Asset Based lending

[Pages:6]Asset Based lending

Reviewing Trends, Structures, Documentation & Topical Issues Perspectives for borrowers, lenders, and professional advisors

This course is presented in London on: 5 October 2018

The Banking and Corporate Finance Training Specialist

Course Objectives

Participants will: Gain an appreciation of asset based lending ("ABL") in tandem with other funding

sources Understand when ABL is and is not suitable, as well as the choice of funding Be taught about the key intercreditor issues applicable for ABL Have explained the financing accounts receivable ("AR") in ABL Learn abCoouut rtshee Okveeyrrveielewvant issues in inventory and plant, machinery and equipment Learn about the relevance of ABL to real estate, including a comparison with specialist

lending Receive an overview of a typical term sheet and commentary thereon

Background of the Trainer

The trainer is a consultant, public speaker and author. He provides training programmes globally to a blue-chip client base on private equity, debt finance, loan documentation and restructuring. He is a senior consultant with Debt Xplained, with Grant Thornton UK (Debt Advisory) and is also a Senior Advisor to KPMG Finland.

He has spoken at conferences in the UK, Europe, Australasia & South Africa. He provides training to a wide range of clients on a bespoke in-house basis & publicly through Redcliffe Training Associates. Additionally, he is the Programme Director for the infrastructure/project finance module for the MBA programme at the Cass Business School in London.

Course Content

Introduction Two approaches to the credit decision

? Cash-flow based lending ? Asset based lending Asset based lending defined and compared with other asset-related finance techniques ? Asset-backed lending ? Asset Finance compared Comparison of funding options ? TLB vs HYB vs Cash flow vs RCF Which types of business are suitable for ABL Which types of firms are not suitable for ABL Two key concepts in ABL ? The "borrowing base" ? "Headroom" Use and application of ABL ? M&A ? Restructuring ? General corporate purposes ? Other

ABL in tandem with other funding sources ABL and traditional senior (bank) loan facilities ABL & high yield bonds (q.v. review of Algeco Scotsman)



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 ABL & Unitranche Key intercreditor issues for the ABL Security ? resolving the conflict over competing claims for collateral

? Review of various approaches Enforcement Standstills ? resolving conflicting agendas with other lenders Option to purchase ? does it help Consents & Waivers Case: Review of key conflict issues between ABL and other funders

Financing accounts receivable ("AR") The basic approach Loan vs debt purchase structure

? Confidential Invoice discounting ? Disclosed Invoice discounting ? Full service Factoring Key differences between discounting and factoring The key benefits of ABL Critical legal issues for lenders Key accounting issues ? off-balance sheet or not requirements ? Recourse vs Non-recourse ? Credit insurance ? key issues and tips Ineligible AR ? review of typical ineligibles Other typical limits ? Permitted territories ? Permitted currencies ? Debtor concentrations ? Export concentrations Typical Reserves Calculating the advance Case: Calculate the effective Advance rate on AR

Inventory financing What types of inventory qualify

? Finished goods ? WIP ? Raw materials / Commodities ? Typical list of ineligible stock ? Calculating the Advance ? Gross Orderly Liquidation Value ? Net Orderly Liquidation Value ? Reserves ? Typical reserves ? Prescribed part ? Employees ? Preferential creditors ? Landlord's "distraint" Retention of title issues ? "simple" vs "all monies"



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 Key risks for the lender Specific issues with "branded" products Plant, Machinery & Equipment What types of PME qualify Key concerns for the lenders

? Ability to sell & relocation Advance rates Pros and cons of other forms of funding (leasing, vendor finance) Key terms of the facility

? Margins, amortisation & tenors Funding PME on a revolving (inventory) basis Legal issues ? Taking adequate security

? Plating (why it isn't always an option)

Real Estate What types of property qualify Advance rates Valuation issues Key terms of the facility

? Margins, amortisation & tenors Pros & cons of using ABL vs specialist lenders Legal issues ? Taking adequate security

Other matters - overview Intangible assets - rationale for leveraging intangibles (unlocking hidden value)

? What types of intangibles qualify Cash-flow based loans

? Typical terms ? Potential pitfalls for the parties

Case: Create a funding structure using ABL

Documentation: overview of a typical term sheet Review of main headings Security package Information & Reporting requirements Financial covenants

? Why and when Operational undertakings

? "Dilution" defined Reps and Warranties ? typical Events of Default Fees and charges (one size does not fit all) The lender's approach to margin, fees and charges Other costs and expenses Exit / termination fees

? "typical" fees ? review various options ? Typical triggers ? Issues for Borrower's to consider (potential pitfalls)



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Course Summary

Asset based lending ("ABL") has been a well-established part of the financing environment in the U.S. for many years and has seen increasing volumes globally. Despite this ABL has struggled to gain the same level of acceptance here for three reason; first, a lack of familiarity, if not confusion, with the product; second, borrower's reluctance to abandon their traditional-bank led facilities and last, the dated perception of the product. These headwinds are abating and 2015 has seen record issuance in Europe as borrowers, both corporate and PE, are increasingly recognizing the multiple benefits of ABL, not least the increased flexibility and reduced cost vis-?-vis RCFs.

In practice the credit markets adopt two distinct approaches to a credit decision: a cashflow based approach and an asset-based approach which includes asset based lending. Most lenders are familiar with the former but not the latter. Moreover, ABL is often confused with other asset-related financing techniques especially asset-backed lending and asset finance. In simple terms ABL is a form of secured lending where loans are advanced against specific assets. The main focus is on working capital, although ABL also extends to hard assets such as plant, machinery and equipment, real estate and, more rarely, intangibles.

This programme provides practitioners with a practical toolkit to understanding ABL from the perspective of borrow, advisor, supporting professional and lender. It covers the key assets to which ABL is applied and the typical terms and conditions applied to each class. It also identifies the pros and cons in each asset class such as, for example, retention of title in the case of inventory and ineligible items in the case of accounts receivable. In the U.S. market ABL is frequently used along-side with other forms of lending (especially high yield bonds) and this is partly true of Europe, however, thus far intercreditor have inhibited these structures from evolving in Europe although these problems have been addressed by asset based lenders who are adopting an increasingly borrowerfriendly approach in order to gain market share. For the same reason ABL are also more willing to up their ABL facilities with cash-flow based facilities

The programme will include a number of hands-on cases illustrating ABL in practice which will provide a practical angle to the topic and reinforce the learning experience.

What Redcliffe's clients are saying about this course "Good presentation, real life examples, in ? depth knowledge"

"Very well thought out & delivered with practical examples" "Lots of industry views / current practices given us"

"Excellent presenter, kept the content interesting, very good at pacing the presentation"

"Good comparisons between different types of financing" "Good detailed explanation of different assets"

"Fantastic course ? Very engaging and full of useful real-life examples"



enquiries@redcliffetraining.co.uk

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09:00-17:00 09:00-17:00

London London

Standard Price: ?675 +VAT Membership Price: ?540 + VAT

?695 +VAT (?834)

In-House Training

Delivering this course in-house for a number of participants could be very cost effective.

The venue and timing can be agreed to suit the client, as well as the selection of the trainer and the precise contents of the seminar.

E-Learning

This course can also be presented as a bespoke e-learning programme created by you to fit your exact requirements.



enquiries@redcliffetraining.co.uk

+44 (0)20 7387 4484

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