At the table
Tim Hawkins, Centric Commercial Finance
Hawkins is the commercial director of Centric Commercial Finance,
the privately backed ABL provider. He has worked in ABL for more than 20 years.
Steve Keating, Privet Capital
Keating founded turnaround house Privet Capital in 2007, having previously spent ten years in the workout and restructuring team at 3i.
Jeremy Harrison, Bank of America Merrill Lynch
Harrison is a senior vice-president and senior business development officer at Bank of America Business Capital. He was previously with Lloyds Banking Group, GE Capital and GMAC.
Mark Owen, NBGI Private Equity
Owen is a director at UK mid-market private equity house NBGI Private Equity. Before joining NBGI, Owen spent six years with Granville Private Equity Managers. Prior to that he ran the private transactions team at Schroders Corporate Finance.
Martin Morrin, RBS Invoice Finance
Morrin is the managing director of RBS Invoice Finance. He joined RBS from Barclays, where he was ABL director. He has worked in banking for two decades.
Adam Johnson, GE Capital
Johnson is head of corporate structured finance at GE Capital. He joined the firm in 2006 and has previously held positions with Rabobank, Hill Samuel, Barclays and West LB.
Since the liquidity freeze, we have seen a contraction in the amount of leverage available from cash flow lenders. Has this opened up an opportunity for asset-based lending (ABL) to win market share and grow?
Harrison: We have seen more business coming through our doors since the credit crunch, but we haven’t seen a huge conversion of cash flow loans to ABL. Businesses have done a lot of self-help and I certainly believe that the larger banks are holding on to a number of deals. What we think will happen is that as we pull out of recession, we will see an increase in business. We are in a situation where ABL is very well positioned.
Hawkins: The ABL market has performed very well in the last three to four years. If you go back five years the stats showed that just over £11bn (€12.4bn) of ABL capital was issued compared to £15bn last year. The ABL market is in a very good place. The availability of cash flow lending is constrained, so ABL is more attractive.
Johnson: ABL does provide an additional pool of liquidity, and in this market that places it in a good position. Following the credit crisis, what you are finding is that ABL, both at the small end of the market and in the larger corporate space, is becoming a mainstream offering because it is providing liquidity. The challenge for the industry is to educate a wider audience about ABL and how it works, because there is certainly capital available.
Morrin: If you look at the industry statistics they show that ABL has been growing steadily for many years. ABL is currently in a strong position.
I think Adam’s point around educating the market is very important, because you have to educate people about where our product is positioned and the different types of finance that ABL can provide.
ABL is more than simply factoring to the extent that we are using a pool of assets to provide a working capital facility, and in some situations much more than this – an acquisition fund, for example.
ABL has grown significantly during the last few years, yet many borrowers still view ABL as the lender of last resort and have a preference for other kinds of finance. Why is that?
Owen: The description of ABL as a lender of last resort is a very unfair one. If you look back, historically ABL was associated with very small, private traders who quite often found themselves in trouble. When things went wrong that reflected on the ABL industry, and that has been unfair as the problem probably lay with those small traders themselves. Maybe you could say the ABL providers should have been more disciplined when picking the people they backed.
From our point of view, ABL is a good product. We recently did a deal where we used an ABL loan and given the recent lack of cash flow lending, ABL has very much come to the fore in our thinking.