The Banking and Corporate Finance Training Specialist

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, 11 March 2019, 7 October 2019

This course can also be presented in-house for your company

or via live on-line webinar

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+44 (0)20 7387 4484

Course Overview

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 about the key relevant 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

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) 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

Course Objectives

Course Content

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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” 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)

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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)

The trainer is a consultant, public speaker and author. He provides training programs 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.

Background of the Trainer

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+44 (0)20 7387 4484

The trainer is a consultant, public speaker and author. He provides training programs 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.

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-à-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 inter-creditor have inhibited these structures from evolving in Europe although these problems have been addressed by asset based lenders who are adopting an increasingly borrower-

friendly 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.

Course Summary

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What Redcliffe’s clients are saying about this course

“ It gave a good overview of asset based lending with some intresting examples”

-- SMBC Europe Limited

“The Speaker was good”

--Banking and Finance Solicitor, Pinsent Mason

“Learning About this new product was great” --Credit Analyst, BNP Paribas Leasing Solutions

“Very Clear Presentation”

-- Partner, Dentons UKMEA LLP

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+44 (0)20 7387 4484

09:00-17:00

London

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

09:00-17:00

London

£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.

Tailored Learning

All of our training courses can be tailored to suit your company’s exact training needs.

We will work closely with you to help develop a training programme with content that is unique for your organisation.

Please email us on enquiries@redcliffetraining.co.uk for more information

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

requirements.