How did you get your start in ABL?
In 1998, I joined GMAC, then called Bank
of New York and prior to that International Factors, which had been sold by
Lloyds TSB Bank Plc. I joined as a client
manager looking after invoice discounting and factoring clients. I quickly
moved into inventory and term lending,
which were the beginnings of ABL. I had
just completed my part-time BA degree
and my dissertation was entitled, “The
Differences between Factoring and
Invoice Discounting.” This served as a
springboard into the sector, which was
growing exponentially, and where my
friends and colleagues were moving
from standard corporate banking.
What are the differences in the UK market and the U.S. market? What about
pan-European asset-based financing?
In the U.S., ABL is mainstream, and in
some ways it is ahead of the UK and
indeed Europe, but in other ways the UK
is more advanced. In the UK, cashflow
lending or RCFs teamed with term loans
or bonds are the predominant structure.
A lot of what I do is to ‘educate’ on the
merits of ABL, and we continue to win
deals in the marketplace, as many of our
clients realize that the ABL product is a better option. Nevertheless, there is room to
grow our product in the European market,
which I expect will happen as it becomes
an increasingly accepted solution.
The challenge within Europe is the
separate jurisdictions with their differing considerations. For example, the
Administrator in Germany or enhanced
employee rights in France. Many European clients continue to use the factoring
product. However, clients are more often
turning to a cross-border ABL structure.
How has ABL evolved in the UK and European markets over the last few years?
Since early 2000, the market has evolved
strongly, and ABL is a real alternative to
traditional methods of financing. ABL
was once dominated by the clearing
banks and a handful of others. Today,
the market also includes the international banks and a number of independently
owned asset-based lenders. Market
depth and capacity have increased, and
we are currently working on several
large multi-jurisdictional transactions.
What are the biggest challenges and
opportunities facing ABL in the UK?
How do you see the product evolving to
address these challenges?
Alternative lenders have been in the
market for four or so years, and we have
seen good ABL deals go down that route,
despite expensive financing for these
transactions. I would like to see progress
around ABL working with alternative
lenders and providing the revolving
piece of transaction. The inter-creditor
is a key document in our suite, and I
believe with some revisions, there is suf-
ficient protection for ABL to work with
From a CFA perspective, I see this as
an opportunity. Working with debt advisors is critical in our market, and giving
them the tools they need to have confidence in ABL is crucial. Recently, Bank
of America Merrill Lynch hosted a Debt
Advisory focused panel, and the key
challenges we uncovered were working
with the alternative lenders, standardized documentation and making the
product less onerous. Of course, we have
views on each area, and I think we have
made enormous progress, but it is important to look at the market dynamics
and adapt where you can. For example,
companies can embrace IT enhancements to make it easier to communicate
with their banks.
How do you think the new regulations
from the EU on leveraged lending may
affect the UK and European asset-based
Generally, my view is that Europe follows
the U.S., and as such, some version of the
U.S. regulations are likely in Europe. But
I would expect these to take note of the
nuances of European lending.
As the president of CFA’s European
Chapter, what role does the chapter
play in the industry?
The Chapter operates at the middle- to
upper-end of the marketplace. We are
not aimed at factoring clients, but do
cover invoice discounting and ABL
clients, with invoice discounting being
unique and larger clients not fitting the
CFA profile. The Chapter is focused on
Europe, not just the UK, and I think we
are beneficial to all market participants
as our aim is to provide useful content.
Education is a critical part as well as offering panels on current trends to asset-based lenders. We host meetings in the
UK, the Netherlands and Germany. It’s
important that we involve ABL professionals at all levels and encourage our
members to be active participants. TSL
Michele Ocejo is editor-in-chief, The