As published in The Secured Lender


In each issue, this column by Michele Ocejo, editor-in-chief of The Secured Lender, asks industry executives…

What is the one thing keeping you up at night right now?

How do you plan to assuage this worry?

Betty Hernandez, executive vice president, chief credit officer answers:

Betty HernandezAs I have said often, inventory advances keep me up at night. However, this time I’m going to be more specific. Borrowers whose inventory is commodity-based are really concerning me right now. Although commodity pricing has always fluctuated, it seems to me that the recent sustained decline in metals, oil and gas prices have impacted collateral values immensely. Not only do the changes in the spot market impact the collateral, the loss of availability for borrowing purposes has impacted the already weakened borrower’s cash flow. Furthermore, despite the fact that we obtain inventory appraisals, by the time the appraisal results come back (no offense to the appraisers out there), the values have probably dropped even further, necessitating not only a decrease in the advance rate (since it is a function of the NOLV) but also the gross collateral values themselves. The real question is: “when will we reach rock bottom?” Unfortunately, no one knows and only the strongest players in the scrap reselling, mini-mills, service centers, etc. will survive. Managing through this volatility keeps me up at night!