TSL September 2019

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

THE SPECIALTY FINANCE ISSUE

ALSO IN THIS ISSUE

TSL INTERVIEW

Everything ythi yt ything hing hin ing g You Y u Wa Yo Wan W Wanted ant nte nt ted To Know About Cannabis…

But Were Afraid To Ask P12

MICHAEL D.

SHARKEY

CELEBRATING 40 YEARS IN ABL P34 CONSTRUCTION: CYCLES AND CONSIDERATIONS IN LENDING P18

ECOMMERCE AND THE OMNICHANNEL EQUATION P26

MIDDLE-MARKET COMPANIES FIND OPPORTUNITY IN FOOD & BEVERAGE DISRUPTION P22

LENDING TO BUSINESS AVIATION: DON’T WING IT P30

DEPARTMENTS

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

Volume 75, Issue 6

September 19

FEATURES

Everything you wanted to know about cannabis…but were afraid to ask

30

12 12 Everything You Wanted To Know About Cannabis…But Were Afraid To Ask Money-laundering statutes, restrictive banking regulations and the stigma surrounding the cannabis industry have caused established banks and wellknown independent secured lenders to stay clear, but the possibility of new regulations may ease their fears. By Myra Thomas

18 Construction: Cycles and Considerations in Lending A Conway MacKenzie executive provides an overview of the construction industry, including its unique cycles. Lending into the construction sector can prove to be a lucrative decision if extensive due diligence is conducted deep into a company’s financials. There are a wide range of factors and potential pitfalls to consider, understand and navigate properly. By Michael Beaver

Lending to Business Aviation: Don’t Wing It

26 Ecommerce and the Omnichannel Equation Tim Anderson of Hilco Valuation Services discusses Omnichannel appraisals, which are now more common than traditional brick-and-mortar appraisals.

By Tim Anderson

30 Lending to Business Aviation: Don’t Wing It As with any industry, lending to the business aviation sector comes with its own set of risks. Shelley Svoren of First Republic Bank gives readers the insider’s tips on this industry. By Shelley Svoren

22 Middle-Market Companies Find Opportunity in Food & Beverage Disruption Capital One executives discuss how innovation in the food & beverage sector are making it an industry lenders don’t want to ignore. By Colin Guheen and Paul Baisley

18

Construction: Cycles and Considerations in Lending

34 The TSL Interview: Michael D. Sharkey: Celebrating 40 Years in ABL Michael D. Sharkey is the president of Fifth Third Business Capital. He oversees a nationwide market with regional offices across the United States and Canada. Sharkey is past president and chairman of Secured Finance Network. He is also past president of the American Brain Tumor Association. Sharkey is a graduate of Rutgers University and J. L. Kellogg Graduate School of Management at Northwestern University. Here he discusses his long career, the outlook for the industry and Fifth Third’s acquisition of MB. By Michele Ocejo

DEPARTMENTS 6

Letter From SFNet’s CEO, Rich Gumbrecht, discusses the transition from Commercial Finance Association to SFNet and upcoming events.

8

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

29

TSL Profile Every business should know their “Why?’ For aVeriFact, LLC it’s as simple (and yet as complex) as obtaining the facts that their clients need to make informed decisions. By Eileen Wubbe

37

TSL Profile Vcheck Global, formally CBI Intelligence, is a deep-dive investigation firm that has been in business for over 19 years. Since inception, and continuing through its branding and restructuring in 2013, today the company services over 500 banks, private equity, venture capital, and law firms. Over just the past three years, Vcheck Global has grown over 700%. By Eileen Wubbe

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The SFNet Brief 38 48 50

52

Among SFNet Members SFNet Chapter News SFNet Chapter Spotlight

Advertisers Index

STAFF & OFFICES Michele Ocejo Editor-in-Chief and SFNet 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@sfnet.com Website: www.sfnet.com

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

The Secured Finance Network 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 asset-based financial services industry (ISSN 0888-255X), 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, SFNet members are complimentary, by Secured Finance Network, 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 Secured Finance Network, 370 Seventh Avenue, New York, NY 10001.

letter from

u

THOUGHTS FROM SFNET AND TSL STAFF

sually life slows down just a bit in the summer, but not this year. We’ve been busy transforming the Commercial Finance Association into Secured Finance Network (SFNet), an essential community for organizations and professionals who deliver secured finance to businesses.

Our team spent more than a year assessing members’ needs, repositioning our value proposition to align with the priorities of our diverse network, and creating a visual system that represents the image we want to convey. More than a cosmetic makeover, the decision to re-envision our name, brand strategy, look & feel and messaging reflects our board’s objective to build a community that better connects our members, increases engagement and delivers more tangible value than ever before.

A big part of this transition is our recently launched website - SFNet.com.

Our complementary Foundation is now Secured Finance Foundation and its web address is SFFound.org. We invite you to check out our updated web presence where you will find targeted content, intuitive navigation and a user-friendly responsive design.

We’ve also been hard at work planning the SFNet 75th Anniversary Annual Convention to be held in New York City,

November 13-15. We have a fantastic lineup of thought leaders whose insights will help you see around corners and make the best decisions for your business.

From leading private debt and equity players and supply chain experts to M&A advisors, ground-breaking economists and the best minds in the legal community, industry authorities will shed light on the issues affecting your business now and in the future. We’ll provide the latest data and forecasts dimensioning the secured finance market and examining its interrelationships. Whether you are an ABL lender, factor, advisor, intermediary or other, there is something for everyone in our Network. Please visit www.sfnet.com for more details and to register.

We have one more big change coming this year: The Secured Lender will be undergoing a redesign in November to better serve you, our readers, with a modern design and reimagined content, including new columns. But, you don’t have to wait until November for great content; this issue is brimming with it.

It’s on everyone’s mind, but still cloaked in uncertainties ...lending to the cannabis industry. Money-laundering statutes, restrictive banking regulations and the stigma surrounding the cannabis industry have caused established banks and well-known independent secured lenders to stay clear, but the possibility of new regulations may ease their fears. Turn to page 12 to learn Everything You Wanted to Know about Cannabis…But were Afraid to Ask by Myra Thomas.

On page 22, Colin Guheen and Paul Baisley of Capital One discuss how innovation in the food & beverage sector

is making it an industry lenders don’t want to ignore.

In Construction: Cycles and Considerations in Lending on page 18, Michael Beaver of Conway MacKenzie executive provides an overview of the construction industry, including its unique cycles.

According to Tim Anderson of Hilco Valuation Services, omnichannel appraisals are now more common than traditional brick-and-mortar appraisals.

These 360-degree retail valuations are modeled to include retail store locations, company-owned website assets and, where appropriate, traditional catalog and wholesale operations. Turn to page 26 to read Ecommerce and the Omnichannel Equation.

As with any industry, lending to the business aviation sector comes with its own set of risks. Shelley Svoren of First Republic Bank gives readers the insider’s tips on this industry in Lending to Business Aviation: Don’t Wing It on page 30.

Industry icon Michael D. Sharkey, past chairman of SFNet, and president of Fifth Third Business Capital, is celebrating 40 years in the industry. On page 34, he discusses his long career, the outlook for the industry and Fifth Third’s acquisition of MB. Thank you for everything you do to make SFNet a vital and thriving community. I look forward to hearing your feedback on both the rebranding and the TSL redesign.

“A big part of this transition is our recently launched website - SFNet.com. Our complementary Foundation is now Secured Finance Foundation and its web address is SFFound.org. We invite you to check out our updated web presence where you will find targeted content, intuitive navigation and a userfriendly responsive design.”

6

DON’T MISS SFNET’S 75TH ANNUAL CONVENTION NOVEMBER 13-15, 2019 TO REGISTER VISIT WWW.SFNET.COM

Warm regards, Richard D. Gumbrecht SFNet CEO

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THE INDUSTRY IN BRIEF

8

Bibby Financial Services (BFS) Appoints David Ciccolo as CEO for North America Global financier Bibby Financial Services (BFS) has named David Ciccolo as its new president and chief executive officer for North America. Ciccolo takes over from Ian Watson who has served as president and CEO since March of 2016.

Ciccolo said: “BFS is a strong and diverse company, supporting the aspirations of more than 10,900 businesses worldwide through our financial solutions.

“It has in its DNA an innate understanding of the needs of small businesses and there is a great opportunity to leverage our outstanding commitment to clients and the experience gained from our 200+ year history to help scale and deliver on this potential.”

Ciccolo, who has more than 30 years of experience in commercial banking, factoring and asset-based lending, joined BFS as managing director for the U.S. in January 2019.

He previously held executive-level positions at Wells Fargo Capital Finance in Denver, CO, most recently as the executive vice president/national sales manager of Commercial Services.

Prior to this, he held the title of executive vice president/national manager of accounts receivable and purchase order financing.

David Postings, global chief executive, BFS said: “At our core, we are a relationship- based financier and this means we get to know our clients’ businesses so that we can tailor an approach that fits them now and in the future. With David’s track record and experience, I’m confident that we can continue to further grow our support for North American businesses.”

Blank Rome Expands to Chicago with Addition of Four-Partner Group Blank Rome LLP is pleased to announce that the Firm is expanding its national platform to Chicago, with the addition of a four-partner group. The Firm expects the new office will launch this week, upon the completion of certain regulatory requirements.

The Chicago office will be led by Kenneth J. Ottaviano. Prior to joining Blank Rome, Ottaviano served as a partner in the insolvency and restructuring group at Katten Muchin Rosenman LLP, where he recently served on Katten’s Board of Directors. Also joining from Katten in Chicago are Karin H. Berg, William J. Dorsey, and Paige Barr Tinkham. Ottaviano, Berg, and Barr Tinkham join as partners in the Firm’s Finance, Restructuring, and Bankruptcy group. Dorsey joins as a partner in Blank Rome’s Corporate Litigation group. They will also be members of the Financial Services Industry group, which has welcomed eight attorneys to date in 2019 and has more than 100 attorneys throughout the United States. Collectively, the group’s experience spans the financial services sector with Ottaviano, Berg, and Barr Tinkham focusing their practices on financing, insolvency, and restructuring transactions, and Dorsey focusing his practice on commercial finance litigation, real estate disputes, and contested merger and acquisition transactions.

“Ken, Karin, Will, and Paige are outstanding people and we are thrilled to have them join us as the founding partners of our new Chicago office,” said Grant S. Palmer, Blank Rome’s managing partner and CEO. “They are the epitome of Blank Rome lawyers—premier practitioners in their fields who work collaboratively in teams with a singular focus on clients’ needs. Providing truly exceptional client service is our top priority, and we are committed to expanding our depth, breadth, and capabilities across offices to continue to serve our clients at the highest levels.”

Since its founding in 1946, Blank Rome has grown through a number of significant acquisitions, combinations, and lateral hires. The Firm has been particularly successful in opening new offices through the hiring of entrepreneurial-minded lateral groups, and effectively integrating the attorneys and professionals to allow for ongoing growth. In the last decade alone, the Firm opened its Los Angeles office in 2009 with the addition of five laterals and has grown to nearly 60 lawyers; in 2011, the Firm opened its Houston office with five lawyers from Abrams Scott & Bickley, L.L.P, and now has nearly 50 lawyers in Texas; and, most recently, the Firm opened in Pittsburgh in 2015 with five partners, which has grown to more than 20 lawyers.

Additionally, the Firm experienced significant growth in 2016 when it welcomed more than 100 attorneys previously with Dickstein Shapiro to its Washington, D.C., and New York offices.

“With strong roots in Chicago and an exceptional national reputation, Ken, Karin, Will, and Paige are the perfect team to anchor our entrance into the market,” stated Lawrence F. Flick, Chair of Blank Rome’s Financial Services Industry group.

“Blank Rome has a number of clients who are based in, or do business in Chicago, so having an established presence in the city with a stellar group of attorneys will help us provide enhanced service to our clients.

In addition, the team’s significant experience in financing and restructuring in the healthcare industry will further expand our strong healthcare finance capabilities.”

“Blank Rome has a proven track record of opening new offices across the United States through the hiring of lateral groups, and we are very excited to join that legacy,” said Ken. “In talking with Grant, Larry, and other partners from the Firm’s offices and practices, we were energized by Blank Rome’s desire to open a Chicago office and its clear vision and commitment to growing in the market. We were also impressed by the Firm’s strong culture of collabora-

DON’T MISS SFNET’S 75TH ANNUAL CONVENTION NOVEMBER 13-15, 2019 TO REGISTER VISIT WWW.SFNET.COM

tor matters, including asset-based and cash-flow transactions, subordinated and second-lien debt, equity classes and rights, intercreditor agreements, and participation arrangements. She counsels clients in connection with prejudgment remedies, Uniform Commercial Code sales and foreclosure proceedings, lender liability actions, and adversary and other bankruptcy proceedings, and has successfully defended major fraudulent transfer and preferential transfer actions. Additionally, Berg advises clients in all aspects of bankruptcy proceedings, assignments for the benefit of creditors, federal and state court receivership actions, and other insolvency proceedings.

William J. Dorsey, Corporate Litigation group –Dorsey’s practice focuses on highstakes commercial disputes, including creditor’s rights, real estate, and mergers and acquisitions. He represents lenders in cases involving intercreditor disputes, breach of credit agreements, guaranty enforcement, lender liability claims, and lien priority fights. He also represents commercial lenders in bankruptcy litigation matters, including cash collateral disputes, preference and fraudulent transfer actions, claim objections, plan confirmation, and lift stay motions. Dorsey has handled foreclosures of industrial, retail, hotel, condominium, and condo-hotel projects across the country, including coordination of multi-state foreclosures. Additionally, Dorsey negotiates and documents forbearance agreements and deeds, litigates construction defect and mechanics lien claims, and prosecutes and defends complex commercial lease disputes, as well as served as a court-appointed attorney to bankruptcy examiners. Dorsey also represents buyers, sellers, and lenders in contested M&A transactions and frequently provides transaction-related advice.

Paige Barr Tinkham, Finance, Restructuring, and Bankruptcy group – Barr Tinkham concentrates her practice in the areas of insolvency and corporate

restructuring. She represents secured and unsecured creditors, purchasers, investors, trustees, lessors, debtors, and other constituents in federal and state court proceedings as well as out-of-court workout scenarios. She also devotes time to pro bono matters, including serving as board president of Ascend Justice, a nonprofit serving domestic violence survivors seeking legal services related to orders of protection, immigration, family law, housing, and employment, as well as individuals who are being investigated or are appealing a finding of child neglect or child abuse.

INDUSTRY NEWS

tion, and innovative approach to client service. Joining Blank Rome presented the perfect trifecta for our group—continue to service clients on an expanded, national platform; facilitate growth in Chicago; and contribute to innovation in our field. We are thrilled to be a part of the team.”

Blank Rome’s Chicago office will be located at 10 South Riverside Plaza, Suite 875, Chicago, IL 60606, while the Firm identifies a permanent location.

Ottaviano Finance, Restructuring, and Bankruptcy group is a seasoned distressed transactions attorney, representing traditional and nontraditional financing sources in complex insolvency and restructuring matters. Ottaviano has noteworthy experience in major corporate bankruptcies, out-of-court workouts and restructurings, local and multijurisdictional assignments for the benefit of creditors, federal or state court receivership actions, judicial and non-judicial foreclosures, Uniform Commercial Code sales, and various debtor-creditor litigation matters. Ottaviano also represents lessors, indenture trustees, bondholders, borrowers, guarantors, debtors in possession, distressed asset and debt purchasers, assignees, trustees, receivers, examiners, special servicers, and various creditor classes. His clients span a variety of industries, including healthcare, automotive, construction, distribution, energy, financial institutions, franchising, hospitality, manufacturing, media, retail landlord, and technology.

Berg, Finance, Restructuring, and Bankruptcy group – For more than 15 years, Berg has focused her practice in the areas of insolvency, bankruptcy, complex loan workouts and restructurings, and secured and unsecured financing. Berg represents secured lenders in all stages of financing from structuring, negotiating, and drafting commercial credit and collateral agreements to negotiating and documenting workouts, restructurings, and reorganizations. Berg also provides counsel in a wide variety of debtor/credi-

BMO Harris Bank Hires Michael Ganann as Managing Director, Retail Finance, Asset-Based Lending Group BMO Harris Bank announced that it has hired Michael Ganann as managing director, retail originations, asset-based lending. In this role, he will lead the coverage efforts in calling nationwide on BMO clients and prospects in the retail industry.

“Our asset-based lending team has been experiencing exceptionally strong growth, and we see retail finance as an opportunity for even further growth,” said Mike Scolaro, head, Asset-Based Lending, BMO Harris Bank.

“Mike Ganann is very well known in the retail finance sector, and he will bring tremendous experience and industry knowledge to our customers, and to our collective team.”

Ganann, who earned a BBA in finance from Baylor University and an MBA from Boston College, has over 20 years of experience, including 15 years in the Retail Finance ABL industry, and several years as a Technology Finance cash flow lender. Ganann joins BMO after more than seven years in a lead-

THE SECURED LENDER SEPTEMBER 2019 9

collateral INDUSTRY NEWS

THE INDUSTRY IN BRIEF

ership role with Citizens Bank’s Retail Finance Group, where he helped grow the client base significantly. His prior experience includes roles with Wells Fargo Capital Finance and Bank of America Retail Finance, and he began his career in retail asset disposition and inventory appraisal work in the Boston area.

