FRONTLINE

Secured Lender, The, Sep/Oct 2006 by Cove, Brian P

Asset-based lending and factoring industries experienced robust growth in 2005 according to CFA Annual Survey

The Commercial Finance Association has released its annual survey of activity in the asset-based lending and factoring industries. The results, based on an extensive survey of CFA member companies, shows that in 2005 total outstandings for asset-based loans grew by 16 percent over the previous year to a record $420 billion.

Highlights of the survey results for asset-based lending include:

* Total commitments increased 17 percent for all asset-based lenders in 2005 compared to 2004 and 15.2 percent for lenders with outstandings greater than $500 million.

* New commitments grew 26.9 percent over the previous year and also increased as a percentage of total commitments to 22.5 percent in 2005, up from 20.7 percent in 2004.

* Average new commitment size rose to $14 million in 2005 from $12 million in 2004.

* Credit line utilization dipped slightly to 47.4 percent in 2005 from 47.7 percent in 2004.

In 2005, the survey results show that the U.S. factoring industry achieved its strongest year-to-year growth since 2000, with volume of $ 112.8 billion, a 9.3 percent increase over the 2004 level. Highlights of the survey include:

* The average advance rate to clients in 2005 was 80%, unchanged from the 2004 level.

* The Northeast and Southeast regions of the U.S. accounted for almost two-thirds of domestic factoring volume.

* International factoring volume grew 26.3 percent in 2005 over the previous year to more than nearly $ 10 billion.

* 80 percent of the factoring reported was on a non-recourse basis and the majority, 85 percent, was also performed on a notification basis.

Complete survey results can be found at CFA's Website, www.cfa.com. Copies of the survey can also be obtained by contacting CFA at info@cfa.com.

CFA urges U.S. Supreme Court to hear Spearing Tool case

The Commercial Finance Association has filed an amicus brief in support of the petition for certiorari filed in the U.S. Supreme Court by the petitioners in Crestnuirk Bank v. the United States (In re Spearing Tool and Manufacturing Co., Inc.).

The brief, prepared by CFA's Co-General Counsel, Jonathan Helfat of Otterbourg, Steindler, Houston & Rosen, P.C. and Richard Kohn of Goldberg, Kohn, Bell, Black, Rosenbloom & Moritz, Ltd, supports Crestmark's petition for the granting of certiorari. CFA argues that the Sixth Circuit incorrectly held that a Notice of Federal Tax lien, prepared and filed by the Internal Revenue Service (1RS) against a corporation using an inaccurate variation of the corporation's registered name, took priority over the lender's previously filed security interest perfected by a UCC financing statement using the corporation's exact registered name. CFA urges that certiorari should be granted because the Sixth Circuit's decision in this case undercuts existing Supreme Court precedent, holding that a primary purpose of the Federal Tax lien Act of 1966 was to "modernize" the relationship between federal tax liens on the one hand, and the interests of commercial creditors, on the other. CFA also argues that modern search and filing systems necessitate a precise and uniform filing standard, and the Sixth Circuit's decision impairs the availability of credit and increases the cost of borrowing.

This case addresses the interplay between Michigan's UCC and lien search logic, and the contents of an 1RS lien filing that did not contain the corporate taxpayer's exact name. Here, the Bankruptcy Court granted summary judgment in favor of the government, and held that the government's filings to be superior to the filings of the secured lenders. On appeal, the District Court reversed the Bankruptcy Court and held as a matter of federal law, in light of the Michigan computerized personal property lien filing system that became effective with the adoption of Revised Article 9 of the UCC and prudent search practices, when the 1RS files a tax lien, that lien must be filed under the taxpayer's correct legal name to attain priority over competing and previously filed liens. On a further appeal, the Sixth Circuit reversed the District Court and held that by virtue of the supremacy of federal law over state law, the 1RS did not need to conform its filing methods with those contained in Revised Article 9.

It is expected that the Supreme Court will rule on Crestmark's petition for certiorari after it reconvenes in early October.

CFA Joins with SRI to cosponsor 3rd Annual Global Asset-Based Lending in the Capital Markets Summit in Frankfurt

The Commercial Finance Association has joined with the Strategic Research Institute to jointly sponsor a conference focusing on global asset-based lending issues. The 3rd Annual Global Asset Based Lending in the Capital Markets Summit will be held September 18 and 19, 2006 in Frankfurt, Germany.

The two-day conference will address a variety of issues faced of interest to asset-based lenders involved in cross-border transactions, including: