Recently, I attended the Commercial Finance Association’s (CFA) Asset Based Capital Conference and Turnaround Management Association’s (TMA) Distressed Investing Conference in Las Vegas.
Overall the collective mood continued to be cautious at the events. Here is my take on both events:
CFA Asset Based Capital Conference
2011 was a good year for asset-based lenders who work with large cap companies, as many sought to refinance using ABL facilities. Many think that ABL volume would not be as strong in the New Year, as most of the companies who were going to refinance did so in 2011. However, I believe asset-based loans will see some action in 2012 from private equity firms who are going to get off the sidelines and start to make acquisitions. It’s my opinion that ABL will play a significant role in these types of deals.
There wasn’t a large amount of action in the mid-to-small cap space with respect to ABL in 2011. This wasn’t necessarily because the need didn’t exist, rather, there were not enough lenders to take on these types of deals. Federal regulators are still pressuring big banks to remove this type of debt from their balance sheets. In turn, banks are reticent to lend to small businesses. I don’t see this changing anytime soon which presents huge opportunities for non-bank lenders like CBC.
TMA Distressed Investing Conference
It appeared to me that there was a lot of ‘wishful thinking’ taking place at TMA conference. Many expect an uptick in business as large banks start to deleverage, severing ties with small, struggling companies that have relied on them. Many are under the impression that these small companies will want to sell themselves in 2012, however, I believe that these companies will try to hold on for another year or two and try to increase their valuations so when they do sell, they aren’t taking such a large hit. These businesses are gong to try to invest and grow until their business and the markets are in a more healthy position. While this might not be a great thing for distressed equity investors, there are opportunities for asset-based lenders.