dealmaker Wine and Whiskey Tasting held January 30, 2020 at 3015 at Trinity Groves in Dallas, TX. For more information, visit cfasw.org.

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

DON’T MISS CFA’S IDEACON EXECUTIVE ROUNDTABLE EVENT JUNE 18, 2019 TO REGISTER VISIT WWW.CFA.COM

CALENDAR May 8-9, 2019 CFA’s Independent Finance and Factoring Roundtable Holston House Nashville Nashville, TN May 10, 2019 CFA’s Midwest Chapter – CFA Cares Spring Gala Ivy Room Chicago, IL May 13, 2019 CFA’s Philadelphia Chapter 24th Annual Golf Outing Philmont Country Club Huntingdon Valley, PA May 14-16, 2019 CFA’s Spring Operations Bootcamp Winston & Strawn LLP Chicago, IL May 14, 2019 CFA’s Florida Chapter – Luncheon Panel Discussion Restaurant, Retail and Entrepreneurs Concepts, Location, Leadership, Technology, Marketing and Scalability Lauderdale Yacht Club Ft. Lauderdale, FL

May 16, 2019 CFA’s Michigan Chapter - Euler Hermes 2019 Economic Update with RMA East Michigan Chapter Location TBD Detroit, MI May 16, 2019 CFA’s Annual Braves Outing: Atlanta Braves vs. St. Louis Cardinals SunTrust Park Atlanta, GA May 21, 2019 CFA’s Europe Chapter – pre-ILC event Panel and Networking reception Squire Patton Boggs London, UK

May 21-23, 2019 CFA’s International Lending Conference 2019 DLA Piper London May 22, 2019 CFA Midwest Chapter- Brewers Outing Miller Lite Deck, Miller Park Milwaukee May 28, 2019 CFA’s New Jersey Chapter Golf & Tennis Outing Essex County Country Club West Orange, NJ June 4-6, 2019 CFA’s Summer Field Examiner School – Online Class 2:00-3:30 p.m. ET

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May 15, 2019 CFA’s Minnesota Chapter Brew and Learn Location TBD Finance with collateral, not credit.

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June 6, 2019 CFA’s Ohio Chapter Golf Outing Quail Hollow Resort Painesville, OH July 10, 2019 CFA’s California Chapter - Summer Party The Standard – Rooftop Los Angeles, CA July 11, 2019 Joint Summer Networker With WFE Community Beer Co. Dallas, TX June 11-12, 2019 CFA’s Summer ABL Basics Virtual Workshop 2:00-4:00 p.m. ET June 12, 2019 CFA’s Midwest Chapter - CFA WICF Wine Tasting Networking Event The Gage Chicago, IL June 18, 2019 CFA’s IdeaCon Executive Roundtable Event MetLife Building New York, NY June 19, 2019 CFA Webinar - Healthcare Finance 2:oo- 3:00 p.m.

June 19-20, 2019 CFA’s Advanced Legal Issues Workshop Location TBD New York, NY June 24, 2019 CFA Midwest 25th Annual Cubs Outing Fannie May Bleacher Sweet Wrigley Field Chicago, IL

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Freed Maxick ABL Services . . . . . . . . . . . . . . . . . . . . www.freedmaxick.com. . . . . . . . . . . . . . . . . . Page 44 Hilco Global . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.hilcoglobal.com. . . . . . . . . . . . . . . . . . . . BC RedRidge Diligence Services. . . . . . . . . . . . . . . . . . . www.redridgeds.com. . . . . . . . . . . . . . . . . . . . Page 19 William Stucky & Associates, Inc. . . . . . . . . . . . . . www.stuckynet.com. . . . . . . . . . . . . . . . . . . . . Page 1 Tiger Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.tigergroup.com. . . . . . . . . . . . . . . . . . . . IBC Utica Leaseco, LLC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.uticaleaseco.com. . . . . . . . . . . . . . . . . . Page 56

June 26, 2019 CFA and Gordon Brothers Webinar: The Life Cycle of an Appraisal 2:00 – 3:00 p.m.

July 9-25, 2019 CFA’s Summer Underwriting Fundamentals Virtual Classes 2:00-3:30 p.m. ET July 10, 2019 CFA Webinar- Tech Finance 2:00 – 3:00 p.m.

July 11, 2019 CFA’s New Jersey Chapter – 9th Annual Party Down The Shore The Proving Ground Highlands, NJ July 15-31, 2019 CFA’s Summer Operations Fundamentals Virtual Classes 2:00-3:30 p.m. ET July 18, 2019 CFA’s Midwest Chapter 30th Annual Golf Invitational Harborside Intentional Golf Center Chicago, IL July 25, 2019 CFA’s Minnesota Chapter - Annual Golf/ Networking Event with TMA Crystal Lake Golf Course Lakeville, MN

July 30, 2019 CFA’s Florida Chapter - CFA - TMA Networking Night with the Miami Marlins The Clevelander at Marlins Park Miami, FL August 13, 2019 CFA’s Florida Chapter - South Florida Wine Tasting The Best Cellar Wilton Manors, FL August 14, 2019 CFA’s Minnesota Chapter - Summer Wine Social with ACG Minneapolis Club Minneapolis, MN August 26-28, 2019 Summer Field Examiner School Location TBD August 28, 2019 CFA Webinar: Nuts and Bolts of Leveraged ESOP Finance 2:00 p.m. – 3:00 p.m.

August 28-29, 2019 CFA’s YoPro Leadership Summit J.P. Morgan Chicago, IL August 29, 2019 CFA’s Ohio Chapter - Annual CFA/TMA Joint Shuffleboard Event Forest City Shuffleboard

DON’T MISS CFA’S IDEACON EXECUTIVE ROUNDTABLE EVENT JUNE 18, 2019 TO REGISTER VISIT WWW.CFA.COM

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