SFNet’s Asset-Based Capital Conference (ABCC), now in its 16^th year, was held February 6-7 in Las Vegas. Attendees experienced thought-provoking discussions on the economy, geopolitics, talent retention, credit quality and industry dynamics.

“As a first-time attendee at the ABCC, I found it very informative.  The topics discussed were very relevant and on point with the times,” said Tina Capobianco, senior vice president, J D Factors Corporation. “The panelists were very knowledgeable and interesting.  I would highly recommend the conference to anyone in the asset-based lending industry.  It is a great gathering of secured finance professionals in a smaller venue so there is more access to everyone there.”

The World According to David and Michael was the first panel, and featured an interview of Michael Skordeles, senior vice president, head of U.S. Economics, Truist Advisory Services, Inc./Truist Wealth, and David Chmiel, co-founder and managing director, Global Torchlight, a geopolitical analysis and advisory firm, by Dimitri Karcazes, principal, Goldberg Kohn. Together the two set the stage for ABCC 2024 with a detailed discussion of the economic and geopolitical considerations that will be driving markets throughout 2024 and beyond.

“On the economic front, a recession appears to be unlikely, however, although consensus is now calling for a “soft landing,” it will be a bumpy 2024 characterized by low GPD growth (1.5% range),” said Roger Welker, who attended the conversation.  “Simultaneously, there are a lot of unknowns and variables which create quite a volatile cocktail.  The Fed should begin reducing rates in the May-June timeframe, and relatively strong employment will keep the country from dipping into recession.  Europe will continue to be sluggish, with key economies such as Germany having endured 7 straight 1% or lower GDP.”

Welker also noted The World according to David and Michael discussed “Nearshoring” and “Friendshoring”, ideas and trends which will continue to grow in importance, moving supply and trading partners closer in proximity to the US while affording a more stable environment.   Businesses will not be moving production back to US per se, but seeking partnerships especially in Mexico and Canada will be a trend.  India is rapidly displacing China in terms of growth and trade opportunities as China continues to suffer its own economic slowdown.

The panel stressed that geopolitically, global security concerns will continue to be a key metric to watch.  Over 40 key countries are holding elections in 2024 including the US, UK, Mexico, and European Parliaments, cumulatively representing over 45% of world GDP. 

Behind the ABL - The Changing Face of Second Lien Debt, sponsored by White Oak Commercial Finance, discussed the current economic challenges that are leading many companies to explore private debt solutions to replace or compliment their existing capital structures.  This panel included several of the market leaders in the ABL junior debt market, and discussed current market conditions and outlook.

Bethani Oppenheimer, shareholder, Greenberg Traurig, served as Moderator.  Panelists included Steve Migliero, chief operating officer, Pathlight Capital; Larry Klaff, senior managing director and head of Asset Based Lending, First Eagle Investments; Cheryl Carner, senior managing director and head of Originations, SLR Credit Solutions and John Ahn, managing partner, WhiteHawk Capital Partners.

The Banking at a Crossroads panel followed. This panel of professionals analyzed the current landscape and provided their insights on the near- and long-term outlook for the banking sector. Peter York, Lecturer at Fisher College of Business, The Ohio State University served as the moderator. Panelists included Chris Wolfe, managing director, Fitch Ratings; Kathy Dick, founder and chief executive officer, Salt of the Earth Consulting; Joseph Gulash, managing director, Keefe, Bruyette & Woods and Peter Torrente, Partner, US Sector leader - Banking & Capital Markets, KPMG LLP.

The panel discussed the aftermath of the Covid pandemic and the impact of all the fiscal and monetary stimulus provided globally, which has been particularly challenging for the banking sector, where increasing funding costs, rising credit concerns, increasing regulatory requirements and slowed capital markets activities are headwinds that have put revenue, profitability, capital and liquidity under pressure.

An Opening Reception, sponsored by Holland & Knight, concluded the first day of ABCC.

