the basics
4Q09 ABL issuance closed out the year
with the lowest quarterly issuance since
the end of 2008.
A number of regional banks amplified
their roles in large, corporate ABL deals.
ABL made up over 18% of total lending for
the year (the highest level in six years).
ABL was one of the only sources of
liquidity available to capital-constrained
issuers in 2009.
In 2010, spread pressures are expected
to continue.
Asset-based lending (ABL) got off to a
tepid start in 2009, gained momentum
partway through the year, and then
saw issuances taper off by year-end.
At $8.55 billion, 4Q09 ABL issuance,
though up 45% over the same time
last year, off 15% from 3Q09 levels and
closed out the year with the lowest
amount of quarterly issuance since
the end of 2008. The softness was
disappointing and, arguably, a bit of a
surprise.
“We saw the capital markets im-
prove,” one lender points out, “and we
would have thought there would have
been more [in ABL as a result].” “I was
not surprised that the quarter was
slow,” notes another, “but I was sur-
prised that it was as slow as it was.”
Although ABL lenders would have
liked more retail volume in 2009,
they were busy. On a simple level, it
seemed that fewer banks were doing
more deals. “Those of us doing deals
are feeling busier,” according to one
lender. Market capacity, although, ar-
guably, less of a concern in December
2009 than in January 2009, was still a
relevant issue.
With the exception of GE Capital,
finance companies including UPS
Capital, Textron and GMAC either
exited the market altogether or were
less-than-predictable investors. In the
large corporate space, in particular,
“You essentially have two or three
guys leading everything,” says one
lender. “There was always a concentra-
tion of deals among the top syndica-
tors, but now there is a huge drop-off.
We need to fill in the second-tier
arranger group.”
In this setting, a number of regional
banks, including Regions and Union
Bank, were able to step up their com-
mitments and amplify their roles in
large, corporate ABL deals. “It was a
good year for what we were trying to
do — and that was play in more large
corporate deals,” says one regional
player.
