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Sophisticated legal counsel for secured lending facilities backed by receivables, inventory, and equipment collateral.
Asset-based lending is a financing structure where credit facilities are secured by a borrower's assets, typically accounts receivable, inventory, machinery, and equipment. Unlike traditional cash flow lending, ABL focuses on the liquidation value of collateral.
The borrowing base—the amount a borrower can draw—fluctuates based on eligible collateral values, with advance rates varying by asset class. This structure provides flexible working capital while offering lenders robust security positions.
Negotiating advance rates, concentration limits, eligibility criteria, and reserves for accounts receivable, inventory, and equipment.
Drafting and negotiating security agreements, pledge agreements, mortgages, and UCC filings across multiple jurisdictions.
Structuring subordination agreements, payment waterfalls, and lien priorities between ABL lenders and term loan providers.
Documenting lender access rights, collateral audit procedures, and remedies for borrowing base deficiencies.
Coordinating multi-jurisdictional facilities with local counsel, addressing foreign collateral and choice of law issues.
Restructuring borrowing bases, modifying advance rates, and negotiating forbearance arrangements during distress.
Committed revolving lines with availability based on borrowing base calculations. Includes letters of credit sub-facilities and swingline options for daily liquidity needs.
Asset-based term loans secured by fixed assets or equipment, often layered beneath revolving facilities with agreed intercreditor arrangements.
Multi-lender structures with administrative agents, collateral agents, and sophisticated sharing and voting provisions among lender groups.
Split-lien arrangements where a portion of the ABL facility has junior payment priority, providing mezz-like returns with ABL-level security.
Our network has represented lenders, borrowers, and sponsors across hundreds of asset-based lending transactions. We understand the commercial dynamics of borrowing base negotiations, the technical requirements of perfected security interests, and the intercreditor complexities of layered capital structures.
Whether you're a senior lender establishing a first-lien position, a borrower seeking maximum availability, or a junior creditor negotiating rights in an intercreditor agreement, we bring specialized ABL expertise to protect your interests.
ABL facilities typically finance accounts receivable (75-90% advance rates), inventory (50-65%), machinery and equipment (70-80% of appraised value), and sometimes real estate. Eligibility criteria vary by asset class—receivables must meet aging and concentration tests, inventory must be readily marketable, and equipment must have established secondary markets. Intangible assets like intellectual property generally aren't included in traditional ABL borrowing bases.
Timeline depends on complexity and borrower readiness. A straightforward domestic ABL facility with clean collateral can close in 4-6 weeks. Multi-jurisdictional facilities or complex intercreditor arrangements may take 8-12 weeks. Key factors include collateral audit timing, third-party consents, real estate appraisals, and local counsel coordination. Having clean financial records and organized collateral documentation significantly accelerates the process.
Yes, ABL can be structured as either senior debt or junior to existing facilities. When subordinated, intercreditor agreements govern lien priorities, payment waterfalls, and enforcement rights. FILO (First In Last Out) structures are common, where the ABL lender has a first-priority lien on working capital assets but subordinated payment rights on term debt collateral. Alternatively, ABL can refinance existing facilities or sit alongside on different collateral pools with carefully defined carve-outs.
ABL covenants focus on asset quality rather than earnings metrics. Standard covenants include borrowing base calculations (tested weekly or monthly), minimum availability requirements (typically 10-15% of the facility), and material adverse change provisions. Financial covenants, when included, typically test only when availability falls below a threshold (springing covenants). This makes ABL more flexible than cash-flow term debt for companies with variable earnings but strong asset bases.
Borrowers submit regular borrowing base certificates (weekly, bi-weekly, or monthly) detailing eligible collateral. The lender applies advance rates to eligible assets after reserves and exclusions—ineligible receivables over 90 days, concentrated customer exposures, non-marketable inventory, etc. The borrowing base determines maximum facility usage at any given time. Field exams (typically annual or semi-annual) verify certificate accuracy. Availability fluctuates with business cycles, providing flexibility during seasonal peaks while maintaining asset coverage.