BMO is one of the largest providers of asset-based lending in the industry. With over 65 experienced ABL professionals located throughout the United States and Canada, it partners with advisors, financial sponsors and companies, helping them to originate, structure and syndicate ABL transactions. BMO Harris Bank provides a broad range of personal banking products and solutions through nearly 600 branches and fee-free access to over 40,000 ATMs across the United States. BMO Harris Bank’s commercial banking team provides a combination of sector expertise, local knowledge and mid-market focus throughout the United States. For more information about BMO Harris Bank, visit the company fact sheet. Accounts are subject to approval. BMO Harris Bank N.A. Member FDIC. BMO Harris Bank is part of BMO Financial Group, a highly diversified financial services provider with total assets of CDN$807 billion (as of January 31, 2019), and more than 45,000 employees.

Gordon Brothers Names Michael Brandt Chief Operating Officer Gordon Brothers, the global advisory, restructuring, and investment firm, announced the appointment of Michael Brandt as chief operating officer. As COO, Brandt will lead Gordon Brothers’ finance, IT, investor relations, and facili-

10

ties functions and, together with the firm’s wider leadership team, drive strategic, financial, investment, operational, and technology success throughout the business. He has also been appointed to the Investment Committee.

“I am very excited to welcome Michael to our management team,” said Kenneth Frieze, Chief Executive Officer of Gordon Brothers. “Michael’s extensive experience at the executive level is a great fit for our firm.

His leadership will be essential as we continue to grow our global platform,” he added.

Brandt arrives at Gordon Brothers with a breadth of executive experience, most recently serving as CFO of Prudential’s International Insurance Holdings and Retirement Services businesses. Previously Brandt held the role of COO and Region Head at Babcock & Brown, an Australia-based private equity firm, leading Babcock’s real estate and infrastructure businesses in North and South America, and he has held numerous operating business CFO roles at GE Capital’s commercial finance and insurance businesses, managing teams in North America, Europe, and Asia.

“At Gordon Brothers I have a great opportunity to contribute to an engaging firm with extensive experience in markets domestically and abroad,” stated Brandt. “I am eager to begin working with this talented and dedicated team of professionals,” he added.

Brandt was a member of the Board of Directors of Bankwell Financial Group, where he served on the Audit and Asset/Liability Management Committees. He has also guest lectured at Duke University’s Fuqua School of Business.

Brandt earned a bachelor of science degree in accounting from Syracuse University’s Whitman School of Busi-

ness and a master of business administration degree in finance, management, and international business from New York University’s Stern School of Business. He also holds the certified public accountant designation.

Since 1903, Gordon Brothers (www. gordonbrothers.com) has helped lenders, operating executives, advisors, and investors move forward through change. The firm brings a powerful combination of expertise and capital to clients, developing customized solutions on an integrated or standalone basis across four service areas: valuations, dispositions, operations, and investments. Whether to fuel growth or facilitate strategic consolidation, Gordon Brothers partners with companies in the retail, commercial, and industrial sectors to put assets to their highest and best use. Gordon Brothers conducts more than $70 billion worth of dispositions and appraisals annually. Gordon Brothers is headquartered in Boston, with 25 offices across five continents.

Ernest Fiorante Joins Hilco Global as Chief Financial Officer Jeffrey Hecktman, CEO of Hilco Global, announced that Ernest (Ernie) M. Fiorante has been appointed the new chief financial officer for the holding company. Fiorante will have responsibility for, and oversight of the entire finance operation and will be involved in all strategic and tactical matters as they relate to company investments; capital structure and allocations; risk management; cash management; and financial planning. He will be taking over this role from John Chen, who has been managing these duties in addition to his responsibilities as chief operating officer.

Fiorante is a terrific addition to

DON’T MISS SFNET’S 75TH ANNUAL CONVENTION NOVEMBER 13-15, 2019 TO REGISTER VISIT WWW.SFNET.COM

MUFG Hires Veteran Banker Deborah Bennett To Bolster Its Supply Chain Finance Group in the Americas Mitsubishi UFJ Financial Group (MUFG), Inc., one of the world’s leading financial institutions, announced it has hired Deborah Bennett as a managing director to join the bank’s Supply Chain Finance group in the Americas.

Based in New York, Bennett began on June 10, 2019. She reports to Maureen Sullivan, head of MUFG’s Supply Chain Finance business for the Americas. MUFG’s Supply Chain Finance group provides account receivables and payables solutions for both buyers and sellers to help meet their respective short-term working capital needs.

In her new role, Bennett will assume responsibility for engaging suppliers of MUFG’s clients and enrolling them in the bank’s supply chain finance program.

“Deborah’s experience in supplier acquisition and on-boarding will amplify MUFG’s commitment to buyers and suppliers alike, ensuring that each program we deliver is optimal for all stakeholders involved,” said Sullivan.

“These stakeholders also include treasurers, procurement staff and accounts-payable personnel on the buyers’ side.”

Before joining MUFG, Bennett spent nearly two decades at Citigroup in a number of related roles. Most recently, she oversaw supplier marketing and on-boarding as the firm’s Global Head of Working Capital Finance, overseeing a worldwide team of more than 50 professionals.

Bennett earned an M.B.A. from Columbia Business School and a B.Sc. in business from Indiana University’s International Business Program, which she graduated with honors.

She is a board member and treasurer

of Families with Children from China, a nonprofit organization supporting Chinese adoptees and their families and friends. Ms. Bennett is also director and secretary of the Service Program for Older People, whose mission is to enhance quality of life and foster independent living among the elderly in New York City.

Earlier this year, MUFG acquired Trade Payable Services (TPS), a leading supply-chain finance platform, from GE Capital to enhance the bank’s capabilities and broaden its coverage in the supply-chain finance business.

With the addition of TPS, MUFG is now able to deliver a robust suite of working capital solutions that address clients’ growing needs to optimize short-capital positions.

MUFG is the world’s fifth-largest financial institution by assets with approximately $2.7 trillion.

INDUSTRY NEWS

the organization’s executive management team and will be a key player in the company’s continued growth.

He has a depth of knowledge and experience in completing complicated transactions for both private and public companies that will prove to be invaluable to Hilco Global. His many years of building and managing highly effective teams will be a great asset and make him a tremendous leader of the holding company.

Fiorante brings an impressive depth and breadth of experience to the chief financial officer role, having served as a CFO and treasurer at several major companies in the Chicago area over the last 25+ years. Since 2016, he has served as chief financial officer at The Inland Real Estate Group LLC, a well-recognized and large commercial real estate and finance organization located in Oak Brook, IL. Prior to joining Inland, Fiorante spent over 20 years holding positions of increasing responsibility at Jones Lang Lasalle Inc., and ultimately serving as JLL’s CFO for the Americas — a region with over 10 different lines of business including leasing, property management, project development services and corporate outsourcing, generating approximately $2 billion in annual revenue.

Previously, Fiorante began his career at Price Waterhouse Coopers as an associate.

Fiorante is a native of the Chicago area where he resides with his wife and family. He holds an MBA from the Kellogg School at Northwestern University and a BS in accounting from DePaul University in Chicago. He is a Certified Public Accountant (CPA) and a member of many associations and industry groups.

THE SECURED LENDER SEPTEMBER 2019 11

Everything You Wanted To Know About Cannabis…

But Were Afraid To Ask.

By Myra Thomas

Money-laundering statutes, restrictive banking regulations and the stigma surrounding the cannabis industry have caused established banks and well-known independent secured lenders to stay clear, but the possibility of new regulations may ease their fears.

12

DON’T MISS SFNET’S 75TH ANNUAL CONVENTION NOVEMBER 13-15, 2019 TO REGISTER VISIT WWW.SFNET.COM

TSL PARTICIPANTS

Samantha Barbere

Debra Borchardt

Robert Cohen

Moritt Hock & Hamroff LLP

Green Market Report

Moritt Hock & Hamroff LLP

Dean Landis

Andrew Lines

Michael F. Schaff

Kind Growth Capital

Prestige Capital

Wilentz, Goldman & Spitzer

Aaron Smith National Cannabis Industry

I Association

t goes without saying that most businesses are dependent on outside financing. However, when it comes to states where marijuana is legal, it’s still a federal crime to finance the companies involved in this new and ever-growing industry. The Controlled Substance Act of 1970 listed cannabis as a “Schedule 1 substance”, making it subject to federal criminal prosecution due to its “potential for abuse.” It’s a category that also includes ecstasy, heroin and LSD. Money-laundering statutes, restrictive banking regulations and other federal laws apply to any lender that might look to fund a marijuana operation, recreational or medicinal in nature. Not surprisingly, established banks and well-known independent secured lenders have stayed away from the industry.

THE SECURED LENDER SEPTEMBER 2019 13

The stigma of the drug also presents a problem for asset-based lenders and factors that are generally conservative in nature.

The specter of federal law enforcement and remaining concerns about the drug’s use hasn’t stopped some funders from investing in and lending to U.S. marijuana dispensaries, growers, commercial properties for the industry, agricultural technology companies, consumption device firms, various types of equipment manufacturers, and many other cannabis-related businesses across

A

the country. They see the profit to be made, and many are taking the long view that recreational and medicinal marijuana will eventually be legal on the federal level. Viridian Capital Advisors reports that investment capital raised by cannabis companies across the globe more than quadrupled to $14 billion in 2018, driven by legalization in Canada and a growing number of states in the U.S. legalizing marijuana for medicinal and recreational use.

Financing Cannabis According to Robert Cohen, a partner at Moritt Hock & Hamroff LLP, the issue for many lenders is whether or not a lender’s conduct runs afoul of the money laundering laws. Although its applicability to a particular company may vary based upon the relevant laws and specific facts, money laundering is generally defined as a financial transaction with proceeds

14

from an unlawful activity with intent to promote the carrying on of the unlawful activity. Cohen further notes that established lenders are also concerned with the lingering stigma that may come with conducting business in the cannabis industry.

Nonetheless, there appears to be a small number of startup secured lenders and lessors in the space. With potential changes in cannabis laws being discussed nationwide, Cohen says he could eventually see secured lenders acting as “trailblazers” for participants in the industry. Thus far,

Crushing the Stigma Even with the threat of federal prosecution looming, the U.S. Treasury’s Financial Crimes Enforcement Network reported that 633 financial institutions (small banks and credit unions) were already doing business with marijuana-related businesses at the end of the 1st quarter of 2019 vs. 411 in the 1st quarter of 2018. The transactions relate to a variety of banking services. Industry insiders note the figures do not accurately represent the number of financial institutions servicing the industry

ccording to Robert Cohen, a partner at Moritt Hock & Hamroff LLP, the issue for many lenders is whether or not a lender’s conduct runs afoul of the money laundering laws. Although its applicability to a particular company may vary based upon the relevant laws and specific facts, money laundering is generally defined as a financial transaction with proceeds from an unlawful activity with intent to promote the carrying on of the unlawful activity.

he has seen most of the financing coming from private money. It also appears that a small number of statechartered banks and credit unions are starting to open their doors to cannabis-related companies.

Early-stage companies tend to find financing from friends and family, notes Andrew Lines, principal at CohnReznick. “Some often mortgage other businesses for start-up cash, application fees and soft cost,” he adds. As these businesses start to scale, they face more limited roads— usually via public filing in Canada, M&A with existing multi-state operators, sale-leasebacks with REITs, if they own their own real estate, or private equity. “There are very few asset-based lenders, but there is some private debt available,” he adds. But Lines does believe that the money in the adult-use market will eventually be too lucrative for lenders to pass up.

and that the figure, while consistently growing, is considerably lower.

Despite the dispute on the numbers, an increase in the number of financial institutions working with the industry does appear to indicate that some of the stigma once associated with marijuana use is slowly and surely going up in smoke.

Simply put, there is considerable money to be made in recreational and medical marijuana sales, as well as in producing hemp-based CBD products, and that is drawing smaller banks and investors into the space. According to “The State of Legal Cannabis Markets” report produced by Arcview Market Research and BDS Analytics, total legal cannabis spending in regulated dispensaries in the U.S. exceeded $9.8 billion in 2018 and is predicted to hit $30 billion in 2024. Arcview Group estimates that sales of CBD-based products in all 50 states will total $20 billion by 2024.

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The prospect of big money is also drawing large and well-known companies in other industries to buy into Canadian companies where marijuana is legal. For instance, Marlboro producer Altria recently bought into Cronos Group and Corona brewer Constellation Brands recently bought into Canopy Growth. Company listings and ETFs on the NYSE and NASDAQ continue to grow and draw attention to a number of cannabis businesses in the U.S. and Canada.

The tide is also turning regarding public sentiment, and many assume that federal laws will eventually need to follow suit.

The Current Landscape Today, Alaska, California, Colorado, Illinois, Maine, Massachusetts, Michigan, Nevada, Oregon, Vermont and Washington, in addition to the District of Columbia and several territories, have legalized recreational use.

More states are expected to make a similar move, given the revenue generated. Medicinal use is approved in 33 states and the District of Columbia. In total, 47 states have approved the use of cannabis in some form.

And, this past year, Canada followed Uruguay’s lead to become the second country to legalize recreational marijuana. Uruguay approved recreational use in 2013.

Bank of Montreal (BMO), one of the biggest banks in Canada, is taking a strong lead by financing cannabis companies. And, in the U.S., a growing number of major industry analysts have initiated coverage of all things cannabis-related. “When you start to see industry coverage, from the big banks and investment firms, which there are, it’s a signal,” says Debra Borchardt, co-founder and CEO of Green Market Report. “It’s their way of signaling that they’re going to be in the business when the time comes.

They’re getting people used to the idea.” It takes time, she notes, and this is the beginning of change.

There’s movement on other fronts

THE 411 ON MARIJUANA VS. HEMP

Cannabis has two primary species—hemp and marijuana. Both hemp and marijuana produce many of the same cannabinoid compounds, but in very different amounts and profiles. Marijuana contains tetrahydrocannabinol (“THC”), the intoxicating cannabinoid. Unlike marijuana, hemp does not produce large amounts of THC. Hemp, like marijuana, is capable of producing cannabidiol or CBD, which is used as a relatively new natural remedy as an isolated compound. It contains low amounts of THC. Hemp plants have also served a variety of purposes for many years—plant stems for fiber, seeds into protein, or leaves and flowers for oils and other products. Hemp fibers are made into paper, clothing, furnishing fabric, rope, and building materials.

According to Samantha Barbere, an attorney at Moritt Hock & Hamroff LLP, the Agriculture Improvement Act of 2018 (commonly known as the 2018 Farm Bill) legalized hemp at the federal level. Hemp, which for decades was classified as a Schedule I controlled substance under the Controlled Substance Act, is derived from the cannabis plant. As per the Farm Bill, hemp must contain a THC concentration of not more than 0.3 percent on a dry-weight basis. Cannabis plants containing more than 0.3 percent THC would be regarded as non-hemp cannabis (or marijuana) under federal law and would not be afforded legal protection under this new legislation. Pursuant to the Farm Bill, the U.S. Department of Agriculture (USDA) must construct a federally run regulatory program, under which hemp cultivators can operate and apply for licenses. The USDA aims to have regulations issued by the fall of 2019 in order to accommodate the 2020 planting season. Barbere notes that the applicability of the Farm Bill to any particular situation requires a more formal analysis.

as well. As of April, the U.S. Food and Drug Administration had approved several cannabis-based drugs, including a seizure medication called Epidiolex, containing a purified form of CBD. Marinol and Syndros were also approved for the treatment of cachexia related to weight loss in AIDS and cancer patients. Both drugs consist almost entirely of THC or the psychoactive part of cannabis.

Another FDA-approved drug, Cesamet, contains a synthetically produced THC-like component, and is used to ease nausea and vomiting after chemotherapy.

Despite the changes afoot, established banks and well-known secured lenders continue to note that the legal and reputational risk remains too great to finance cannabis companies. However, Aaron Smith, executive director of the National Cannabis

Industry Association (NCIA) says there are “innovators” stepping in to fill the gaps created by onerous federal policies and the continuing stigma they create for the cannabis industry in the financial sector. He adds, “There are boutique firms that specialize in offering services to the cannabis industry in underserved fields and areas that are popping up all the time, and many of them are earning an excellent reputation in the industry.” When there’s money to be made, entrepreneurs, whether funders or cannabis-related companies, are sure to capitalize on the market high.

How to Underwrite But given the current landscape, it can be difficult to determine which funder or cannabis company is the most reputable. The borrower needs to do homework on the lender, and

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that may not even be possible or feasible. Given the limited options for capital available to cannabis businesses, particularly smaller ones, Smith says that many of these companies are more than willing to take on “additional risk by working with relatively unknown lenders simply to survive and maintain viability.” The cost of capital is another industry concern.

Funders too are tasked with doing due diligence on cannabis companies in an uncharted and heavily regulated industry. The state of Colorado,

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the largest CBD makers, served as the test case, citing the company for “illegally selling unapproved products containing cannabidiol (CBD) online with unsubstantiated claims that the products treat cancer, Alzheimer’s disease, opioid withdrawal, pain and pet anxiety, among other conditions or diseases.” Topical CBD items aren’t yet on the FDA’s radar.

Federal regulation isn’t the only problem for the industry. Onerous state laws and regulations can make illegal marijuana more attractive and often cheaper. California, for

ank of Montreal (BMO), one of the biggest banks in Canada, is taking a strong lead by financing cannabis companies. And, in the U.S., a growing number of major industry analysts have initiated coverage of all things cannabis related. “When you start to see industry coverage, from the big banks and investment firms, which there are, it’s a signal,” says Debra Borchardt, co-founder and CEO of Green Market Report.

for example, has prohibited security interests in state-licensed entities, which might be where a cannabis company’s assets are held. Dean Landis of Kind Growth Capital (KGC), notes, “Kind Growth Capital typically lends to non-licensed entities in Colorado—a state where we have a large presence.” A good deal of the lending is in the form of real estaterelated loans rather than traditional ABL, he adds. Given the nature of cannabis businesses and the laws and regulations they face, Landis says that traditional asset-based lending transactions generally don’t work.

