Recently, Linda Jahnke, senior vice
president and marketing manager of
the Western Region of Bank of America
Business Capital, sat down with her
friend and colleague Alister Bazaz, head
of Bank of America Business Capital
International ABL at Bank of America
Merrill Lynch, to talk about those early
days and the evolution of international
Alister, what was the stimulus for the
development of international ABL in
those early days?
I was at Barclays, and I had been heavily
involved in serving the international
credit needs of U.S. companies that
were moving overseas as well as U.K.
companies investing in the U.S. Barclays
Business Credit was a leader in the domestic ABL space, but had not ventured
overseas in meeting the needs of its
U.S. customers. At the time, StanChart
Business Credit, another British-owned
lender, announced it was offering to
assist U.S. ABLs with the U.K. needs of
their clients. Well, that was like a red rag
to a bull for the largest British bank. So
we immediately created the disciplines,
infrastructure and underwriting criteria
necessary to offer U.K. sub-lines to our
U.S. borrowers in need of working capital finance.
Who else was offering U.K. financing at
It is an irony that Bank of America Business Capital has many of the early U.K.
players as part of its heritage. Clearly,
Barclays Business Credit, StanChart Business Credit (later to be LaSalle), Nat West
USA (acquired by Fleet), Security Pacific
Business Credit, and Bank Boston were
all key players in the development of the
European asset-based lending industry.
Many of the executives that were part
of those organizations are still playing a
role in international ABL today.
Why were they able to offer the capability?
First of all, with so many players in the
ABL industry at the time, companies had
to distinguish themselves from the pack.
Likewise, a competitor could offer the
capability you had to match them and
neutralize the competitive advantage.
However, these firms stood out because
of their willingness to invest resources
and people to deliver the solution locally
Having a presence in London enabled lenders to offer nearly-seamless
service to the U.K. subsidiaries of their
U.S. clients. There were no limitations
on currency lending as London was
ahead of the U.S. in those days. Multi-currency bank accounts were a way of
life at the time. In fact, U.S. banks still
typically don’t offer non-U.S. dollar
accounts in the U.S. In some countries,
a physical presence is essential. For example, to lend to a Singapore borrower,
the lender must be locally licensed
under the Singapore Money Lenders
Act. In other countries that impose
withholding tax, having a local branch
is a competitive necessity.
So how did international ABL evolve?
A key component in international ABL
is the legal confidence that a particular
jurisdiction may offer. The U.K. was the
perfect platform as English Common Law
offers lenders the ideal legal framework
for ABL loans. The historical precedent
that existed and the depth of the market
were important. So, by extension, English
Common Law countries such as Ireland,
Australia, Hong Kong, New Zealand and
Singapore were all ideal for this product.
But let me be clear, ABL is still primarily
secured loans “in country” to subsidiaries of North American companies, with a
secured parent company guarantee. Only
a few firms have been offering an ABL
solution to indigenous companies. And,
again, the U.K. has been the primary location for this particular approach.
As far as other countries are concerned, client need and the desire to
continue to push the envelope have
also been key drivers of growth. It is
widely held that the Netherlands and
Belgium also have favorable legal
frameworks. Most importantly, they are
critical distribution locations for pan-European supply chains.
Germany has always been a conun-
Twenty-;ve years – that’s how
long U.S.-style asset-based
lending has been o;ered outside
of North America. Today, many
U.S. lenders can say they have
made ABL loans in the United
Kingdom, Ireland, Netherlands,
Germany and Belgium. Some,
such as Bank of America Merrill
Lynch, can say that they have
made loans in Australia, New
Zealand, Hong Kong, Japan and
Singapore. What is even more
exciting is that the market has
evolved from small bilateral lines
on a country- by-country basis to
multi-tranche, complex, multi-jurisdictional capital markets-style ABL transactions. Whether
they are take-private deals,
sponsor-driven, or just companies seeking international
growth through acquisition, the
multi-jurisdiction senior ABL
market is thriving.
BY LINDA JAHNKE