Page 6 - MUFG Spring 2021

INTERVIEW WITH ED GATELY
Managing Director and Head of Asset Based Finance with MUFG
The commercial credit market is undergoing some evolution in the asset based finance space as a result of the coronavirus pandemic. We have taken the opportunity to discuss some of the trends that Ed Gately is seeing in this market.
Q A
Can you give us a quick overview of the market? Can you comment of the scale of asset- based financing in the Americas? What kind of institutions tend to play in that market?
For the last few years, the ABL market has been particularly robust. It generally grew by high single digits every year, with the exception of 2019 when growth was flat. Although it is difficult to quantify total commitments to ABL borrowers at any point in time, there is data on quarterly ABL issuances. As an example, in 2019, there were approximately $100B in broadly syndicated ABL transactions which is similar to the previous year.
For years, asset-based lenders (ABL) were considered lenders of last resort. There was clearly a negative perception if you couldn't borrow on either an unsecured or cash flow basis. However, ABL has become much more mainstream over the last 15 years and is now a very popular product. Borrowing on an asset-based formula will generally provide more liquidity/availability at lower financing spreads. Almost every major financial institution and most regional/small banks have asset-based lending units. In addition, many non-bank lenders also specialize in ABL. One of the most significant benefits of asset- based structures is from a credit risk perspective.
Asset-Based facilities have more controls in place. Therefore, banks are able to support the majority of their customers through all
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MUFG TRANSACTION BANKING AMERICAS GROUP / SPRING 2021