Simply put, there may not be sizable receivables that are paid for by check, ACH or wire. And Landis wryly notes that KGC and most lenders aren’t interested in lending against cannabis.

There are other concerns about the industry. The SEC has warned investors about the fraud associated with a hot sector like cannabis. And

Michael F. Schaff, shareholder at Wilentz, Goldman & Spitzer, notes that there are many other complicating forces at work when evaluating the sector. He notes, “Internal Revenue Code Section 280(E) presents an immense challenge to the cash flow of cannabis operations in the U.S due to cannabis’ status as a federallycontrolled substance. Unlike a typical business, which is permitted to deduct the business expenses associated with carrying on its business, cannabis businesses can only deduct its cost of goods sold and not its oth-

er business-related expenses.” And, cannabis-related businesses, even in states where cannabis is legal, are unable to file for federal bankruptcy protection. The federal and state legal and regulatory environment is fraught with challenges and many often conflict with one another, making it quite complicated for cannabis businesses to operate.

The Bloom Off the Proverbial Rose Another big stumbling block is ahead for one major segment of the industry—CBD companies. The FDA is looking into cannabidiol or CBD products to ensure the safety of consumers, as well as evaluate their therapeutic nature. Specifically, the FDA is warning CBD companies to stop making health claims. In July, the FDA put a hold on CBD food and beverage additives, choosing to conduct further investigation into ingestible products. Curaleaf Holdings, one of

one, didn’t experience the expected outcome for sales of recreational marijuana. In a press release, Tom Adams, managing director and principal analyst for BDS Analytics’ Industry Intelligence group, noted, “California’s rocky start on full legalization was unprecedented.” It became the first state to have legal spending on cannabis drop. BDS Analytics notes that the Golden State went from $3 billion in sales in 2017, when only medicinal marijuana was legal, to $2.5 billion in 2018—the year in which recreational marijuana became legal.

The Next Set of Hurdles With any nascent and hot industry, investor and stock market enthusiasm can sometimes be a bit irrational.

Borchardt worries that the cannabis industry might be experiencing a bubble similar to the dot.com era. “Many of these companies are borrowing tons of money, and expenses are

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higher than expected,” she notes. The summer saw a drop in stock prices of a number of major cannabis companies. “When there’s a new frontier, it’s hard to trust all of the numbers,” she notes. And with the wholesale price of cannabis dropping and sales likely to plateau at some point, the future is a bit uncertain.

But what does that mean for secured lenders down the road? Borchardt notes that industry consolidation is rampant, at least for the stable, established and more-profitable companies. That could mean fewer quality businesses to work with when

A

other funders get into the industry, she believes. “The companies that will need the financing at that point will be late to the party.” The better companies are finding less difficulty getting investors, and these cannabis businesses are busily establishing financial relationships.

The future of cannabis financing certainly remains a what-if situation.

At the moment, businesses in any way involved with marijuana production even find it difficult to put money into a bank, since it “raises the specter of reputational risk and prosecution for money laundering for the banks,” says Smith. When bank accounts are opened at established banks, they are quickly closed when the nature of the business is discovered. Many in the marijuana trade are forced to purchase massive safes for their retail locations or pay private security transportation and storage

firms to hold their cash at a secure place until they need it, which creates further financial burdens. “None of these options are acceptable or sustainable long term,” he notes. Dispensaries are often awash in money and the proverbial cash stuffed in the mattress might be more realistic than many might imagine.

If and when banks will be able to accept deposits and finance marijuana-based businesses depends on the political tide. The momentum seems to be in favor of an eventual legalization on the federal level. The

the industry until cannabis is legal, but once it is, I can’t imagine any lenders still purposefully avoiding involvement in the market for a federally legal commercial commodity,” he adds. Of course, a growing interest by established banks and well-known secured lenders isn’t simply dependent on laws and regulations. Public perception is another point of concern for these institutions. TSL Myra Thomas is an award-winning editor and journalist with 19 years’ experience covering the banking and finance sector.

nd Michael F. Schaff, shareholder at Wilentz, Goldman & Spitzer, notes that there are many other complicating forces at work when evaluating the sector. He notes, “Internal Revenue Code Section 280(E) presents an immense challenge to the cash flow of cannabis operations in the U.S due to cannabis’ status as a federally controlled substance.

question is when? It doesn’t appear to be in the very near future. But Smith believes there is some momentum for cannabis policy reform in Congress.

He adds, “There are a lot of politics in play, and lawmakers are, unfortunately, still lagging behind the public on this issue.”

That may be slowly starting to change. The Secure and Fair Enforcement (SAFE) Banking Act passed the House Financial Services Committee in March. The SAFE Banking Act of 2019, which would allow “depository institutions” to provide services and lending to the state-approved cannabis industry, could eventually be approved by Congress, says Smith.

The American Bankers Association has come out to publicly support it. The Act might provide enough assurance for all but the biggest banks to feel comfortable working with the industry. “There may be some larger operators who continue to deny services to

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Construction Cycles and Considerations in Lending

BY MICHAEL BEAVER A Conway MacKenzie executive provides an overview of the construction industry, including its unique cycles.

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The construction industry has an idiosyncratic cycle for financial standards unlike any other. This article will help demystify lending in the heavily segmented construction sector, a very cyclical industry that mirrors our economy. And while we don’t see a lot of shopping malls being built these days, hospitals and oil and gas pipelines go through periods of significant infrastructure expansion and growth when those sectors are hot. Most construction companies typically specialize in building in one sector or another before, so when considering lending to a construction firm, it’s important to understand if a particular industry segment warrants investment based on economic trends in the marketplace. Lenders must be aware of the potential up or downside of a particular segment of the economy at any given time.

Construction industry financial reporting and accounting are unique.

In fact, financial statements in the construction industry are based on estimates – a fact that in and of itself makes most lenders’ heads spin. Additionally, accounts receivable, payable and labor all operate a bit differently in the construction sector. Take labor for instance, where a skilled labor shortage has construction companies scrambling to keep crews on jobs.

Companies pay workers on a weekly basis as they attempt to retain the carpenters, electricians, plumbers and others assigned to a particular project.

Accounts payable and receivable work on cycles that do not match what investors are normally accustomed to seeing. It’s possible a construction company could receive payment at the beginning, middle and end of a project. Yet, they have to pay building material suppliers on a monthly basis and skilled laborers weekly. As such, it is important for lenders to know how disciplined a borrower is with their projects and financing. Are they using money from project X to pay for supplies or labor for project Y? Other common pitfalls lenders need

to be aware of include recognizing contractors who do not manage their projects and money well and those that lack an understanding of their working capital needs. These deficiencies often manifest themselves in lack of cash management and controls.

Poor budgeting and implementation can lead to cost overruns, excessive overhead and problem projects affecting the entire business (i.e., claims, liens, litigation). Insufficient financials can damage bank and surety relationships. It’s important to be mindful that standard operating procedures (SOP) are in place, including: ◗ Technology/platform (ERP, Best in Class, Office templates/shared drive, Manual or combination of the above) ◗ Resources needed to develop SOPs, safety programs and training programs ◗ Sufficient estimating and take-off processes ◗ Reliance on leading indicators versus lagging indicators ◗ Execution capabilities and span of control issues Signs of trouble can show themselves in a number of ways. Is there working capital growth on the balance sheet? Has the company taken on expansion plans into new industries, geographies, or service offerings?

Are there delays in receiving monthly financial information? Has there been

a change from auto payment to payment by check? Have disbursements for accounts payable slowed or ceased to function? Is leverage rather than equity being utilized to finance the company?

Historical due diligence is not the only important diligence when weighing loan agreement contingencies.

Lenders must also closely follow the work in progress report (“WIP”). The balance sheet and the work schedule by project can offer insight to the company’s financial strengths and weaknesses. Be aware, as a lender, if you’re not thoroughly knowledgeable about the construction sector financial practices, you can be caught off guard with investment dollars not being used for their intended purpose.

A common scenario for construction companies is possessing a $50 million of revenue backlog with a need for $70 million in cash to finish the project as the revenue backlog was overbilled.

Additionally, a common construction sector practice is to bill for work that hasn’t yet been performed. And, it’s not unusual for money paid on one project to be used for another project.

Percentage completion accounting (“POC”) makes a contractor’s financial statements an estimate. How real is the revenue number? Below is a sample on how POC accounting can create a period with negative revenue.

Evaluating a company’s credit stance, net income, EBITDA and cash

THE SECURED LENDER SEPTEMBER 2019 19

flow provides an essential view into a construction company’s financial well-being. Understanding their balance sheet, leverage, working capital and asset value (book vs. appraisal) provides a deeper dive into daily operations. And, while the numbers typically tell most of the financial story, it is also important to understand the company’s ownership structure. Is this an owner-operated business or is it run by a private equity firm? Personal relationships between lenders and clients can have an effect on how loans are managed, especially when performance goes awry and difficult decisions have to be made.

When seeking to understand the financials of the business it is also imperative to know the trading multiples, projected base and leverage positions. Trading multiples should be low. Project-based contractors at 4.0x and service-based as high as 7.0x.

Leverage should be at 2x to 3x.

Securing Your Loan Is the senior lender really senior? That’s a loaded question if ever there was one, considering there are subcontractors with mechanic lien rights working on multiple projects simultaneously. Further complicating matters is the nature of accounts receivable collateral for a construction project when a surety bond has been provided for the project.

Surety bonds are required for most municipal and government construction projects, but lenders don’t necessarily appreciate a project that has them in place. Surety bonds and subcontractors could put the lender into third position when looking at account receivable collateral. If a subcontractor’s work has been completed on a project and they haven’t been paid within 90-120 days (depending on the state where the work took place), a mechanics lien can be placed on the property. If the contractor fails to live up to their financial agreements and a surety bond is in place, it will be enacted to pay money due to subs.

This also means the surety company

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will claim the accounts receivables for the bonded project. This leaves the lender three rungs down in the payment pecking order when looking at accounts receivable collateral. When a contractor fails to pay their subs and there is no bond in place, the project owner may very well step in to avoid having any liens placed on their property and, write joint-checks with their contractor to pay off the subcontractors. When a surety bond is in place for the project, the surety insures the subs are paid and the project is performed; providing a level of security for the property owner.

Deciding to lend comesdown to the strength and credit worthiness of the contractor. There’s no divining rod to lending into the construction sector. Some lenders are willing to take on risk at higher interest rates with an eye on a company’s collateral, but counting on collaterals is akin to throwing the dice at a craps table.

Collateral does provide a degree of security in case money dries up, but recouping a loan through collateral is far from foolproof. When it comes to physical assets, asset-based lenders are extremely reticent to attaching value to equipment unless it is easily locatable and not used for specialty applications. A remedy for a lender in a project-based scenario, when the contractor defaults leaving uncompleted projects, is relying on equipment owned; there are important nuances lenders need to be aware of when using equipment as a collectible asset. One has to consider: Is it industry-specific or general construction equipment? By way of an example, energy company contractors use specialty equipment to build pipelines.

When the energy market tanked, the associated equipment/collateral lost value. It’s extremely important to know the exact equipment being used for collateral. First question should be: Is it specialized equipment or general construction equipment (i.e., a side boom vs. an excavator)? Another concern is whether the equipment is

readily available. And, you’ll want to know its resale value in case you need to liquidate the holdings.

Lending into the construction sector can prove to be a lucrative decision if extensive due diligence is conducted deep into a company’s financials.

There are a wide range of factors and potential pitfalls to consider, understand and navigate properly. You’ve heard the phrase, “If I owe the bank that’s my problem. If I owe the bank a substantial amount of money, it’s the bank’s problem.” Success and profits can be had with a well-thought-out methodology, but an understanding of the construction-sector market factors is critical for success. TSL Michael Beaver, managing director, Conway MacKenzie, is a Certified Construction Industry Financial Professional (CCIFP), Certified Public Accountant (CPA) and Certified Insolvency & Restructuring Advisor (CIRA). He is a member of the Construction Financial Management Association, Turnaround Management Association and the American Bankruptcy Institute.

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Our Foundation Donors Deserve the Spotlight If you are considering a gift to the Foundation, please donate by September 30th so your name or logo can be prominently featured at our largest event of the year, the 75th Annual Convention. Your tax-deductible donations support key initiatives: Industry Information: Valuable benchmarking and industry data such as the SFNet Quarterly Confidence Index and our groundbreaking Market Sizing & Impact Study ■ Education: Including reshaping both content and delivery to better serve the needs of members We also sponsor guest speakers at international and local events.

■ NextGen: We celebrate young professionals with our semi-annual SFNet 40 Under 40 Awards. The Secured Finance Foundation’s Scholarship and Diversity Committee has also developed a Guest Lecture Program for colleges and universities ■ Community: The Foundation works with local community groups as well as national organizations such as the Small Business Administration (SBA) to establish new markets and opportunities for our members ■

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To learn more about the Secured Finance Foundation, visit SFFound.org.

Middle-Market Companies Find Opportunity in Food & Beverage Disruption

BY COLIN GUHEEN AND PAUL BAISLEY C it l One O executives ti di h i ti Capital discuss how innovation in the food & beverage sector are making it an Industry lenders don’t want to ignore.

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A short walk down any aisle in your local grocery store reveals the tremendous opportunities now available to middlemarket companies in the food and beverage industry. Take a product that had been as innocuous and ubiquitous as yogurt. Just 15 years ago, Hamdi Ulukaya, seeing that this bland backwater in the dairy case was ripe for innovation, launched Chobani. Today, Chobani not only is the top-selling yogurt brand in America but, more importantly, has paved the way for scores of new entrants — Siggi’s, Stonyfield, Brown Cow, and Noosa to name a few — while inspiring a whole range of new yogurt categories, from Icelandic to Australian and high-sugar indulgence yogurt to non-dairy coconut milk yogurt. At the same time, retailers have reinvigorated their private label offerings in many of these subcategories.

Yogurt, of course, is not an exception. The same story has been replicated thousands of times across the grocery store, one sign of the sweeping transformation in food and beverage over the last decade. At a time when the relevancy of the bigger brands is slowly being eroded, these trends have created opportunities for middle-market companies for branded and private label offerings. That’s why for senior secured lenders, it is a great time to be providing financing for them.

The Consumers Engage A number of factors came together to overturn the long-established order in grocery. The first, and likely the primary driver, was consumer behavior. Food has become a lifestyle choice, most closely approximating the taste of the younger generation of shoppers. Fresh tops frozen, local trumps mass-produced, and quality and authenticity trounce price.

But preferences have not simply changed: they have proliferated. Food is no longer simply a form of sustenance, it is an extension of identity. Shoppers have segmented, with distinct groups congregating around gluten-free, probiotic, sustainable, local, organic, and ethnic offerings, to name just a

few. Shoppers also view food as fuel.

They are seeking products that will promote heart and digestive health, raise energy levels and sharpen memory.

These groups, augmented by the amplifying power of social media and the pronouncements of influencers and celebrity chefs, are substantial enough to have significant pricing power. According to the Bureau of Labor Statistics, Millennials are shaping today’s food industry as their spending power is expected to reach $4 trillion in 2020, and they have not even reached their prime earning years.

Big Food Creates an Opening The larger food companies were slow to react to this change, continuing to focus on the traditional processed foods and condiments at the heart of their business model and concentrating on pruning costs rather than innovating.

According to PwC‘s 2018 Global Innovation 1000 study, the major Big Food companies devote just 1.4 percent of revenues to R&D. They have been more comfortable with brand extensions than new products.

This sluggishness in the face of change has hurt their bottom line. A survey by consultancy A. T. Kearney revealed that the top 25 food manufacturers in the United States ceded 300 basis points to small- and medium-sized competitors between 2012 and 2015; their annual revenue growth was 1.8 percent compared with 11 to 15 percent growth racked up by the smaller companies.

Middle-market companies, by contrast, have the flexibility to respond to these trends and, unlike smaller companies, have access to sufficient capital to specialize and scale up production and to take new products more effectively to market. It doesn’t require a $10-million Super Bowl ad to introduce a specialty tortilla chip. On the manufacturing side, contract and private label manufacturing facilities are both specialized and technologically sophisticated, allowing middle-market companies to scale up strategically to accommodate sales and demand growth.

In addition, middle-market companies have ready access to consumer data.

Some middle-market companies are utilizing this data along with sophisticated digital marketing tactics and distribution methods to punch well above their weight. Companies that understand how to combine data and social media channels together are poised to see excellent results and growth.

While Big Food is down, it is certainly not out. The larger food companies are responding while being mindful of their core brand customers. They are ramping up their own in-house development groups, purchasing attractive specialty brands, and starting their own venture capital operations to nurture young growth companies. To cite just a few examples, PepsiCo’s in-house incubator, the Hive, developed Maker Overnight Oats, which boasts flavors like mulberry and chia. Kellogg bought the protein-bar company, RXBar, for $600 million. And General Mills has its 301 Inc venture group, which has invested in Kite Hill, a maker of nut-based dairy products, and Beyond Meat, an alternative protein business, among others.

Retailers Add to the Opportunity It is perhaps no surprise that retailers, with their vast amounts of data on consumer purchasing, have been much quicker to act on emerging consumer trends than the major food companies.

Krogers, for instance, captures 97 percent of annual transactions from 60 million households nationwide in its 84.51° customer analytics platform.

