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Monroe Capital’s Koenig & Moser Talk Retail ABL

Date: Nov 12, 2015 @ 07:00 AM
Filed Under: Company Profile

Only last week, the industry learned that Monroe Capital launched a new asset-based lending unit geared toward the retail and consumer product vertical with well-known industry professionals – Andrew Moser and Marc Price – to co-lead the new effort. In the following exclusive interview with ABL Advisor, Ted Koenig speaks frankly about the thinking behind the move, Monroe’s choice of leadership and the advantages Monroe Capital brings to borrowers in the sector. ABL Advisor also speaks with Andy Moser, who provides insights into the unique and complex dynamics retailers and their lenders face in today’s environment.

ABL Advisor:  Aside from the fact that a retail finance offering complements Monroe Capital’s existing verticals, why did you decide to form this vertical now and what are the current market dynamics that convinced you that this is the right time for Monroe to establish an asset-based lending group geared toward this sector?

Photo of Theodore L. Koenig - President & CEO - Monroe Capital, LLC

Ted Koenig:  We have been following this space for quite some time. If you recall, our early roots at Monroe were in doing second lien, asset-based term loans in the 2000 to 2003 period for retail deals such as Zany Brainy, FAO Schwartz, Family Toy, Payless Cashways, MC Sports, Natural Wonders and others. Over the years since, we have become predominantly first lien, senior secured lenders. Our portfolio has grown quite a bit since those early days—we now have about $3 billion in the ground with over 220 companies as borrowers in virtually every Moody’s industry class. Our healthcare, technology and media verticals have been very successful for us.

Retail and consumer goods accounts for about 30% of the U.S. gross domestic product and many of our current customers are in this market segment. We see an opportunity to capitalize on our deep, long-term dated and permanent capital base, together with a history of best in class underwriting and credit, to be a “solutions oriented” lender in this space. There has been, and will continue to be, dislocation in the retail lending space, with what has been happening to regulated financial institutions courtesy of the Fed, OCC, Comptroller and so forth, combined with the recent drastic consolidation in the overall asset-based lending market and to the retailers themselves, as many have been and will be increasingly challenged by the Internet. We have the ability to provide a clean and elegant solution to middle-market companies operating in this space that the banks today simply cannot match in terms of availability, liquidity and flexibility of structure. As it has been the case with our other verticals, my guess is that we will become preferred partners to companies and to other banks in this space, rather than being viewed as competitors.

Photo of Marc S. Price - Co-Head, Retail & Consumer ABL Group - Monroe Capital, LLC

ABL Advisor:  Our readers are of course familiar with Andy and Marc from their many years in the industry. With their collective experience in mind, what made you choose Andy and Marc to be the right team to co-head this new vertical at Monroe Capital?

Koenig:  Together, Andy and Marc have almost 50 years of experience in the retail and the consumer products space as lenders and investors. They have worked for multiple and different lending platforms; some successful and some not. They have had their share of wins and also their share of losses. Some of the losses were the result of institutional or regulatory issues associated with their past employers and some, unfortunately, were self-inflicted. Nevertheless in my opinion, there are not two better people in the industry that have the depth and breadth of knowledge and relationships with retailers and consumer products companies. Andy and Marc’s relationships extend to the many private equity sponsors, investment banking firms, turnaround management consultants and the other professionals that deal regularly in this space. These guys understand what retailer borrowers need and when they need it from a financing standpoint. The talents of Andy and Marc, combined with the “zero loss, credit first” mentality and stellar track record of Monroe, should result in a winning combination for this new vertical of ours.

ABL Advisor:  Andy, please share with our readers what attracted you and Marc to Monroe and the opportunity to launch this new group as part of Monroe Capital?

Photo of Andrew H. Moser - Co-Head, Retail & Consumer ABL Group - Monroe Capital, LLC

Andy Moser:  What attracted us to Monroe were many things; first and foremost, quite simply, the people -- many of whom we have been close to, respect and have admired for many, many years. While the vertical is new for Monroe, their comfort and knowledge of the industry sector and relevant asset classes gives Marc and me great comfort that we have a unified approach and the ability to execute consistently for the market in a way that allows us to meet and often exceed the expectations of our customers and partners. Additionally, their existing and broader infrastructure and platform undoubtedly aids in our ability to scale this new vertical and allow us to focus with safety and soundness top of mind. Lastly, Monroe’s consistent and well-respected track record, together with a diverse and permanent capital base, made the decision to join an obvious one. To build on what we do best and with our many years of experience to draw upon now inside of an existing best in class organization, affords us an amazing opportunity that we look forward to being a part of for many years to come.

ABL Advisor:  From what we gather, the retail sector faces some unique and significant challenges -- changes in spending habits brought about by e-Commerce and keeping in step with millennials and their habits, the migration away from second tier malls and the real estate and other issues this migration poses. What is your outlook for the sector and what does it take to succeed given these challenges?

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