medium · Corporate Credit Analysis
A distributor is seeking liquidity through an Asset-Based Lending (ABL) facility. It has $100M in eligible accounts receivable (85% advance rate) and $80M in eligible inventory (60% advance rate). Calculate the borrowing base and identify the primary risk to this liquidity source in a downturn.
- $180M; liquidity is fixed no matter the collateral
- $133M; collateral values contract as operations weaken
- $133M; this is inherently safer than a cash-flow revolver
- $153M; lender advance rates typically rise during stress periods
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