ABCC Capital Markets Extravaganza 2024, sponsored by White Oak Commercial Finance, started the second day of the ABCC. This panel of capital markets professionals, consisting of moderator Barry Bobrow, managing director, Regions Business Capital, and panelists; John Murchison, managing director, Wells Fargo Capital Finance; Brad Mascott, managing director, Citizens Capital Markets; Kelly Thompson, founder and editor, KBRA Analytics (DLD), and Lisa Hanson, executive director, Global Capital Markets, Morgan Stanley, who provided their views on where private debt, the asset-based market and overall M&A activity lies for 2024 and beyond.

The Legal Issues Panel: Critical Issues Continue to Evolve, sponsored by Goldberg Kohn Ltd., featured panelists representing both borrowers and lenders exploring the current transaction environment and the continued pressure on numerous issues critical to lenders, including negative covenant baskets, liability management, and limited condition agreements.

Tim Johnston, partner, Haynes & Boone, served as moderator. Panelists included JW Perry, head of Sponsor Finance Practice, Davis Polk; Jennifer Ezring, partner, Latham & Watkins LLP; Wade Kennedy, partner, Holland & Knight and Harrison Roberts, managing partner, Parker, Hudson, Rainer & Dobbs LLP.

“The panel covered a wide range of the issues that confront asset-based lenders in the negotiation of the terms of their credit documents,” said attendee David Morse, partner, Otterbourg, P.C. With a panel of three lawyers clearly (and admittedly) looking through the lender lens given their practices representing lenders and one lawyer with a practice representing sponsors and other borrowers, the ongoing struggle to preserve the basic principles of asset-based lending in the face of consistent pressure from sponsors to get more flexibility and shift risk to lenders was clear. As a recurring theme, the most striking elements of the discussion was the difference in the view of the principles of asset-based lending of the lender’s counsel and the view of the borrower’s counsel.  The backdrop for many of the comments and observations from the borrower side were based on the view that the asset-based lender has its collateral and should therefore not be concerned about the overall business, while the lender’s counsel repeatedly returned to the concerns of the lender about the working capital available to the company, the company’s ability to continue to do business and the risks to the lenders’ recovery as a result of overall distress."

The Rosen Report – Live featured former Wall Street executive and hedge fund founder Eric Rosen, who runs his family office, which invests in liquid markets, real estate, venture, private equity, and hard money lending. Eric also devotes much of his considerable energy and unique perspectives to his successful newsletter The Rosen Report. The twice-a-week publication allows him to engage with his readership, which includes a broad community of financial professionals and entrepreneurs from across the world. Eric engaged in a wide-ranging discussion with Barry Bobrow, president of SFNet.

“Topics covered spanned an interesting mix of personal reflections and industry experience,” said attendee Spencer Murtha, analyst, Regions Business Capital. “The Rosen Report was an informative session that brought a light energy to the conference and provided plenty of laughs and thought-provoking ideas to take home. Eric’s honest opinions and quick wit are not lost in translation from writing to speaking.”

Restructurings: Lots of Lessons to Be Learned, sponsored by Hilco Global, looked at the current economic and market trends pointing to an increase in restructuring activity. Recent cases have revealed some new trends and market dynamics impacting the secured lending community.  The panel will consider these trends and current market dynamics, their impact in future restructurings, and other valuable insights.  

Ian Fredericks, president, Retail Group, Hilco Global served as moderator. Panelists included Holly Etlin, partner & managing director, AlixPartners; Surbhi Gupta, managing director, Houlihan Lokey; Leslie Plaskon, Partner, Sidley Austin LLP; Shapleigh Smith, managing director, Citibank, N.A. and Suzzanne Uhland, partner, Latham & Watkins.

The Conference concluded with the ever-popular Joint Reception with TMA's Distressed Investing Conference, which was sponsored by Cadence Business Finance, Parker, Hudson, Rainer & Dobbs LLP, Siena Lending Group and White Oak Commercial Finance.

For attendees who missed  a panel or want to revisit, please visit https://sfnet.app.swapcard.com/event/sfnets-asset-based-capital-conference-2024. There are also several on-demand sessions available, including The ABCC European ABL Panel 2024 Update and Navigating Congress, Divided Government and the Presidential Election.