This helps it target brands that are relevant to its customers, a trend that works to favor middle-market companies. Grocers are diversifying their store shelves by reducing the number of declining legacy brands they carry in favor of on-trend solutions. Middle-market companies that previously faced stiff competition from larger competitors are finding it easier to secure a place on grocers’ shelves. In addition, specialty brands typically come with a price premium over traditional products, which appeals to grocers.

THE SECURED LENDER SEPTEMBER 2019 23

At the same time, grocers have refocused their private-label brands, once synonymous with generic, on-brandequivalent and specialty products. This enables them to ensure their relevancy with consumers while capturing more of the margin. For instance, Krogers reported that it added 219 Our Brands products in the first quarter of 2019, including such niche items as Private Selection Artisan Jerky and Kroger Deluxe Unicorn Swirl Ice Cream. It reported that its private label products accounted for 28.9 percent of the company’s unit sales at the end of the quarter.

To produce these products, the supermarket chains are turning to middlemarket companies, both private label specialists and specialty brands with excess capacity. They depend on these suppliers not simply for their manufacturing prowess and fast turnaround times, but also for their sector-specific expertise. Working with middle-market companies, grocers can go beyond metoo private label products and provide consumers with differentiated offerings with the appropriate attributes for their target audiences.

Direct to Consumer Is on the Horizon Over the last decade, the rise of the engaged consumer has disrupted the food and beverage, creating an environment favorable to middle-market companies.

The next challenge on the horizon is direct-to-consumer sales, which promises to upset the food distribution channel.

This development presents both an opportunity and a quandary for middlemarket companies as well as large food producers. Those companies that succeed in forging direct connections to the consumer will capture revenue that had been shared with distributors, but it is not going to be easy to create a viable platform, especially for fresh, perishable products.

Options might include selling through a platform like Amazon or developing their own in-house direct-to-consumer capabilities. One of the reasons behind Kellogg’s purchase of RXBar was that the smaller company had developed an effective direct-to-consumer strategy.

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Look for Value-Add Lenders One thing is clear: after decades of predictability in food and beverage, which favored the large consolidated producers, the food and beverage market has entered a period of rapid disruptive change that creates openings for mid-sized companies. In these circumstances, middle-market companies should seek out lenders that specialize in the food and beverage industry. These lenders will have a better understanding of market dynamics. They will be able to more accurately assess the business trajectory and have a more nuanced appreciation of the risks they face.

At the same time, these lenders, because of their experience, can be a source of information and relationships for middle-market companies. They can, for instance, help speed middle-market products to market by connecting borrowers to suppliers and distributors.

Having worked through issues as varied as plant automation and product recall with other customers, they can also be an important source of guidance and advice. And finally, financing from a respected lender that specializes in the industry is, in effect, an endorsement.

It means that they have rigorously analyzed a customer’s business plan and chosen to risk their funds on its future.

To succeed in this exciting, but rigorous, environment, middle-market companies should look for lenders whose contributions go beyond lending. TSL

sponsor finance, syndicated, cash flow, asset-based, equipment, and real estate portfolios.

Colin is a CFA charterholder and holds a bachelor degree in International political economy from the University of Puget Sound.

Paul Baisley is managing director and leader of Capital One’s FB&A Corporate Finance business. Prior to its acquisition

by Wells Fargo, Paul was a senior originator for GE Capital’s FB&A group. He has over 25 years of experience in the food industry.

Prior to joining GE in 2006, Paul worked as an ingredient food broker, deepening his understanding of the industry. He also is an equity owner of a farm in western Illinois growing corn and soybeans, giving him a real-life appreciation for commodity issues surrounding the food industry.

Paul holds a bachelor degree from Colby College.

Colin Guheen, CFA, is managing director of Food, Beverage, and Agribusiness investments at Capital One, focused on sponsor and leveraged finance. Colin’s specialization is investments in food, beverage, and consumer companies from restaurants and supermarkets to food processors and production agriculture.

Prior to Capital One, Colin was senior vice president of food, beverage, and agribusiness investments at Wells Fargo.

He also spent three years at GE Capital in investments, where he worked to source and make credit decisions on over 200 food, beverage, and agribusiness opportunities across the minority equity,

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Ecommerce and the Omnichannel Equation

BY TIM ANDERSON

Tim Anderson of Hilco Valuation Services discusses Omnichannel appraisals, which are now more common than traditional brick-and-mortar appraisals.

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Much of the growth occurring today in ecommerce inventory valuations is taking place as part of “Omnichannel” appraisals. These 360-degree retail valuations are modeled to include retail store locations, company-owned website assets and, where appropriate, traditional catalog and wholesale operations. In fact, Omnichannel appraisals are more the norm today than those performed for traditional brick-and-mortar stores only.

Given that the purpose of conducting a valuation exercise is to mimic a potential liquidation scenario, the analysis delivered is meant to serve as a blueprint for the business and lender to follow should a liquidation be required. To provide optimal valuation, it is essential to model for the scenario that gives best overall outcome based upon utilization of an optimal mix of channels available.

Accordingly, when appraising businesses within their retail portfolios, lenders/ ABLs must be certain that they engage a valuation partner that possesses the proper retail expertise required to accomplish this task.

Learning Curve Although many retailers have been engaged in ecommerce for some years now, the practice is still essentially in its infancy, particularly when compared alongside the traditional brick and mortar retail model. In fact, approximately 80 percent of retail ecommerce today is an offshoot of an original brick-and-mortar-only business. While some retailers have developed sound practices and mastery of ecommerce as a part of their overall mix, others continue to grapple with the many nuances and complexities of conducting business in this “Direct” channel. Not surprisingly, the lending community, too, has struggled to some degree with how to assess risk and maintain a watchful eye on inventory valuations within their retail portfolios which operate an ecommerce component; and with good reason.

Because there is no singular established best practice utilized by retailers for managing inventories across chan-

nels, retailers operating in both worlds still present a bit of a quandary for lenders. We have found in our engagements, for example, that it is particularly meaningful and appreciated when we take the time to clearly explain to our lender customers how and why the Omnichannel appraisal we are delivering is likely very different from the hundreds of brick-and-mortar or ecommerce-only valuations they have seen previously over the course of their careers. It is critical that we, and other firms engaged to provide Omnichannel valuation analysis and liquidation services, be highly proficient at conducting a thorough assessment of the costs, benefits, limitations and performance characteristics of each relevant retail channel and communicating the findings to our customers. Only then can the inventory pool be effectively directed to the end user to ensure the most advantageous outcome for both business and lender.

Inventories and a IP At a high level, Ecommerce retail inventories model very similarly to their brick-and-mortar counterparts, with Net Orderly Liquidation Value (NOLV) being determined by gross sales, less expenses to conduct the liquidation. When conducting Omnichannel appraisals, however, there are unique considerations regarding the interplay of these two retail channels and how they can best be utilized together to ensure a successful liquidation.

The use of Intellectual Property (IP) in disposition is often a key driver behind a successful liquidation. In our appraisal efforts, we often find that the primary lender holds a lien on both the inventory and the intellectual property, which enables use of the website for liquidation purposes. When a third party holds a lien on the URL of a company, however, things typically become more complex as the holder’s focus at that point in time is most likely on selling the IP to ensure they recoup their investment. In such cases, it is not likely that the URL IP will be made available for use in selling the inventory. That is why we

promote to our clients the best practice of securing both the inventory and the IP whenever possible.

That said, even when the same lender does hold liens on both, during the preliquidation wind-down period we have witnessed the tendency to cut back on costs including those that drive “eyeballs” to the website. For this reason, we model based on an agreement that the customer will remain committed to both driving traffic to the website and maintaining it during this period. This includes search, server, ecommerce, website maintenance and other related costs that don’t even exist in the brickand-mortar world and vary widely from retailer to retailer.

Customer Base and Loyalty For both in-store and ecommerce, the size of the active customer base is important as well as the level of customer loyalty to the brand. These are best measured for purposes of appraisal primarily based upon data the company itself has collected over time, which they provide to us for assessment based on the terms of our contractual agreement. The loyalty of a customer is somewhat more difficult to gauge and often easier to determine once liquidation is underway.

We have seen first-hand through our work with customers including Coldwater Creek and others, however, that thorough due diligence can also help crack the loyalty “code” and drive values to even higher than expected levels.

Cracking the Customer Loyalty Code 1. How long has the brand been around?

2. Did it fail due to a change in customer focus?

3. Who is the customer now vs. during the most successful years?

4. Is that customer likely to remember the brand and be enticed to buy if we can: ◗ Reach out to their active email? ◗ Present them with the magic of a discount? ◗ Convey the message that this is their “last chance ever opportunity” to buy from the brand?

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Determining Whether to Sell Through the Website Deciding if and how to sell inventory through the direct/ecommerce channel is, understandably, a critical decision in Omnichannel appraisals and liquidations. Not only is the direct liquidation expense structure mix typically quite different from traditional retail, but the expense structure of one ecommerce company can differ wildly from the next.

In making this determination, the maturity of the channel, its historical sales concentration (10% of total retail sales is a loosely defined low-end threshold), and profitability are each key consideration. For example: If the ecommerce P&L has been bleeding money, then it is safe to say that it will continue to do so during a liquidation, and no liquidator will be able to make it a profitable undertaking. Is the site within its first couple years of operation where building an online user base is still a heavy portion of the monthly spend? Are online inventories maintained at, and shipped directly by, vendor distribution centers? Are some orders shipped from retail store locations or made available for pickup at those locations? Is online/ direct utilized historically as a discounted channel to sell through slow-moving inventory?

On the other side of the modeling equation are considerations such as retail store capacity and merchandising space. Can the company’s retail stores physically accommodate the added influx of online merchandise? Can it be properly merchandised on top of the existing store inventory to avoid the need for further discounting? Will it take longer to move in the store than it would online, resulting in the need for added sales staff and distribution center cost?

As a general rule, liquidation sales achieved should exceed the prior year’s results over the same period. If use of the direct channel as part of the mix doesn’t model as being capable of delivering on that expectation, then we may take another path to ensure success for our customers.

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Ecommerce Systems Efficiency In an Omnichannel scenario, understanding the proficiency of a company’s systems for content and ecommerce management is critically important. For example, how easily can pricing and other information be updated on the website? Are there discount capabilities built into their content management system currently or would this be an allmanual process? Is there an initiative in place or on the horizon that will address any of these gaps? Interviews, company documentation and company data all should be reviewed to make an informed determination.

Return Rates & Freight Because liquidation is essentially retailing without replenishment, it is equally as important to have a full understanding of traditional return rates via the direct channel. Will consumers’ inability to return product during the GoingOut-Of-Business (GOB) sale because it’s damaged, doesn’t fit, is the wrong color, or has expired, have an impact on what the company’s historic purchase level data indicates? What about the lack of a retail warranty? When we review sales concentration on a case-by-case basis, product categories such as furniture, workout equipment, jewelry and grocery are less likely to have the direct channel utilized in the appraisal or GOB process.

Additionally, companies operating in rural markets and those selling products that are freight-cost prohibitive are also less likely to be considered because in most cases the liquidator will pay for shipping and that will impact GOLV. Additional Considerations for the Direct Channel: ◗ Credit card fees, given 100% credit card usage online, will be higher than in retail stores ◗ The liquidating agent should be given access to the customer database to market the inventory ◗ Any monies owed to maintain the website and related IT infrastructure must be kept current ◗ The website must remain operational

and accessible throughout the course of the GOB ◗ Recovery vs. expense analysis should be conducted as the GOB progresses to determine the appropriate time to end the online sale ◗ A wholesale component should be modeled for disposition of remaining online inventory balance ◗ Approximately one additional week beyond the GOB will be needed for shipment of those orders placed at the end of the GOB. If, for whatever reason, the liquidator chooses not to use the website for transaction purposes during the Omnichannel GOB, it is likely that the website can still be used effectively to advertise the event provided that the domain remains accessible and operational during the course of the sale. TSL Tim Anderson is senior vice president, Hilco Valuation Services. He joined Hilco Valuation Services in 2001. He has conducted and managed thousands of retail, wholesale and industrial appraisals on behalf of lending institutions worldwide. Anderson’s tenure at Hilco provides a diversified background to assist these institutions in recognizing collateral value and potential exit strategies for their portfolio companies. He currently oversees consumer and retail appraisal operations and is responsible for the overall vertical’s growth as well as ensuring the delivery of high quality, dependable services to clients within and beyond the New England region. Prior to joining Hilco, Anderson worked with GE Plastics, where he was a graduate of the GE financial management program. He holds a bachelor’s degree in finance and accounting from the University of Massachusetts, Amherst, MA. He can be reached at Tanderson@hilcoglobal.com.

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tsl profile very business should know their “Why?’ For aVeriFact, LLC it’s as simple (and yet as complex) as obtaining the facts that their clients need to make informed decisions. aVeriFact, LLC began July 1, 2015, when Sheri LeGeaux and Sandra Lovett-Tillman decided to go into business for themselves after their employer retired. Having worked together for over 20 years, they founded aVeriFact, a licensed private investigation agency. With two licensed private investigators at the helm, aVeriFact conducts financial and background investigations for asset-based lending, factoring, special assets, workouts, recovery and litigation scenarios.

With over 50 years of combined experience, Sheri and Sandra are positioned to aid their clients with a wide range of publicrecord search options, as well as standard database resources, to identify potential risks pertaining to new or ongoing business relationships: pre-lending, employee, supplier/vendor, partner, investor and mergers and acquisitions. aVeriFact can also identify and locate assets & liabilities to determine potential avenues of recovery on past due A/R, litigation and judgment execution situations.

Sandra explained that aVeriFact investigators start their search with applicable database resources, which is where most companies end their search. A database search returns the findings on a subject from the information already within that specific database. aVeriFact’s investigators then proceed to search the appropriate public record sources for information that may have been incorrectly noted in the database, and were not recently updated

AVERIFACT, LLC

or may not have been reported to the database at all.

“A ‘no hit’ simply means that the database searched doesn’t have any information on the subject,” she explained. “It does not mean that there isn’t information to obtain through a search of the applicable public records.” aVeriFact has access to multiple database resources that are not available with standard subscriptions that most companies are offered.

“For example, consider a clean application indicating that there is nothing filed against the borrower,” Sandra added. “aVeriFact conducts a search of the public record sources and locates a history of numerous settled civil suits that were shown on the database report as closed (over 100 cases).

The physical search found that all of the cases had re-opened and the settlements were thrown out. The applicant claimed to be unaware of this. In this case, do you change the terms or proceed with the loan?”

Another scenario Sandra described is a prospective borrower not disclosing a history of bankruptcy filings.

“The borrower discloses a more recent filing on your application, for example; however, they did not disclose the first two as they thought they would be removed from the record and not show up due to the age of the filings,” she said. “When this becomes a standard operating procedure for a borrower, there is increased potential that you will be included in future filings.”

“What happens when the search is in the U.S. and database comes back clean?”

Sandra said. “Should you move forward?

Had aVeriFact conducted the search, a review of media findings would have found one of the subjects involved in your deal was on trial in another country for money laundering, and that the government in that country had granted the subject a temporary visa to come to the U.S. Could that make a difference in how you would choose to proceed and on what terms?” aVeriFact will also search professional sanctions on prelending reports since such

findings are typically not included in a standard database. It pays to know the source locations for such information in order to better grasp the level of risk. aVeriFact recently launched search service offerings to Small Business Owners.

“We recognize that SBOs make a significant investment in their company and community through their talent, resources and products; however, they don’t always know how to identify risks when engaging others to work with (or in) their businesses; and sometimes, that lack of knowledge has increased costs in litigation, embezzlement, theft, sabotage and cash flow,” Sandra explained. “We want to balance the scales by giving SBOs access to resources, database or direct search that makes sense for them. By helping SBOs, we hope to improve the level of our current clients’ pool of prospective borrowers as well.” aVeriFact has pledged a portion of their profits to fund Childhood Cancer Research through St. Baldrick’s Foundation. aVeriFact, LLC is WBE, WOSB and SEBD certified. They are involved with the Louisiana Small Business Development Center, Louisiana Economic Development and Lovett-Tillman just completed the Goldman Sachs 10,000 Small Business Development Program.

“We invest in areas that will benefit our clients, our company and our community,” Sandra added. “Our mission is to provide cost-effective, accurate, verified public record findings tailored to your needs. By understanding identified risk, you can make the appropriate decisions in order to mitigate said risk for your business throughout the lifecycle of the business relationship.”

Eileen Wubbe is senior editor of The Secured Lender.

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Lending to Business Aviation:

Don’t Wing It

BY SHELLEY SVOREN As with any industry, lending to the business aviation sector comes with its own set of risks. Shelley Svoren of First Republic Bank gives readers the insider’s tips on this industry.

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The world of private aviation splashed across all media forms evokes images of the glamorous life. Comparatively The New York Times’ “The History of Private Planes Is Less High Life and More Daily Grind — The 41,000-foot Commute is Still a Commute,” by Jennifer Harlan, illustrates that most private aircraft are instead used for business. For business owners, a private aircraft enables executives to efficiently meet with employees, clients, prospective clients, and suppliers. Holding meaningful face-toface meetings will unlikely ever be supplanted by emails, texts, phone calls, or video chat. Fundamentally, one should consider the purchase and use of private or “business” aircraft as a part of an investment in one’s brand that is essentially a business tool, which increases the effectiveness of the teams employed to fulfill the organization’s goals.

