Asset Based Lender Alex Mazer of Big Shoulders Capital demonstrates why the Article 9 transaction is the fastest, easiest way for lenders to recover on a non-performing credit. In as little as 45 days, full asset value is recovered without the cumbersome inefficiencies of traditional liquidation.
In the Article 9 transaction, all assets are sold to a single purchaser, in one lot – and because that purchaser intends to continue operations within a new entity, they will typically pay a premium over and above what might have been recovered in an auction scenario – with less cost, far less time and full control.
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So as an asset-based lender we have a Credit and default we’re not getting Paid so what do we do understanding our Downside and how we’re gonna exit credit If it’s not performing is everything the Article nine sale process is the perfect Way for us to exit a non-performing Credit because it’s the quickest and the Fastest and the least costly means of Selling distressed assets before we Started initiating article nine sales as A means to sell distressed assets we Were often relying on third parties Attorneys receivers atthenes things like This in that process we are exposed to Fees that we can often control and third Parties that can take these in a Direction that we don’t always influence The bankruptcy process does not come for Free it’s incredibly expensive and There’s a lot of oversight to the Process so in the article nine we in the Borrower cooperatively retain all Control of the sale again it’s the Senior lender initiating the sale of the Assets and it happens in a very quick Time frame in a bankruptcy process we Don’t have that luxury and if we do it Typically happens in a 12 month time Frame it doesn’t happen in a 30 day Window so certainly the article 9 sale Process for us gives us both the control The speed and the control over the cost To achieve the same outcome as an asset
Based lender the article 9 sale process I don’t think could be any easier again Once a borrower’s in default we send an Issued a notice to that borrower Formalizing a letter of default and then After that we begin to send notices to The subordinated creditors those notices Say that the borrower is in default we As the senior lender are exercising our Rights as the senior lender to convey The assets free and clear on Such-and-such a date and it’s again Within a 30-day time frame assets that Are currently encumbered by both our Senior debt and who knows what other Subordinated debt are sold and conveyed Free and clear to a number of Potentially interested buyers as a means Of us getting repaid and the assets Being acquired by someone who intends to Continue ongoing operations without the Article 9 sale process there wouldn’t be Any buyers of those assets the article 9 Sale process creates assets that now Buyers can buy because there Shedding all the subordinate and legacy Liabilities the article nine sale allows Us to finance a buyer of those same Assets who then inherit the enterprise Value of the business and that business Continue operating with our with our Financial support suppose a lender Initiate article nine sale process we Fully intended the business is operating
Up through the sale because a buyer Places more value on those assets when They’re in operation than they do if They’re parked or idled or not operating We finance a lot of manufacturing Companies If the tooling has already been picked Up and the place is dark and the staff Has gone to find other work there’s not Much of enterprise value there but if we Can execute on a quick sale and find a Buyer that values that the values that The tooling is still there the employees Are still there the customers are still Intact And because they’re going to continue Operating they’ll pay for the assets More than they would in a pure Liquidation or certainly with the assets Fully encumbered we as lender love that Because sometimes at the end of this Process we’re hoping to get all of our Money back and by executing on the Article 9 sale process and selling that Enterprise to a going concern buyer free And clear of all subordinate claims that Buyer is willing to pay a little bit More and that recovery then assures that We get our money back second win from Our experience has been critical to Helping coach us as lender but also the Borrower through the article 9 sale Process compiling all the relevant Information and allowing the process to
Happen as efficiently and effectively as It can it was very helpful that our Borrower had engaged second wind because It was helpful for them to understand The process not directly from us as the Lender who’s initiating the sale process But from a third party that had a lot of Repetition and practice executing on the Article 9 sale process and seeing the Benefits of it [Music]