Intangible Asset and Enterprise Value Lending

Today's asset-based lending (ABL) environment continues to get pushed beyond the traditional paradigms established for credit facilities. As pricing pressure has increased, driving lower yields and lower fees, one of the prime remaining differentiating factors among lenders has become loan structure. With the resurgence of cash flow lending, traditional revolving credit facilities and term loans for the ABL community are becoming scarcer.

As a matter of practice, intangible assets have historically been viewed as "boot collateral" or as a way of stretching on traditional assets. However, there are certain intangibles that have true liquidation value and require loan structures to understand and accommodate the potential realization of these assets. Additionally, certain intangible assets fully encompass the plant, property and equipment (PP&E) and other tangible assets of a borrower. These situations either require a lender to approach a potential term loan on an in-place liquidation (or distressed enterprise value) basis, or at minimum to understand the overlap in the borrower's collateral.