Business aviation is a global industry with countries providing a coordinated regulatory framework for the use, safety, and registration of ownership and legal issues through their registries. Original Equipment Manufacturers (“OEMs”) such as Bombardier, Dassault Falcon Jet, Embraer, Gulfstream, and Textron (Cessna and Beechcraft), located throughout the world, work with the international regulatory agencies to mandate required maintenance and operations for owners of the 21,000plus business aircraft. The demand for business aviation ebbs and flows with the global economy; however, the U.S. accounts for the largest number of business aircraft owners (nearly 66%) although representing 24% of global GDP (according to The World Bank), which is attributed to the favorable capital expenditure climate and early adoption of private aviation following World War II. Significant opportunities exist to support clients who purchase business aircraft. In 2018, 1,063 new business jet and turbo propeller-equipped (“turbo prop”) aircraft were delivered

by the OEMs and 3,628 previouslyowned business jet and turbo prop aircraft were sold to new owners. Of the 4,691 transactions, only 1,709 aircraft – or 36% - obtained financing (where a lien was placed on the aircraft) within three (3) months of closing.

This does not include financing where an aircraft was financed; however, another form of financing (e.g., margin lines, unsecured loans, lines of credit, other structures, etc.) not involving an aircraft mortgage occurred. (Aviation industry data graciously provided by AMSTAT, a business aviation research company.)

The reason to (or not to) finance an aircraft is complicated for many owners. Typically, a business aircraft is owned by a single-purpose entity that exists solely to own and operate the aircraft and may, depending upon the tax structure, not produce income. Not surprisingly, most financiers require repayment assurances that include credit enhancements (e.g., additional collateral, personal guaranties) or significant loan payment amortization.

Due to “Know Your Customer” due diligence requirements mandated by law and acknowledged by the global financial transaction community, the detailing of corporate ownership structures can be convoluted. For aircraft owners who provide the due diligence needed, it is possible to fix their cost of capital over the taxable life of the depreciable asset and use their cash for other investments.

For financiers, much must be considered Risks financiers should acquaint themselves with prior to entering into business aircraft transactions: Risk is defined in a variety of ways, but the underlying issues focus on answering the question: “How will our institution be repaid?” Above and beyond the financial risks, one must understand the tax, regulatory, and legal implications of one’s client’s decisions regarding the operations of the aircraft. Addressing these issues at the onset of the relationship is paramount

THE SECURED LENDER SEPTEMBER 2019 31

as it will impact structuring and these issues must be reassessed over time: ◗ How will the aircraft be used?

Knowing the number of annual hours of use is critical to determining the forecast Fair Market Value (“FMV”), which enables a financier to structure the loan accordingly.

Furthermore, the use of an aircraft results in the operating costs, which can exceed the financing expense threefold. ◗ Will the client engage aviation counsel and tax advisors? Given the complexities of aviation tax and laws, an owner should retain aviation specialists who will work with their existing tax and legal advisors. ◗ How will maintenance be addressed? Enrolling an aircraft and

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its components in maintenance programs does not ensure that it meets the mandated maintenance of the OEMs and Registries. Finding a qualified aircraft maintenance provider is critical to ensuring the aircraft functions properly and can be used in accordance with all laws. ◗ Who will operate the aircraft and will third-party charter/leasing occur? This must comply with all mandatory requirements associated with the registry where the aircraft is registered. In the case of the U.S.’s Federal Aviation Authority (“FAA”), business aircraft are flown under FAR Part 91 or Part 135; the former is used predominately by the sole owner with limited use by friends and family, while the latter is flown for a combination of sole ownership and third-party usage.

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Aircraft flown under the slightly less stringent FAR Part 91 found violating those requirements face multi-million dollar fines (Business Aviation Advisor’s: Fifteen Shades of Grey Aircraft Charter, by John McGraw, addresses these issues.) An aircraft management company may be desirable as they offer turnkey solutions for owning and operating aircraft. ◗ Will insurance be sufficient? It is critical to read the entire policy (not just accept an Accord certificate) as it details the limitations of use. A financier must assert their rights as loss payee and additional insured and it is incumbent upon financiers to mandate breach of

rather than solely rely upon industry valuation guides.) The tenor of the facility typically ties to the use of the aircraft and whether it is flown under the FAR Part 91 or Part 135 as that ties to MACRS depreciation schedules. Payments amortize loan outstandings to a balloon based upon the forecast FMV because the value of the aircraft is expected to decrease over time. True-up payments are included in most structures to ensure that Loan-to-Value requirements are met. Loans may be priced at either fixed or floating rates and interest rate swaps can be offered to fix the interest rate during the loan term.

One of the frequent questions posed to financiers is “How much

financier must first file a mortgage with the FAA, which identifies the OEM, model, and serial number of the aircraft and its engines, in addition to other collateral that may include insurance proceeds, lease/ charter and or management agreements, logbooks and records (which are critical to determining how the aircraft was maintained since delivered from the OEM); and aircraft maintenance contracts. warranty coverage to ensure payment if terms of use are violated.

Types of financing for business aircraft: Many financing options are available for those seeking to finance business aircraft, much of which focuses on the tax and legal requirements for both the purchaser and the financier.

Traditional term loans: With traditional aircraft secured loans, the user of the aircraft owns the asset and the financier provides a portion (ranging between 20-90%) of the capital needed to purchase it. Most traditional aircraft financiers structure loans with an original commitment in an amount that is based upon a percentage of purchase price or an appraised FMV (Note: Best practice is to use an accredited aircraft appraiser who will assess the current market issues,

information do you really need?”, which contains pricing, structure and tax implications. Loans are structured as recourse or non-recourse. With recourse loans, a higher percentage of the purchase price/FMV is financed if a personal guaranty is provided and lower interest rates may be offered if a substantial relationship exists between the financier and the guarantor. With non-recourse loans, interest rates may be higher and the Loan-toValue may be lower compared to a recourse loan. Furthermore, the owner may be limited on tax deductibility due to the at-risk rules.

From a financier’s perspective, traditional loans offer tangible and intangible benefits: It is a way to enhance the relationship with one’s client and the financier earns projectable interest income. Moreover, the risk associ-

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ated with the declining value of the aircraft is placed on the borrower.

Leasing: Leasing switches the mindset from the business aircraft user being the owner to one where the financier owns the asset and user simply uses the aircraft. The financier/lessor obtains the tax benefits and structures a lease whereby the user/lessee agrees to operate and maintain the aircraft in addition to the periodic lease payment.

Early termination clauses and lease buy-out dates are generally included.

Additionally, explicit use, maintenance, and return conditions enforce the lessor’s ability to ensure the value of the aircraft upon its return.

For lessors, one must weigh the tax benefit against the risks. While the lessors may obtain the tax benefits associated with owning an aircraft, the lessor assumes the risk associated with the declining value of the aircraft that is challenging to predict. During the last economic downturn, the values of certain business jets declined by 8-12% per quarter, which well exceeded the forecast values at inception of the leases and caused many lessors to report losses caused by marketing-to-market their portfolio. It is also possible for lessors/financiers to use their portfolio to securitize bonds and/or debentures.

Perfecting One’s Interest in a Business Aircraft Perfection of a financier’s interest in an aircraft is subject to local, country, and international laws. Aviation counsel focused on the Registry where the collateral is registered is critical, particularly as local laws can impact a financier’s enforcement of rights and remedies in default and foreclosure situations. A best practice is to obtain an opinion of Registry counsel to ensure that perfection and priority of the financier’s liens. In some circumstances, title insurance should be obtained.

Financing (via a loan) a U.S. reg-

istered aircraft highlights these complexities, which differs with each country and their Registry: A financier must first file a mortgage with the FAA, which identifies the OEM, model, and serial number of the aircraft and its engines, in addition to other collateral that may include insurance proceeds, lease/charter and or management agreements, logbooks and records (which are critical to determining how the aircraft was maintained since delivered from the OEM), and aircraft maintenance contracts.

The mortgage should address propellers and auxiliary power units (as applicable); limitations on use (both annual hours and locations where the aircraft may be used); Loan-to-Value requirements; access to the aircraft and its logbooks and records; defaults; and rights and remedies for all parties.

The aircraft mortgage (along with the ownership structure) is a public record and can be viewed to determine if a lien exists on the aircraft.

The International Registry (“IR”) electronically records “interests” (essentially ownership and liens) in certain mobile assets and is recognized by over 88 countries. Depending upon the size of the aircraft and the engines, financiers can register their financial interests in those assets with the IR after filing the aircraft mortgage with the FAA. Interests on an aircraft and its engine(s) are also publicly viewable records.

A UCC-1 should be filed to perfect the financier’s position at the state level. A UCC-1 filing on “all assets” is insufficient and should instead encompass all aircraft collateral detailed in the aircraft mortgage.

Assignments of all contracts involved in the aircraft collateral should be obtained through tri-party agreements as this enables the financier as it requires the provider to acknowledge the financier’s rights and remedies. If the aircraft is chartered/ leased, the assignment allows the financier to continue the revenue generating activity and obtain rights

to the proceeds. If the aircraft is managed by an aircraft manager, the assignment enables the aircraft to be maintained and managed. If the aircraft is enrolled in aircraft maintenance program agreements for its hull, engines, auxiliary power unit, or avionics, the accrued payments will ensure maintenance under the program occurs.

This example emphasizes that the world of business aviation is complex and underscores that beyond the initial glitz, much work by many occurs. Financiers must educate themselves on the intricate legal, tax, and operating issues associated with the industry. Because corporate businesses and their owners require flexibility to meet their goals, opportunities continue to exist for financiers.

And much like a client’s ownership of a business aircraft, financing one is truly an investment in expanding one’s brand. TSL Shelley A. Svoren is a senior business banking analyst and industry specialist for First Republic Bank’s Aviation & Marine lending team where she oversees the portfolio management. Her 27-plus year career includes Assistant Bank Examiner for the FDIC, AVP at Silicon Valley Bank, Financial Analyst and Budget Manager for Macy’s West, Agilent Technologies, and Southcorp Wines, where she oversaw a $500MM+ budget and managed the finances for a joint venture. She moderates panels and speaks at conferences regarding aviation and marine industries and mentors junior colleagues. She is a board member of the International Aviation Womens Association.

THE SECURED LENDER SEPTEMBER 2019 33

Michael D. Sharkey: Celebrating 40 Years in ABL

BY MICHELE OCEJO

Michael D. Sharkey is the president of Fifth Third Business Capital. He oversees a nationwide market with regional offices across the United States and Canada. Sharkey has more than 40 years of experience in financial services. Prior to the Fifth Third Bank merger with MB Financial, Sharkey was responsible for the bank’s asset-based lending group, Cole Taylor Business Capital and then MB Business Capital. For 15 years prior, he ran LaSalle Bank’s nationally ranked asset-based lending group. As president and CEO of LaSalle Business Credit, he helped build the group into the fifth largest asset-based lending company in the United States. During his tenure at LaSalle, he also served as executive vice president for LaSalle Bank and ABN Amro. Sharkey began his career in financial services with GE Capital as a field examiner and loan officer and moved on to Manufacturers Hanover Commercial Corporation where he served as senior loan officer. From there, he joined and within four years became president of StanChart Business Credit, which was ultimately acquired by LaSalle Bank.

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years is that I have always felt like I am still learning and still being challenged to take things to another level.

Michael D. Sharkey President Fifth Third Business Capital Sharkey is a past president and chairman of Secured Finance Network. He is also past president of the American Brain Tumor Association.

Sharkey is a graduate of Rutgers University and J. L. Kellogg Graduate School of Management at Northwestern University.

Here he discusses his long career, the outlook for the industry and Fifth Third’s acquisition of MB.

You celebrated 40 years in the industry in 2018. How did you get your start in the industry and what made you stay?

After I graduated from Rutgers, I was fortunate to be recruited into U.S. Steel’s management training program.

When I graduated from that program two years later, I decided I wanted to use my accounting degree and joined what was then GE Commercial Corporation (GECC) as a field examiner. GE was a great training ground for ABL back then and I rapidly moved from field exam to underwriting and then became an account executive. The reason I stayed in ABL was that the ABL industry presented great opportunities for rapid advancement. I was an SVP and head of credit for Union Bank’s ABL group in California by the time I was 32 and became president of Stanchart Business Credit at the age of 33. I think the reason that I refused other offers and continued to stay in ABL for all these

The issue of hiring and retaining great employees is raised again and again.

What do you think can be done to attract and retain the best of the best?

That is a great question and, in fact, the most important issue anyone faces when running a service-oriented business. I once heard Larry Bossidy of GECC say that the single most important responsibility of a CEO is to be the head of player personnel and to constantly be looking to strengthen and improve the team. I have found that to attract the best people you need to maintain a first-class organization and a great reputation. Experienced people in the industry know where the best places to work are and want to go where there will be not only opportunity, but stability. We have had great success recently hiring training and retaining young people. You need to have a robust training program and present those individuals with regular opportunities for advancement. Even with our successful training program we occasionally need to augment staff with experienced personnel. Strong BDOs tend to be like major league pitchers; sometimes you must seek out a free agent for that role!

Clearly, you’ve seen many changes over the past 40 years, one being the birth of online lenders. How do traditional, relationship-based asset-based lenders compete successfully in this landscape?

We don’t compete with online lenders in our segment of the market. Having said that, competition in our space is at an all-time high. The good news is that relationship lending is not dead, and we have worked hard over four decades to cultivate and maintain relationships with our key partners with whom we do business. I would say that in most, if not all, the deals we do there is an advocate somewhere in the transaction who has done business with us in the past. Those individuals advocate for us because they have a high level of confidence that we will close what we

THE SECURED LENDER SEPTEMBER 2019 35

propose and treat the customer fairly on an ongoing basis. To me, it is all about fairness.

After everyone sounding alarm bells about the next recession, the latest surveys indicate middle-market business owners are feeling good about the economy. Do you share this optimism?

I am optimistic about our ongoing success because an experienced assetbased lender does well in good times and bad for entirely different reasons.

I see some signs that the economy is softening in certain sectors, but nothing that would signal a precipitous decline. We would welcome a downturn because that normally creates a target-rich environment and a reduction in competition. I see a target-rich environment because of softening performance and the increased need for monitoring that goes along with it.

Reduced competition because the local and regional banks tighten up and the non-bank lenders who have ill-advised or cash flow structures tend to have problems. We had a field day in 2009 and 2010 when the entire middle market looked like one big ABL market.

What are the biggest challenges, in your view, that ABL lenders are facing today?

I think that you already touched on two of them, people and competition. Both of those are very challenging. Outside of that, keeping up with technology and satisfying the regulators are probably the other two facing the bank-owned lenders today. I don’t envy any bank or finance company trying to find a niche and start up a new ABL in the current environment. Having said that, there are a couple out there who have managed to gain a foothold in the market.

How did your time serving on the SFNet (formerly CFA) Management Committee and as chairman affect your career? Why should young professionals today volunteer their time with SFNet? My first experience with the CFA was at

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GE. They sent me to a chapter meeting on the bankruptcy reform act of 1978. From that point on I rarely missed a chapter meeting. I found it to be a great way to broaden my technical knowledge and to meet not only peers but senior individuals in the industry.

I found serving on the Executive Committee, Management Committee and finally chairman to be my way of giving back to the industry. To me it was a way to try and make the industry and the association better and stronger. I am very happy that I did that and would not trade that for any other experience in my professional career.

In March, Fifth Third Bancorp announced it had completed its acquisition of MB Financial, Inc. You are now leading the combined ABL groups.

Can you tell us a bit about the group’s structure and short- and long-term goals?

I am very excited to be leading the combined ABL operations of Fifth Third and MB, now Fifth Third Business Capital.

Not surprisingly there was little overlap in the two organizations. The two fit together perfectly and result in an organization that can fund a small ABL and lead a large syndicated transaction.

In many ways this transaction gets us right back to where we were over 10 years ago at LaSalle Business Credit.

The legacy Fifth Third team is expert in leading large syndicated deals and our legacy MB group has closed over 300 relationships in that $5-to-$30 milliondollar range. We called it plug and play.

Unlike other transactions I have seen or been involved with, we barely missed a beat in our productivity throughout the transition.

How does the merger affect your customers?

The merger certainly gives us a broader and stronger product set to offer to our customers. It also allows us to grow; where in the past we might have had to find a co-lender to service larger customers, we can just continue to grow with them and not have to find a

partner.

MB was more in the $5-to-$30 million deal range and Fifth Third starts at $30 million. So the two groups complement each other very well. It gives us the ability to hold larger transactions and service companies as they get bigger without having to find a partner.

Are there specific industries you’ll be concentrating on?

Regardless of the size of the company, certain industries lend themselves to what we do or they don’t. We’re fairly straightforward traditional ABL lenders, so we stick to the distributors and the manufacturers and we do some service companies but, generally speaking, we want to have assets. We don’t lend on a multiple of cash flow per se. Some lenders have migrated in that direction, but I don’t really consider that asset-based lending to get that far afield.

Everyone seems to be talking about tariffs. Is that something that’s keeping you up at night?

Tariffs seem to have affected consumer product companies quite a bit. Companies that are importing home goods or those types of things largely from China, they’re having to resource. The good news is I think they are all in the same boat so, unless there is an alternative product or the buyer just won’t buy at the higher price, they seem to have the time to resource from other countries. That’s really where we’ve seen the biggest impact, on consumer products and maybe on metals to some degree. I think the agricultural sector is getting hit pretty hard by it, but we don’t have a big concentration in Ag. We don’t have a lot of manufacturers that are selling to Caterpillar or big manufacturers like that.

