By Steve Viuker
“Yes, Virginia, Bank Loans are Available” was the catchy subject of an ACGNY panel discussion on Feb. 17 in Tarrytown. And while Christmas was 10 months away, the panelists appeared to believe the lending spigot is open and the economy is rebounding.
The discussion was moderated by Barry Korn, managing director, Barrett Capital Corporation. The panelists were Stephen Altneu, vice president, Capital One Business Credit; Barry Karen, first vice president, IDB Bank; John Mulvey, senior vice president, Wells Fargo Bank; and Oleh Szczupak, executive vice president and chief credit officer, Keltic Financial Services.
“We do asset-based lending with somewhat better financial statements than what a Keltic would do. We specialize in financing finance companies and debt buyers,” said Barry Karen of IDB. “If you’re making money and have some capital, banks are chasing you. If you put out a RFB, you’re likely to have multiple banks interested. For the profitable company, there is lending at the bank level.”
“Wells Fargo is the largest middle market lender in terms of customers in the United States,” explained Mulvey. “We can provide any type of asset based lending at various entry points with $50 million in revenue size up to $500 million. The majority of our business is with family owned clients but we also have small and mid-cap corporate clients in our portfolio. Banks can’t hang on to customers when the risk rating deteriorates. That gives an opportunity to asset based lenders.”
Mulvey also said that “everyone is competing on price,” adding that it won’t be long before everyone will be competing on structure. “Bankers are lemmings and we’ll be back to where we were in 2007-08 with covenant transactions.”
And where does Keltic fit in? “If companies are having operational problems or facing financial distress, they are being pushed out of the banks,” explained Szczupak “We are a privately owned finance firm. We target small to middle firms with revenues from $10-$100 million. What does a firm do if they’re a $50 million revenue company; have a good product line but don’t have a bank that will support them if they have issues. Banks, due in part to their regulatory requirements, can’t react to [that] type of companies. We’re finding family owned businesses that are solid companies but their bank won’t give them a loan. That void is creating huge opportunities for [privately owned] ABLs because the banks can’t service those people.”
Altneu pointed out that there has been an influx of players providing financing on the smaller end where the credit quality isn’t bank quality. “We provide financing to the middle and lower markets and do transactions only on the senior side from $5 to $50 million,” he said. “On the larger end, the existing players are more competitive than ever. Lenders want to hold onto companies with good credit facilities. It’s difficult for a competitor to win business away from a company that has a good relationship with its lender.”
As for the future, Mulvey expressed optimism. “The economy is recovering slowly and steadily,” he said. “Companies that saw revenues contracting in 2009 and capital requirements decreasing due to the economy have seen a rebound in sales in 2010-11. They’re on firmer footing and financial performance has improved. The real headwinds in commercial banking are that we look at things a little tighter structure-wise.”
Regarding sector improvements, Mulvey pointed to media, tech and health care – the latter as baby boomers age.