AR, Inventory, and Fixed Asset Collateral Due Diligence of New ABL Borrower

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Business Issue

Our client, a middle market bank, agreed to issue an asset based loan to a highway construction contractor and materials supplier, based on AR, inventory, and fixed asset availability. Riveron was engaged to perform a full-scope collateral due diligence exam and issue a comprehensive report. The potential borrower had never been an ABL borrower and as such, was unfamiliar with the reporting requirements and extent of data needed, both for the exam procedures and monthly borrowing base calculation.

Riveron Approach

A Riveron team of three professionals visited the borrower’s headquarters to obtain and understand necessary data and completed testing procedures to evaluate the borrower’s eligible assets.

As ABL procedures require evaluating all potential ineligibles, Riveron created an AR ineligible waterfall database which accumulated and organized all AR data at the customer level, as well as linked to the borrowing base calculation. Riveron also created an inventory ineligible waterfall database which organized all inventory data including inventory perpetual data by sku and location, an excess analysis, royalties, and physical measurement ineligibles, which linked to the borrowing base calculation. Furthermore, Riveron compared the listing of eligible fixed assets provided by the client’s appraiser to the borrower’s general ledger to exclude any which had been sold or retired at the date of analysis.

Benefit to our Client

Riveron completed and provided a comprehensive collateral exam report, highlighting the borrower’s availability and potential risks to the client in the event of a liquidation scenario.

Furthermore, Riveron provided the borrower with the AR and inventory waterfall database files which were prepopulated with formulas customized to its borrowing needs and trained the borrower’s Management on completing the monthly borrowing base calculation. These waterfall databases automate the calculation process to reduce the time required by the borrower’s Management on a monthly basis. Additionally, they reduce the potential double counting of ineligibles to ensure proper availability for the borrower and facilitate reconciliation of the monthly calculation by the client’s recurring field exam manager.


Riveron Consulting is not a CPA firm

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