As a general comment, it doesn’t seem like it’s impacted our portfolio very much at all. TSL Michele Ocejo is director of communications for Secured Finance Network and editor-in-chief of The Secured Lender.

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v

tsl profile check Global, formally CBI Intelligence, is a deep-dive investigation firm that has been in business for over 19 years. Since inception, and continuing through its branding and restructuring in 2013, today the company services over 500 banks, private equity, venture capital, and law firms. Over just the past three years, Vcheck Global has grown over 700%.

From c-suite hires to pre-IPO due diligence to on-the-ground human intelligence around the globe, Vcheck offers a wide variety of investigative tools depending on the need and focus of the client. Vcheck’s customized reports include archived filings to assure in-depth details of the individuals or a company’s history. Research encompasses private and public sources that include credit checks, county and state courts, federal district and appeals courts, tax assessor and other recorded documents, secretary of state registrations, Medicare fraud, Department of Justice and Bureau of Prison, FTC bulletins, social media postings, and several nationwide data aggregators.

Vcheck Global’s key personnel and research leaders consists of Shai Stern, chairman; Seth Farbman, co-chairman; Adam Rudman, CEO; Lyndee Fletcher, COO; Brendan Binkoski, director of investigations; and Ken Blumenthal, managing director.

Stern is currently the co-chairman and CEO of CheckAlt, the largest independent provider of treasury and lockbox solutions.

He led CheckAlt’s acquisitions of ERAS from

VCHECK GLOBAL

Diebold, Inc. and Klik from MUFG Union Bank. Stern currently serves on the board of Bankjoy and was a lead investor at Double Beam, Inc. He co-founded and previously served as CEO and co-chairman of Vintage Filings, a New York-based EDGAR filing firm, which was acquired by PR Newswire in 2007.

Farbman has built a career in servicing private and public companies. In this role, Farbman serviced over 3,000 publicly traded companies to provide SECEDGAR and financial print services related to Ipos, proxy statements, annual reports, shareholder meetings and all aspects of compliance filings.

Rudman led Vcheck’s sales growth as senior VP and implemented his vision for the expanding the width and breadth of company’s offering to become its CEO in 2018. During his tenure, the company has significantly increased revenue and he has helped to secure some of the largest Fortune 500 companies as clients. His client-driven work ethic and diligence has enabled the company to continue to grow in a dynamic environment, evidenced by its recent listing on the INC 5,000.

Binkoski is the director of investigations of Vcheck Global. Binkoski has over 10 years of experience in investigative due diligence, compliance, and risk management. Before joining Vcheck Global, Binkoski was a fraud investigator with the Commonwealth of Massachusetts, investigative consultant with Kroll, an associate director of Risk Management at Cambridge Associates, and an assistant vice president of AML Compliance at State Street Corporation. Binkoski is a Certified Anti-money Laundering Specialist (CAMS) and a Certified Fraud Examiner (CFE).

Vcheck Global has been focusing on its international desk by adding multi-lingual investors to help meet the demands of its clients with more firms doing thorough checks of entities and individuals that either once lived abroad or still have a business and a presence internationally.

“We’ve seen this heavily in third-party

onboarding, know your customer (KYC), M&A transactions and lending,” explained Blumenthal. “This also raises the need for firms to understand what international laws they are required to uphold in their due diligence. The EU General Data Protection Regulation (GDPR) has been a large topic of conversation amongst our clients but there are many other countries who have specific sanctions and laws that require extra care to ensure you are in compliance with all jurisdictions in which you are accessing data. The best practice internationally` is to have in-house language specialists that focus on specific jurisdictions to ensure the most possible accuracy of reporting. Another significant trend we are seeing is KYC checks increasing for client intake and vetting.”

Machine Learning and Artificial Intelligence (“AI”) is also on the rise, said Blumenthal, and completely revolutionizing background investigations. With many firms completely automating their “lite” employment scopes, AI opens up an entirely new avenue of possibilities by essentially taking the “time” factor out of due diligence.

Data scrapers, APIs and filters that apply machine learning and natural language processing can aggregate and analyze exponentially greater amounts of data than a human going site by site.

“Over the next five years, this will be the biggest change and challenge in our industry to help regulate, test and properly utilize AI in reports,” Blumenthal added. “We have found that AI is a great starting point and aggregator; however, the filtering and aggregation still needs diligent oversight from an investigator to vet that the searches are fully comprehensive and that the systems are not over-filtering results that could potentially lead to false positives or false negatives .”

Eileen Wubbe is senior editor of The Secured Lender.

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SFNET NEWS IN PRINT

Axiom Bank N.A.: Van Firios was named vice president, commercial relationship manager. In this role, he will develop commercial relationships and drive revenue growth.

“Van is results-focused and relationship-oriented, with a long track record of serving commercial customers,” said Ted Sheppe, executive vice president, Commercial Banking of Axiom Bank. “His expertise will be invaluable as we continue to become the bank of choice for customers seeking financial solutions to enhance their businesses.”

Firios brings more than two decades of experience in banking and sales management. He previously served as vice president, small business banker at a national bank.

G. Hunt Dawkins was promoted to the position of VP, SBA division manager. In his new role, Dawkins will lead Axiom’s programs for extending government-guaranteed loans to small businesses.

Dawkins has more than three decades of experience in banking. He joined Axiom Bank in 2018 as VP, commercial relationship manager.

“By understanding the challenges local small business owners face, Hunt has been finding customized solutions that allow for growth and new jobs in Central Florida,” said Ted Sheppe, Axiom’s executive vice president of Commercial Banking. “We’re excited

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to have Hunt leading our effort in continuing to build a strong SBA business for the benefit of customers and the community.”

Scott Leitner was named as VP, commercial relationship manager at Axiom Bank. In this role, Leitner will develop commercial relationships and drive revenue growth.

“Scott’s diverse background in law and business brings a wealth of knowledge to our team,” said Ted Sheppe, executive vice president, Commercial Banking of Axiom Bank. “His experience helping small businesses reach and exceed their financial goals through innovative solutions is a valuable asset as we continue expanding our services.”

As a licensed Florida Bar attorney, Leitner boasts nearly a decade of legal experience, including real estate litigation, commercial banking, as well as experience in account management.

He previously served as assistant vice president, small business banker at a national bank.

BHI: Louis Barone was appointed as senior vice president, team leader of Middle Market General & Brand Financing. Barone has more than 35 years of experience in all aspects of factoring, commercial finance and risk management. He was instrumental in establishing the factoring business and developing new product offerings at several well-known financial institutions. Louis will be instrumental in leading BHI’s General C&I and Brand Financing teams and continue expanding and managing markets.

Barone will report to Mitchell Barnett, EVP, division executive – General Middle Market & Brand Financing at the Bank’s New York City Headquarters. He was most recently employed as managing director and head of new business development at CIT Group.

He holds a bachelor degree from New York Institute of Technology.

Briar Capital, now focused exclusively on providing owner-occupied, commercial real estate financing solutions for asset-based borrowers, has promoted Jeff Van Sickle to president and Jeff Appleton to executive vice president.

“Both Jeff Van Sickle and Jeff Appleton are experienced professionals who understand how to partner with working capital asset-based lenders and traditional banks to solve the most challenging credit solutions,” says Frank Goldberg, founder of Briar Capital.

Goldberg, who founded Briar Capital in 2003, will maintain his current role as chairman.

Van Sickle joined Briar Capital in 2005 after a successful tenure with Ford Motor Company. Since then, he has closed in excess of $100MM in loan commitments. He has served as President of the Commercial Finance Association, Houston Chapter and is currently a member of the Turnaround Management Association. Van Sickle is a graduate of the University of Michigan’s Stephen M. Ross School of Business in Ann Arbor, Michigan.

Appleton has 30 years in assetbased lending for Siemens, Wells Fargo, FINOVA, TD Bank and JP Morgan Chase & Co. where he served in seniorlevel capacities working with accounts receivable, inventory, real estate and equipment. He began his career at Ernst & Whinney and later held assetbased lending audit positions at GE Capital. Appleton is Past President of the Turnaround Management Association, Atlanta Chapter and a Past Board Member of the Commercial Finance Association, Atlanta Chapter.

Briar Capital has named commercial lending veteran Paul Count as senior

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vice president, Midwest markets.

Based in Indianapolis, Count will be responsible for developing owneroccupied, commercial real estate financing opportunities throughout the Midwest.

“We’ve been looking to expand our presence to the Midwest by adding an asset-based lending and/or banking veteran with roots in the region,” notes Jeff Van Sickle, president of Briar Capital. “Having spent over 35 years in commercial lending, all of which in the Midwest, Paul is the perfect fit for our organization.”

In addition to his extensive assetbased lending and banking experience, Count served as founding President of the Association for Corporate Growth – Indiana and founding President of the Indiana Association for Corporate Renewal. He also has fulfilled leadership positions in a number of civic and philanthropic organizations throughout the Midwest communities where he has lived and served.

Capital One: Todd Hammond was appointed to its underwriting and portfolio management team and welcomed Brian Schwinn to the team on June 10. Hammond joins the team to lead underwriting for Middle Market Banking, supporting the Regional Commercial Bank, Not-for-Profit, and Municipal groups and coordinating closely with the Diversified Industries group. Schwinn will lead the Financial Institutions Group’s Underwriting and Portfolio Management team. Both executives will report directly to John Crosby, head of underwriting and portfolio management for Capital One’s Commercial Bank.

“At Capital One, we continue to develop and look for leaders who have deep segment experience and will help support our customers,” Crosby said. “Both Todd and Brian exemplify

this objective, and we are very happy to welcome such strong leaders to our team.”

Prior to joining Capital One, Hammond spent 15 years at Key Bank N.A., where he held various risk operations positions and most recently served as SVP, head of Business Banking and Commercial Underwriting. In that role, Hammond was responsible for underwriting and portfolio monitoring activities within SBA, business banking, agribusiness, private banking, and middle-market commercial lending throughout Key Bank’s footprint.

Schwinn will be joining Capital One from Santander Bank, where he was most recently EVP, head of Asset Based Lending and Restructuring Finance. In that post, he led a team of origination, underwriting, and portfolio management professionals delivering structured asset-based financial solutions to a variety of industries. Prior to this role, Schwinn was chief credit officer, responsible for overall commercial credit risk management for Santander Bank, N.A. CIBC: Brandon Barr has joined CIBC’s U.S. Asset-based Lending team as head of business development/strategy.

“Brandon has served as part of CIBC’s U.S. Specialty Finance group for the last four years and brings expertise in complex commercial financing solutions to our clients,” said Bruce Denby, co-head of CIBC’s U.S. Assetbased Lending team. “As we continue to expand our ability to serve commercial clients across the U.S., we are pleased to have Brandon’s experience and strategic approach helping to guide our asset-based lending solutions.”

Barr joined CIBC in 2011, leading a U.S. Private Banking team in Chicago serving business owners and entrepreneurs before transitioning to Specialty

Finance in 2015, where he led origination efforts for commercial clients.

CIBC (NYSE: CM) (TSX: CM) is a leading North American financial institution with 10 million personal banking, business, public sector and institutional clients. CIBC offers a full range of advice, solutions and services in the United States, across Canada and around the world. In the U.S., CIBC Bank U.S.A provides commercial banking, private and personal banking and small business banking solutions and CIBC Private Wealth offers investment management, wealth strategies and legacy planning. cibc.com/U.S. CIT: Marc Heller, CIT’s President of Commercial Services, was recently recognized by the New York Institute of Credit (NYIC) with its prestigious Founders Award. Heller is only the 5th recipient in NYIC’s 101-year history.

Heller is only the 5th recipient in the last century to receive the award, which recognizes those who served in a leadership role and enhanced the success of the NYIC. Heller played a vital part in transitioning the NYIC from a classroom-based school into the successful professional and educational association it is today.

“This organization plays a vital role in professional education for the industry leaders of today and tomorrow and in recognizing professional excellence,” Heller said. “I am thrilled to have played a part in helping NYIC grow and evolve and represent CIT’s values with this important community advocate.”

The NYIC is a non-profit organization that bridges the gap between business theory and business practices. It consists of educators who are credit executives or prestigious accountants and lawyers who value the alliance of these professions. The NYIC aims to educate business profes-

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sionals and sharpen their knowledge of business theories and practices.

Elijah Kaplan was appointed to lead CIT Northbridge Credit business development efforts across the Northeast.

Based in New York, Kaplan is an experienced professional in middle-market lending, private equity, and restructuring. He has over 19 years of experience in financing, acquiring, and advising middle-market businesses on assetbased transactions across a wide array of industries.

In his new position as a managing director with CIT Asset Management, Kaplan will be responsible for identifying new business opportunities for CIT Northbridge Credit and for leading financing origination across the Northeastern states.

“Elijah has creatively structured and negotiated both new transactions and restructurings to create win/ win solutions for all those involved, including lenders, borrowers and financial sponsors,” said Neal Legan, who leads CIT Northbridge. “We are pleased to welcome Elijah to the team at CIT Northbridge and look forward to his contributions to our growth.”

Prior to joining CIT Northbridge Credit, Kaplan held a similar role at Gibraltar Business Capital LLC. Earlier in his career, he worked as a turnaround and restructuring advisor at DeloitteCRG and at various investment funds focused on special situation lending.

CIT Northbridge Credit is a trusted financial partner supporting middlemarket companies with a broad range of flexible asset-based debt solutions.

A joint venture managed by CIT Asset Management LLC, it provides revolving and term loan commitments from $15 million to $150 million to companies across various industries and business cycles, and serves primarily as sole lender, agent, club participant or co-lender.

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CIT Group Inc. also announced that Leslie Grizzard has joined the company as managing director in the company’s Aerospace, Defense & Government Services business.

In this position, Grizzard will have responsibility for leading CIT’s lending activity to serve the multibillion-dollar government contractor industry. She will be based in the Washington, D.C. area.

“Leslie is a talented and experienced financial executive with strong relationships and an impressive track record of success in the government services sector,” said John Heskin, managing director and group head of the Aerospace, Defense & Government Services business. “She is an excellent addition to our team and we look forward to her contributions.”

“I am pleased to welcome Leslie in this new role as we continue to unlock the full potential of CIT and expand our presence in key industry sectors,” said Robert Rubino, president of CIT’s banking subsidiary and head of Commercial Banking.

Grizzard comes to CIT from Citizens Financial Group, where she headed the Aerospace, Defense & Government Services business as senior vice president and managing director. In that position, she earned a reputation for responsiveness and skill in executing financial strategies that helped clients achieve their growth objectives.

CIT’s Aerospace, Defense & Government Services group, part of the company’s Commercial Finance division, provides integrated financial solutions for manufacturers, suppliers and service providers in the aerospace, defense, homeland security and government services markets.

Commercial Finance Partners: John Buanno was hired to serve as director

of operations. He will be assisting in Commercial Finance Partners’ growth efforts through strategic initiatives designed to expand the company’s direct lending efforts and market footprint around the United States and Canada.

Buanno’s factoring and asset-based lending background, as well as his experience with operating companies, created a naturally perfect fit for our team’s growth strategy” commented Darren Palestine, managing partner.

“Commercial Finance Partners’ footprint is expanding rapidly and we are excited to have John on board to help manage the growth of our direct lending and consulting programs.”

Buanno has extensive underwriting and business development experience in the asset-based lending and trade finance industry working at both Bibby Financial Services and Federal National Commercial Credit. Buanno has also served in senior executive finance roles in both aerospace and home interior manufacturing businesses.

Crestmark: John Ryan was appointed as vice president, senior underwriter for the East Division. Based in Troy, he will report to senior vice president, East Division underwriting manager John Trendell.

Ryan brings more than 30 years of commercial finance experience to Crestmark. He most recently served as vice president of the special credits group with JP Morgan Chase Bank, where he was responsible for managing a portfolio of commercial loan relationships undergoing workout. Ryan also served as risk portfolio manager of business banking, and senior credit manager of business banking while at JP Morgan Chase Bank. Previous experience includes Comerica Bank, as vice president of credit administration for

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business banking; vice president and manager of commercial workout for Comerica Loan Center; vice president of special asset group; vice president, senior commercial workout officer; and vice president, senior commercial asset-based loan officer. Ryan also served as asset-based lending credit manager for Greenfield Commercial Credit.

“John’s knowledge of credit underwriting and experience with loan quality management for commercial lending will be an asset to our team of underwriters,” said Crestmark executive vice president and East Division president Steven Tomasello. “We welcome him to our team and we look forward to his contributions.”

Hitachi Capital America (HCA) has named executive vice president Terry Hatfield as operational excellence leader and hired Valerie Pagliaro as senior vice president and CFO. In her newly-created position, Hatfield, who previously served as HCA’s CFO, is charged with spearheading a company-wide initiative to drive customer experience, process, and operating infrastructure improvements across the company. By focusing on key value drivers and data-driven decision making, Hatfield will build the capabilities and culture needed to continue HCA’s marketplace success and business growth trajectory.

“Terry has been an integral member of the team here at Hitachi for nearly 30 years,” said HCA President and COO Ryan Collison. “Her in-depth knowledge of finance, IT, process, and compliance make her the perfect leader for our company’s excellence initiative.”

Replacing Hatfield as CFO is Valerie Pagliaro, who comes to HCA from The Alta Group. In her new role, she is responsible for providing strategic

and operational leadership for all HCA accounting and finance functions.

Pagliaro, a finance industry veteran, held many senior positions at GE Capital including operating business CFO roles for the core equipment financing, vendor finance, and trade finance businesses.

