Mr. Clark D. Griffith, Vice President , Los Angeles Commercial Banking Division , Union Bank*

Clark D. Griffith, a vice president and senior relationship manager with UnionBank in Los Angeles, says that one of the bank's clients, a public company that had a credit facility backed by a syndicate of many lenders through June 2011, recently made "a strategic decision" to continue that arrangement for just a single year.

Clark D. Griffith, a vice president and senior relationship manager with UnionBank in Los Angeles, says that one of the bank's clients, a public company that had a credit facility backed by a syndicate of many lenders through June 2011, recently made "a strategic decision" to continue that arrangement for just a single year. And it cost the company a pretty penny. What the borrower did was to strike an "amend and extend" arrangement with the syndicate, changing the terms of the deal in midstream and putting down extra money to extend it. To push its borrowing capacity out to 2012, the company cashed in its then-current interest rate of the London Interbank Offered Rate plus less than 1% of LIBOR for a rate that was "north of 3% of LIBOR," according to the banker. Speaking during "Where to Get Credit Now," a panel at last month's CFO Rising West conference, Griffith used the example to illustrate the world of whopping amendment charges, closing fees, and increased pricing that corporate borrowers â€" many of which are facing imminent loan maturities â€" are running into in today's credit markets. Credit officials, said Griffith, are not "big bad evil entities in a private room deciding whether to do a deal or not. These credit approvers are the same people that have lost their consumer confidence and are not spending as much money on cars or TVs. They're a little bit more skeptical on the credits they're underwriting. It's very difficult for them to understand where the economy is going. So they want a lot more attention to detail and a much clearer, transparent understanding of the borrower." Besides the pressures generated by uncertainty, banks are undergoing much more intense scrutiny of lenders' existing clients by the Office of the Comptroller of the Currency and other regulators, according to Griffith. In turn, credit officers are drilling down much further into borrowers' financial arrangements than they were two years ago. Providing an example of that, he spoke of a longtime client seeking an arrangement that previously would have been a simple rollover of existing debt. "Two years ago, there would have been a quick memo; it would have shot up the chain," noted Griffith, and the credit approvers would have said, "the company's profitable, done." In these times, however, the client must endure much more extensive scrutiny for "some nonspeculative hedging" that would have been perfectly acceptable before. Now, Griffith is finding that he must draw diagrams "that actually show the accounting flow for such transactions" to help regulators understand the accounting. "It's gotten to the point where I would even recommend bringing the senior credit officer out to the field to meet with the company," he said. To be sure, it wasn't uncommon in the past for bank credit staff to visit a company for "a superficial walk through the warehouse, [a] look at the inventory and systems, just to get a big-picture feel," noted Griffith. In today's climate however, visitors from the bank need to find out if the company has the personnel to make it through the current crisis and whether its collateral can stand up as a secondary source of payment to the bank in the event of default. The banker observed that corporate finance executives have a growing awareness of this. "I'm finding out that word's gotten out," said Griffith, "because people are much more willing to stay on the phone and explain their case." Besides hedging, many companies are buying credit insurance on their receivables to make themselves more attractive to lenders, according to Griffith, who acknowledged that, unfortunately for the insured, the policies can be cancelled on very short notice. "They are an extra added protection for any borrower that may be on the fence," he said.

Clark D. Griffith, senior vice president, GE Capital Japan, said: "We are pleased and excited to provide this asset-based loan agreement to TowerJazz and we look forward to supporting them as they achieve their strategic goals.