“We’re very excited to welcome Valerie to the team,” adds Collison. “She brings decades of industry leadership experience, the demonstrated ability to drive superior results, and a track record of implementing sound financial processes. Her skills and abilities will prove invaluable as we embark on this next phase of HCA’s strategy.”

Monroe Capital LLC announced that it has expanded its direct originations team with the addition of seven experienced investment professionals: David Fischer and Nick McDearis in the firm’s Atlanta office; Dan Letizia and Tommy Ryan in the firm’s Chicago office; and Jack Bernstein in the firm’s New York office. In addition, recently hired Stewart Hanlon is in the firm’s San Francisco office and Alex Patil is in the firm’s Los Angeles office.

“We are very fortunate to continue to attract the very best talent to our investment team with the addition of these seven experienced professionals,” said Tom Aronson, managing director & head of originations of Monroe Capital. “Our new team members will further support the growth we have experienced in middle- market financing and opportunistic investing with private equity sponsors and non-sponsored businesses. We remain focused on providing flexible and customized financing solutions to our clients.”

The expanded Monroe Capital team includes: David Fischer, managing director, and Nick McDearis, managing direc-

tor, will co-lead the firm’s relationship sourcing and the origination of new business opportunities within the Southeast region. Together they have an average of over 12 years of experience in commercial lending and structured finance. Both will be located in the firm’s Atlanta office and have previously worked at AloStar Capital Finance.

Dan Letizia, managing director, will be responsible for relationship sourcing and the origination of new business opportunities within the Midwest region. He has over 15 years of experience in leveraged finance and investment banking. Letizia will be located in the firm’s Chicago office and has previously worked at Twin Brook Capital Partners.

Tommy Ryan, managing director, will join the healthcare vertical with group head, Matt Evans. He will be responsible for relationship sourcing and the origination of new business opportunities within the healthcare industry in the West Coast region.

He has over 15 years of experience in middle-market direct lending focused in healthcare. Ryan will be located in the firm’s Chicago office and has previously worked at Twin Brook Capital Partners.

Jack Bernstein, vice president, started with Monroe Capital in 2015 in an underwriting and portfolio management capacity and will join the firm’s origination team. He has over six years of experience in the financial services industry. Jack is located in the firm’s New York office and has previously worked at HIG Capital.

Stewart Hanlon, managing director, recently joined the technology vertical alongside Mark Solovy, and is responsible for co-leading the firm’s relationship sourcing and origination of new business opportunities in the technology, software and recur-

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ring revenue industries. He has over seven years of experience in middle market direct lending in software and technology finance. Stewart is located in the firm’s San Francisco office and has previously worked at White Oak Global Advisors, LLC. Alex Patil, managing director, recently joined the firm and is responsible for relationship sourcing and origination of new business opportunities in the West Coast region. He has over 10 years of experience in middle market direct lending. Alex is located in the firm’s Los Angeles office and has previously worked at Medley Management, Inc. Ted Koenig, president and CEO of Monroe Capital commented, “Our people and platform are the driving factor in the success we have achieved as a

firm. We are grateful for the relationships that we have developed with our borrowers, financial sponsors, limited partners and consulting firms over the last 15 years. We remain dedicated to providing our limited partners and investors the very best investment returns in the private credit space.”

Monroe Capital LLC (“Monroe”) is a private credit asset management firm specializing in direct lending and opportunistic private credit investing.

Since 2004, the firm has provided private credit solutions to borrowers in the U.S. and Canada. Monroe’s middle market lending platform provides debt financing to businesses, special situation borrowers, and private equity sponsors. Investment types include cash flow, enterprise value and assetbased loans; unitranche financings;

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and equity co-investments. Monroe is committed to being a value-added and user-friendly partner to business owners, senior management, and private equity and independent sponsors. The firm is headquartered in Chicago and maintains offices in Atlanta, Boston, Los Angeles, New York, and San Francisco.

Monroe has been recognized by Creditflux as the 2019 Best US Direct Lending Fund; Private Debt Investor as the 2018 Lower Mid-Market Lender of the Year; Global M&A Network as the 2018 Small Middle Markets Lender of the Year; M&A Advisor as the 2016 Lender Firm of the Year; and the U.S. Small Business Administration as the 2015 Small Business Investment Company (SBIC) of the Year. For more information, please visit www.monroecap.com.

Moritt Hock & Hamroff: Dennis C. O’Rourke was appointed as chair of its Corporate & Securities Practice Group.

O’Rourke, who joined Moritt Hock & Hamroff in 2006, and serves a Partner in the firm’s Corporate & Securities Practice Group, said: “I am honored to be given the opportunity to lead the firm’s corporate practice into its next phase and look forward to continuing to work with our highly accomplished team of attorneys as we continue to advance the scope of our practice.”

“With more than 20 years of experience and an impressive track record, I am confident that Dennis will utilize his vision, skills, and talent to guide our growing and broad-based corporate practice. He has proved to be a team leader, mentor to our young lawyers and a trusted business advisor,” said Marc Hamroff, managing partner at Moritt Hock & Hamroff.

O’Rourke concentrates his practice in handling all facets of complex mergers, acquisitions, securities

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offerings, business transactions and general counsel matters. The scope of his practice is diversified and includes providing corporate advice to business owners, public and private companies, including the structuring and negotiating of sophisticated sales and purchases of businesses, as well as capital-raising transactions and joint ventures. His experience also includes work with both domestic and foreign-based clients in a wide range of industries, including technology, fintech, ad tech, logistics, e-commerce, card processing, medical devices, nutraceuticals, food and beverage, manufacturing, construction, real estate, biotechnology, alternative energy, telecommunications, pharmaceutical, financial services, professional services, insurance, gaming, and cannabis. O’Rourke earned his J.D. from Hofstra University School of Law and his bachelor degree from the United States Naval Academy, attaining the rank of Ensign.

Moritt Hock & Hamroff LLP is a 75-plus lawyer firm providing a wide range of legal services to businesses, corporations and individuals worldwide from its offices in Manhattan and on Long Island.

People’s United Bank announced the hiring of an industry specialist to its Asset-Based Lending team. Andrew Loughlin (Drew), vice president and underwriter, brings more than 17 years of commercial lending experience and will be responsible for new business underwriting in the Northeast and nationally. He will be based in Manhattan, New York.

Loughlin’s prior experience includes specialized roles of increasing responsibility at TD Bank and CIT. He is the President of the New York Chapter of the Secured Finance Network and received his bachelor degree in econom-

ics from Fairfield University.

“Drew brings a unique skill-set and an understanding of the evolving needs of our clients, delivering tailored, flexible capital solutions,” said Mike Maiorino, EVP of Specialized Lending at People’s United Bank. “Our clients increasingly demand banking partners who understand their business, and have the ability to act as an advisor, helping them to overcome financing and growth challenges.”

People’s United Bank’s Asset-Based Lending team provides senior secured asset-based loan facilities for borrowers requiring between $5 million and $50 million. Industries include manufacturers, distributors, wholesalers, business services and retail, for companies in transition, for turnarounds, refinancings, acquisitions and seasonal businesses.

Regions Bank: Joel Stephens has been appointed executive managing director and head of Regions Capital Markets. Stephens joined Regions in 2008 and most recently led the Real Estate Capital Markets group. He succeeds Terry Katon who has chosen to leave the company to spend more time with his family. Katon will work with Stephens through the second half of 2019 to ensure a smooth transition for clients and associates.

“Capital Markets is a strategic focus area for Regions as our teams provide the capabilities and expertise to help our clients succeed,” said Ronnie Smith, head of Regions’ Corporate Banking Group. “With 25 years’ experience in commercial mortgage-backed securities and commercial real estate lending, Joel is a seasoned professional with excellent leadership skills and a strong commitment to serving clients. I’m confident his leadership will allow us to continue to expand our Capital Markets team and offer-

ings to grow with our clients.”

Smith continued, “Terry has made significant contributions to the company and to the Charlotte community over the years by investing in our associates and making life better for our clients, and we wish him the best in the future.”

Tim Monte, executive managing director and head of Credit Products, will assume the additional role of Charlotte market executive, also previously held by Katon. He will work closely with business group leaders in the Charlotte market to collectively expand Regions’ client base and make a meaningful difference in the community.

Seacoast Business Funding: DJ Krystopa has joined as vice president, business development officer to, cultivate and grow the portfolio in the Northeast region. Krystopa has an extensive knowledge of the invoice factoring and asset-based lending industry and brings a high level of expertise to solving complex financial challenges for businesses.

A graduate of LaSalle University, Krystopa has held many distinguished roles throughout her career in both accounts receivable financing and traditional banking. “Seacoast’s ability to understand their clients’ needs and to quickly provide a cost-effective working capital solution is what sets them apart. The opportunity to be part of such an experienced and clientfocused team is exciting, and I look forward to increasing Seacoast’s presence in the Northeast,” commented Krystopa.

Krystopa is a member of the Secured Finance Network, International Factoring Association, and is a current Board Member of the Turnaround Management Association Philadelphia Chapter. For deal inquiries DJ may be

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contacted by email at dj.krystopa@ seacoastbf.com or by phone at (215) 350-3839.

Sidley Austin LLP: Samuel (Sam) Newman has joined its global Restructuring group as a partner in the Los Angeles office. Newman was previously a partner at Gibson, Dunn & Crutcher LLP. “While Sam will continue to live in Los Angeles, he will operate as an integrated member of our world class Restructuring practice in national and cross-border matters,” said James F. Conlan, leader of Sidley’s global Restructuring group and member of Sidley’s Executive Committee. “Along with me and other Sidley restructuring partners, Sam will lead in matters where clients face mission-altering challenges and opportunities relating to their obligations, financial and otherwise.”

“Sidley’s leading Restructuring and M&A practices are mutually reinforcing and complementary, and serve as the platform on which Mr. Newman will now operate,” said Dan Clivner, managing partner of the Greater Los Angeles offices and member of Sidley’s Executive Committee. “Sam has demonstrated the kind of dedication and excellence our clients have come to expect from Sidley for matters critical to their life cycle.”

Sidley’s Restructuring practice has 60 restructuring and insolvency lawyers operating across the global law firm. Another 120 lawyers from other disciplines assist the Sidley restructuring and insolvency lawyers in some of the biggest restructuring matters in the world, most often as lead counsel for the company/debtor.

With 2,000 lawyers in 20 offices around the globe, Sidley is a premier legal adviser for clients across the spectrum of industries.

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Siena Lending Group LLC (“Siena”): Suzanne Lovett has joined the firm as director of Southwest originations in Dallas, TX. In her new role, Lovett will be responsible for originating, structuring, and funding asset-based financing solutions with commitment amounts up to $35 million for middlemarket companies in the Southwestern United States.

Lovett brings over 30 years of assetbased lending experience to Siena, beginning her career managing nonperforming assets for Foothill Capital Corporation. For the past 20 years, she has focused on new business development in the Southwest, primarily for Wells Fargo Capital Finance and its predecessor companies Norwest Business Credit, Congress Financial, and Wachovia Capital Finance.

Lovett earned a Bachelor of Science in business administration degree with a concentration in finance from the University of Texas at Dallas with magna cum laude distinction. She has previously served as President of the Women’s Finance Exchange, Grants Chair and Board member for the Dallas Women’s Foundation, and Treasurer for the DFW Chapter of the Turnaround Management Association. Lovett currently serves on the Board of Directors for the Southwest Chapter of the Commercial Finance Association and is an active member of the Association for Corporate Growth and the Turnaround Management Association.

Sterling National Bank, the principal subsidiary of Sterling Bancorp (NYSE: STL), announced that Glenn S. Burroughs has joined the bank’s asset-based lending division as managing director, originations. He will report to Doug Motl, national marketing manager, Asset Based Lending at Sterling.

Based in Bellevue, WA, Burroughs

will have geographic coverage responsibility for the Pacific Northwest and the Rocky Mountain markets, focused on new client acquisition with established referral sources to deepen and expand existing client relationships, and evaluate and structure prospective asset-based credit solutions.

Most recently he was Woodforest National Bank’s managing director and Western region manager of the Asset Based Lending team, with duties that included sourcing, structuring and negotiating new asset-based loans.

During his 38-year banking career, Burroughs has held senior positions at KeyBank Business Capital, PNC Business Credit, and National Bank of Canada in a new business development capacity.

Burroughs attended University of Southern California with a bachelor of science degree in finance and banking and Pepperdine University with a masters of business administration.

Sterling National Bank also announced that William Bogatay has joined the bank’s Asset Based Lending division as managing director, originations. He will report to Doug Motl, national marketing manager, Asset Based Lending at Sterling.

Based in Dallas, TX, Bill will have geographic coverage responsibility for the Southwestern U.S. market, focused on new client acquisition with established referral sources to deepen and expand existing client relationships, and evaluate & structure prospective asset-based credit solutions.

Most recently Bogatay was Woodforest National Bank’s senior vice president and Southwest regional manager of the Asset-Based Lending team, with duties that included sourcing, structuring and negotiating new asset-based loans. During his 25-year banking career, Bogatay has held

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senior positions at Bank of America, GMAC and PNC Business Credit, in a new business development capacity.

Triumph Commercial Finance: John Hanley has joined as its senior vice president responsible for managing client relationships for the assetbased lending and commercial factoring business units. Hanley will oversee a team of account executives with the primary objectives to retain, expand and maintain client relationships.

“John brings extensive experience in portfolio management to the Triumph Commercial Finance team,” said Dan Karas, executive vice president.

“I’m excited to have John on the same team again, given his proven history of enhancing profitability and effectively managing teams across a wide range

of industries and geographies.”

Hanley joins Triumph Commercial Finance with more than 20 years of experience in portfolio management. He has spent the last 15 years with Wells Fargo Capital Finance in both Dallas and Denver, leading high-performing teams and maximizing individual talents. In his previous role, he was responsible for the double-digit growth in average credit lines and financed volume while minimizing loss.

“I am excited to be a part of this skilled team,” Hanley said. “I have spent my career driving organizational improvements and implementing best practices, and I look forward to bringing those experiences to Triumph Commercial Finance.”

Among Hanley’s many accomplishments is his ability to cultivate strong

relationships within his team and clients while generating growth. At Triumph Commercial Finance, Hanley will be responsible for managing client relationships while contributing to profitability and maximizing asset quality while minimizing loss.

Wells Fargo Capital Finance (WFCF), a unit of Wells Fargo Commercial Capital, has promoted Jack Morrone and Daniel Pfeiffer to lead its channel finance division.

Channel finance is a specialized business which underwrites and collects payments from technology hardware resellers and distributors, the receivables of which are sold to the business by the manufacturers. It sits alongside three other working capital businesses in Wells Fargo’s broader

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the sfnet brief

supply chain finance division: supplier finance, accounts receivables and accounts receivables securitization.

Morrone has become division manager while Pfeiffer is now head of business development.

Both report to Holly Kaczmarczyk, Wells Fargo’s head of supply chain finance.

Based in Chicago, Morrone most recently served as Wells Fargo’s regional underwriting manager for supply chain finance and led an underwriting team that supported its channel finance division.

He previously spent 19 years at GE Capital in various underwriting and relationship management roles in asset-based lending, leveraged finance, channel finance and floorplan finance. In those roles, Morrone led cross-functional teams that served customers in multiple industries, verticals, and geographies.

Meanwhile, Pfeiffer, based in Florida, joined Wells Fargo in 2016 as head of sales for supplier finance and the key accounts purchase programs in supply chain finance. Before that, he worked for Taulia to build a supply chain finance offering for Europe and the US. He previously spent 10 years with Citi in a variety of roles, including transaction services head for Trinidad & Tobago, Bahamas and Barbados.

“Jack Morrone and Daniel Pfeiffer have extensive supply chain financing and lending experience, strong relationship development and leadership skills, and history of achieving outstanding results that add value to our team and our clients,” says Kaczmarczyk. “They will play key roles in developing of our capabilities and finding working capital solutions for technology firms globally.”

Continuing to strengthen and simplify how it serves commercial cus-

46

tomers, Wells Fargo & Company (NYSE: WFC) announced the leadership team and regional structure for its Commercial Banking business, led by Kyle Hranicky, a 25-year company veteran.

With this new structure, Wells Fargo Commercial Banking has more than 6,000 team members across 24 divisions and 80 markets nationwide providing industry expertise, customized solutions and local service to support the diverse financial needs of customers.

As previously announced, Wells Fargo combined its Business Banking, Government & Institutional Banking and Middle Market Banking businesses to establish an integrated Commercial Banking business focused on operating more efficiently, reducing risk and better serving customers.

“In looking for ways to invest in and strengthen our business, we decided to bring together these marketleading businesses because it was an opportunity to further improve how we serve our customers,” said Perry Pelos, head of Wells Fargo Wholesale Banking. “By establishing Commercial Banking, we are building on our strengths, investing in our capabilities and creating an integrated business that best serves the evolving needs of our customers.”

Wells Fargo Commercial Banking provides products and services, including credit and treasury solutions, to customers with annual sales typically ranging from $5 million to $2 billion. With its newly formed national Specialized Industries group, Wells Fargo also provides expertise across industries including Food, Beverage & Agribusiness, Investor Real Estate, Government and Technology throughout its regional presence. Organized under a simplified and consistent leadership structure, the business operates in three regions across the U.S.:

East, Central, and West. Each region has division and market leadership structure dedicated to providing local service and decision making.

“Our focus on building long-term relationships has not changed, and customers will continue to receive the same level of service and commitment they have come to expect from Wells Fargo,” said Hranicky. “With our new integrated business model and regional structure, we’re strengthening our core capabilities — providing local service and industry expertise.

Our market leadership affirms that we have the best team in the industry, and we’re excited to continue to help our commercial customers grow and be successful.”

Under the new Commercial Banking organization, the following leaders report to Hranicky: East Region is led by Kristin Lesher, a 20-year industry veteran. Based in Washington, D.C., Lesher oversees Commercial Banking operations across six divisions in 19 states — including Alabama, Connecticut, Delaware, Florida, Georgia, Kentucky, Maine, Massachusetts, Maryland, Mississippi, North Carolina, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, South Carolina, Tennessee and Virginia — as well as the District of Columbia and Eastern Canada. Previously Lesher was co-head of Investment Banking Coverage, part of Corporate and Investment Banking.

Central Region is led by Laura Oberst, a 35-year industry veteran.

Based in Minneapolis, Oberst oversees Commercial Banking operations across six divisions spanning 20 states - Arkansas, Colorado, Iowa, Illinois, Indiana, Kansas, Louisiana, Michigan, Minnesota, Missouri, Montana, North Dakota, Nebraska, New Mexico, Ohio, Oklahoma, South Dakota, Texas, Wisconsin and Wyoming. Previously

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Oberst was head of Wells Fargo’s Business Banking Group.

West Region is led by John P. Manning, a 34-year industry veteran.

Based in Irvine, CA, Manning oversees Commercial Banking operations across five divisions in nine states — including Alaska, Arizona, California, Hawaii, Idaho, Nevada, Oregon, Utah and Washington as well as Western Canada. Previously Manning was head of Wells Fargo Middle Market Banking, East Region.

Chief Operating Office is led by David Pope, a 35-year industry veteran.

Based in Charlotte, Pope is responsible for leading strategic initiatives including market implementation, business initiative support, regional services and partner relationships. Previously Pope was chief operating officer for Wells Fargo’s Business Banking Group.

Specialized Industries is led by Phil Smith, a 30-year industry veteran.

Based in Charlotte, NC, Smith oversees operations to deliver industry expertise and specialized capabilities across 48 states and Canada. Previously Smith was head of Wells Fargo’s Government and Institutional Banking Group.

For more information on Wells Fargo Commercial Banking, please visit wellsfargo.com/commercialbanking.

ment, and Small Business Administration Lending. With more than 6,000 team members across 24 divisions and 80 markets nationwide, Commercial Banking provides customers with local service and decision making.

About Wells Fargo Wells Fargo & Company (NYSE: WFC) is a diversified, community-based financial services company with $1.9 trillion in assets. Wells Fargo’s vision is to satisfy our customers’ financial needs and help them succeed financially.

Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, investment and mortgage products and services, as well as consumer and commercial finance, through 7,700 locations, more than 13,000 ATMs, the internet (wellsfargo. com) and mobile banking, and has offices in 33 countries and territories to support customers who conduct business in the global economy. With approximately 262,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 26 on Fortune’s 2018 rankings of America’s largest corporations. News, insights and perspectives from Wells Fargo are also available at Wells Fargo Stories.

About Commercial Banking Wells Fargo Commercial Banking delivers a comprehensive suite of products and industry expertise to serve the diverse financial needs of companies with annual sales typically ranging from $5 million to $2 billion. As a leader in serving commercial customers, Wells Fargo offers financial services, including credit and treasury management solutions, as well as specialized expertise across industries including Technology, Food, Beverage & Agribusiness, Investor Real Estate, Govern-

THE SECURED LENDER SEPTEMBER 2019 47

CHAPTER NEWS

the sfnet brief

Atlanta The Chapter held its Summer Social at Industry Tavern Buckhead in Atlanta with TMA on August 15.

For more information visit www.sfnet.com/atlanta Charlotte The Chapter held a lunch with speaker Kurt Stakeman of Womble Bond Dickinson, discussing Neurolinguistics – True or False? Techniques to determine if someone is telling the truth, on August 27 at The Palm in Charlotte.

For more information visit www.sfnet.com/charlotte Europe The Chapter will host an event in Paris on October 3 at Banque Neuflize OBC. The event, Paris: The French ABL Market, will explore the French ABL market in detail from both business and legal perspectives. Speakers will focus on the specifics of the domestic market and the opportunities available to dealmakers, including sector-specific trends and the technical differences in the French market.

Lenders and service providers from the ABL community are expected to attend from across Europe, who have a keen interest in understanding France as a source of potential opportunity. Welcome remarks will be conducted by Lauren Garret, chief executive officer, Banque Neuflize OBC and Jeremy Harrison, president of CFA’s Europe Chapter. The Keynote presenter will be Françoise Palle Guillabert, director general at ASF - Chair at EUF (EU factoring association), followed by An Overview of the French Legal Framework with Véro-

48

nique Collin, partner, Squire Patton Boggs, presenting. The Business Panel: Asset Based Lending in the French Market will comprise: Arjan de Liefde, managing director France, ABN AMRO Asset Based Finance; Patrick de Villepin, global head of factoring, BNP Paribas Factoring; Gaëtan du Halgouet, founding partner, ChateaudunCredit with moderator: Ronald Biemans, head of Origination & Structuring, ABN AMRO Asset Based Finance.

Save the date for the Chapter’s Seasonal Celebration in London on November 20 at Aon, The Leadenhall Building, co-partnered with TMA UK. The event will also feature an informal keynote from Trevor Williams, economist, visiting professor, lecturer and writer. Registration will open in September.

For more information visit www.sfnet.com/europe Houston The Chapter will hold its 11th Annual Private Equity Luncheon on September 18 at Vic & Anthony’s in Houston, TX. Panelists will include: Gretchen B. Perkins, Huron Capital; David Magdol, Main Street Capital; JB Dollison, Crutchfield Capital and Codi Biller, Amegy Bank. To register visit sfnethou.org.

For more information visit www.sfnet.com/houston Midwest The Chapter’s YoPro 2nd Annual Rooftop Summer Networking Event was held August 22 at Joy District Rooftop in Chicago, IL. Attendees enjoyed a summer evening at one of the hottest rated rooftops by Eater Chicago, TimeOut Chicago and Thrillist Chicago.

For more information, visit www.sfnet.com/midwest Minnesota The Chapter hosted a Summer Wine Social with ACG on August 14 at the Minneapolis Club in Minneapolis, MN. The event featured Croatian Wines from

Korta Katarina Winery and the tasting was led by Leslee Miller, Certified Sommelier and owner of Amusee.

For more information, visit www.sfnet.com/minnesota New England The Chapter held a Summer Panel Discussion on August 8 at Choate, Hall & Stewart LLP in Boston. Attendees had an opportunity to hear directly from the professionals that helped shape and direct the events leading up to the Sear’s bankruptcy filing and eventual restructuring. Panelists included: Steve Garvin, managing director, Bank of America Retail Finance Group; Mark Renzi, managing director, BRG Corporate Finance; Kevin Simard, partner, Choate, Hall & Stewart, Finance & Restructuring Group; John Ventola, co-chair, Choate, Hall & Stewart, Finance & Restructuring Group and Keith F. Vercauteren, managing director, Retail Finance - Wells Fargo Capital Finance.

For more information, visit www.sfnet.com/new-england New Jersey The Chapter will hold a Monday Night Football and SFNet New Jersey Chapter Members Registration event on October 21 at MetLife Stadium in East Rutherford, NJ. The New York Jets vs. the New England Patriots game will kickoff at 8:15 p.m. Registration includes food and drink during a two-hour “tailgate” inside the stadium and a ticket to the game.

Save the date for the Chapter’s 2019 Holiday Party on December 11 at Calandra’s Mediterranean Grill in Fairfield, NJ. For more information, visit www.sfnet.com/new-jersey Ohio The Chapter’s Annual CFA/TMA Joint Shuffleboard Event was held August 29 at Forest City Shuffleboard in Cleveland,

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OH. The venue featured indoor and outdoor shuffleboard courts, regulation shuffleboard tables and a patio.

For more information, visit: www.sfnet.com/ohio Orlando The Chapter hosted a CLE-accredited Cyber Security Seminar on August 14 at the Citrus Club in Orlando. Led by featured speaker Buddy Pitt, director of client services at Network Support Co., the course was intended for finance and legal professionals to learn how cyber security threats are changing the way people do business. Attendees had the chance to learn in an interactive small group environment while enjoying lunch. Topics included: How to identify and protect against cybercrime; the impact of security in the workplace; best practices for email, social media, and smartphone use; how to prepare your employees to be aware of possible threats; how to protect your business and mitigate cyber attacks; some interesting statistics on cybercrime; an overview of Cyber Security Liability Insurance and potential costs and liability resulting from a security breach For more information, visit www.sfnet.com/orlando.

Southern California The Chapter hosted a summer party at The Standard-Rooftop on July 17. A Women of CFCC event, a cooking class with L.A. Food Works, will be held on September 25; a Panel Discussion with Inspirational Speaker, Jake Olson, USC football player, will be held at the Luxe Summit Hotel in Los Angeles on October 2. The Annual Fall Golf Classic will be held at Coyote Hills Golf Course on November 5 and a holiday party will be held at Mr. C’s in Beverly Hills on December 11.

For more information visit www.sfnet.com/southern-california

Southwest The Chapter held a Women’s Practice Clay Shoot - hosted by Riveron at the Elm Fork Shooting Range in Dallas, TX on August 28. The event included lunch at Hugo’s Invitados in Las Colinas. On August 29, the Chapter held its Annual Clay Shoot at Elm Fork Shooting Sports.

The Eighth Annual Energy Summit will be held on September 17 at the Belo Pavilion in Dallas. The Holiday Party with TMA and TFF, will be held at Dallas Country Club in Dallas, TX on November 21. PEGapalooza 2020 Dealmaker Wine and Whiskey Tasting will be held January 30, 2020 at 3015 at Trinity Groves in Dallas, TX. For more information, visit www.sfnet.com/southwest.

Tampa Bay CFA Tampa Bay hosted a Wine Tasting on August 13 at The Best Cellar in Wilton Manors, FL. For more information, visit www.sfnet.com/tampa-bay For more information on SFNet Chapters, please visit: www.sfnet.com/chapters

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CHAPTER SPOTLIGHT

the sfnet brief

SFNet’s Midwest Chapter’s Inaugural Gala Raises $40,000 for Cancer Support Secured Finance Network’s (SFNet) Midwest Chapter held its inaugural charity gala event, CFA Cares (the gala was held prior to the name change), on May 10 at the Ivy Room in Chicago’s River North neighborhood. Proceeds from the evening benefitted Imerman Angels (www. imermanangels.org), a Chicago-based nonprofit providing free one-on-one cancer support for cancer survivors, fighters and caregivers. The CFA Cares’ Spring Gala marked one of the largest third-party event awards received by Imerman Angels in its 13-year history with proceeds totaling approximately $40,000.

The SFNet Midwest Chapter has supported Imerman Angels since 2018, naming it the beneficiary of its member events, drawing on hundreds of leaders in the finance and banking industries.

Funds raised go directly to advancing the Imerman Angels’ mission. Through its unique matching process, Imerman Angels partners anyone, any age, any gender, anywhere and any cancer-type seeking support with someone just like them – a “Mentor Angel”. A Mentor Angel is a cancer survivor or caregiver who has faced the same type of cancer. These one-on-one relationships give a cancer fighter or caregiver the chance to ask personal questions and get support from someone who has been there before.

“A big initiative for the Midwest Chapter going into 2018 was for increased charitable contributions and involvement in our community,” explained Tessa Payne, managing director, FGI and gala co-chair.

“Imerman Angels was an overwhelmingly

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From right to left: SFNet Midwest President, Nick Paynem Tessa Payne and Anita Mauro, Co-Chairs of the Spring Gala Committee.

The audience raising a glow stick to signify if they or a loved one has ever been affected by cancer. popular choice for our charitable focus.

Several CFA Midwest Chapter members had used Imerman Angels in their own family members’ fights against cancer, and that was one of the biggest reasons why we selected Imerman as our partner char-

ity, because they have personally enriched the lives of many of our members.”

Imerman Angels’ founder, Jonny Imerman, also attended the gala and addressed the audience.

“Having Jonny there sharing his own

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A SPECIAL THANKS TO THE CFA CARES SPONSORS: Marquee Sponsor BMO Harris Bank

Premier Sponsor Hilco Global

Patron Sponsors Siena Lending Group Thompson Coburn LLP Wintrust

Table Sponsors Chapman & Cutler LLP Conway MacKenzie, Inc. FGI Goldberg Kohn Ltd. Katten Muchin Rosenman LLP

Imerman Angels founder, Jonny Imerman, sharing his cancer survivor story and how Imerman Angels helps thousands of others through their fight. personal story on how and why he started Imerman Angels resonated with a lot of people,” said Payne. “We felt very honored to have him there.”

“This was the first-ever event of its kind for the Midwest Chapter, and I believe by any SFNet Chapter,” said Anita Mauro, gala co-chair and partner at Thompson Coburn.

“Originally we had budgeted that we were going to donate $10,000 to Imerman Angels, and we exceeded our goal by 400 percent!”

“I don’t think there are any other cancer support organizations that have free oneon-one support as well as support for the fighter’s loved ones caring for them who are often overlooked in the fight against cancer and need support too,” said Payne.

“They are pairing up fighters with survivors and caregivers of fighters with caregivers of survivors. Caregiver support is something that is wholly unique to Imerman Angels,” added Mauro.

“BMO was proud to sponsor an industry event which not only gathered professionals across the asset-based lending industry in a social setting, but also

raised thousands of dollars for Imerman Angels, the most worthy of causes,” said Mike Scolaro, ABL group head, BMO Bank and Gala emcee. “From my viewpoint, the energy in the room was incomparable to other events as our community rallies around the cause. Congratulations to the committee that brought this great night to life!”

“The Imerman Angels mission is one that is close to our hearts,” said Nick Payne, director, new business originations, Siena Lending Group and president of SFNet Midwest Chapter and gala event liaison.

“We are proud and humbled to offer our support to such an amazing cause. We look forward to continuing our work with Imerman Angels and growing our partnership to create a positive impact in the Midwest and worldwide.”

The gala began with a cocktail reception accompanied by a jazz trio and a silent auction followed by a dinner, presentation and a live auction. Capping off the evening was a performance by “Along the Drive,” a Chicago-based indie/alternative rock band.

The gala also featured Art Beat Live,

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where abstract expressionist performance artist Elliott From created pieces of art within five minutes in front of attendees. A Chicago Blackhawks logo and a cityscape of Chicago were created, spurring a bidding war for both. From then split up the bid and recreated an additional painting for everyone. At the end of the evening, six original paintings had been sold.

“We weren’t sure how some of the auction items would be received as this event was the first of its kind, but we were ecstatic about how many attendees engaged in both the silent and live auctions and touched by their generosity,” said Tessa. “Our live auctioneer, Adam Evans, senior vice president of Hilco Global, did an amazing job engaging the crowd and keeping up with the momentum of the bidding frenzy.”

Going forward, the Chapter plans to host the gala yearly or every other year.

THE SECURED LENDER SEPTEMBER 2019 51

the sfnet brief

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September 17-19, 2019 SFNet’s Fall Operations Bootcamp Greenberg Traurig, LLP Atlanta, GA September 17, 2019 SFNet’s Southwest Chapter’s Eighth Annual Energy Summit Belo Pavilion Dallas, TX September 18, 2019 SFNet Webinar - Getting in Touch with Intangibles: IP Collateral 2:00 p.m. - 3:00 p.m. (ET) September 18, 2019 SFNet’s Houston Chapter 11th Annual Private Equity Luncheon September 18, 2019 10:00 AM - 1:30 PM (CDT) Vic & Anthony’s Houston , TX September 19, 2019 SFNet’s Cross Border Lending Summit Winston & Strawn LLP MetLife Building New York, NY September 24-26, 2019 SFNet’s Foundations of Account Management Virtual Class September 25, 2019 SFNet’s California Chapter Women of CFCC Event Location TBD October 2, 2019 SFNet’s California Chapter Hot Topic Panel Discussion Luxe Summit Hotel Bel Air, CA

52

October 3, 2019 SFNet Europe Chapter Event - Paris: The French ABL Market Banque Neuflize Paris, France October 21, 2019 SFNet’s New Jersey Chapter – Monday Night Football NY Jets vs. New England Patriots MetLife Stadium East Rutherford , NJ November 5, 2019 SFNet’s California Chapter Annual Fall Golf Classic Coyote Hills Golf Course Fullerton, CA November 13-15, 2019 SFNet’s 75th Annual Convention New York Marriott Marquis New York, NY

December 5, 2019 SFNet’s Ohio Chapter - Holiday Party Nuevo Cleveland Cleveland, OH December 11, 2019 SFNet’s California Chapter Holiday Party Mr. C’s Beverly Hills, CA December 11, 2019 SFNet’s New Jersey Chapter – Holiday Party Calandra’s Mediterranean Grill Fairfield, NJ January 30, 2020 SFNet’s Southwest Chapter - PEGapalooza 2020 Dealmaker Wine and Whiskey Tasting 3015 at Trinity Groves Dallas, TX

November 13, 2019 SFNet’s California Chapter OC Networking Event Center Club – Orange County Costa Mesa, CA November 20, 2019 SFNet’s Europe Chapter Seasonal Celebration Aonm The Leadenhall Building London, England November 21, 2019 SFNet’s Southwest Chapter Holiday Party - SFNet, TMA & TFF Dallas Country Club Dallas, TX

DON’T MISS SFNET’S 75TH ANNUAL CONVENTION NOVEMBER 13-15, 2019 TO REGISTER VISIT WWW.SFNET.COM

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