In mid-April, the commercial finance industry learned that EverBank combined its asset-based lending unit with its capital equipment finance group to form one cohesive group now known as EverBank Business Capital. Ken Walters, a relative newcomer to the EverBank organization, was named to lead the new endeavor aimed at providing a full suite of senior secured financing solutions to middle-market companies on a nationwide basis. ABL Advisor spent time with Walters to learn more about EverBank Business Capital and the rationale behind the move. We also learned a bit more about Walters and his unique and varied background that has him well positioned to take on his new responsibilities.

While his tenure with EverBank began nearly two years ago, Walters’ career in commercial finance began in June of 1985. Walters explains, “I’ve been around for a while … I began my career right out of college as the result of an on-campus interview. I started in CIT’s internal audit group and that was great because in the early stages of my career, I audited the equipment and project finance groups.” Walters explains that within a year’s time, he moved to the  pricing and structuring group. “That’s how I officially got into the business and I eventually ran that group.”

With his commercial finance career in full swing, Walters went on to lead the Capital Markets group charged with buying and selling large-ticket transactions and then moved to the  private equity investment group. He notes, “This was also a great learning experience. We were executing middle-market buyouts and I learned how to source deals, conduct in-depth due diligence and manage these businesses. These middle-market companies were doing $20 million to $200 million in annual revenues and I sat on their boards and helped to recruit and manage the CEOs and management teams … really setting the strategies for these companies.”

In 2004, Walters reconnected with a former colleague who had begun Emigrant Business Credit, a division of New York-based Emigrant Bank. “I was hired to run Emigrant Capital, the bank’s private equity group. It was very much like what I had been doing earlier in my career with middle-market buyout transactions.”

A Powerful Partnership on Many Levels

In 2011, Walters was asked to re-launch Emigrant Business Credit, which since 2009 (post-Recession) had been in run-off mode. It was during this time Walters worked with Sondra Rowland, who was Business Credit’s president from 2009 to 2011. “We relaunched the effort because Emigrant’s management realized that this was the only group in the bank that hadn’t lost money during the Recession. Based on my equipment experience and the fact that we weren’t really doing much in the way of private equity deals due to the regulatory environment, Sondra and I partnered up and started running that business which combined both ABL and equipment finance.”

The years that followed served as the foundation of a powerful partnership that developed between Rowland and Walters. So much so that in 2014 when, EverBank executives were looking to launch a large-ticket structured equipment finance group, the two decided to take advantage of the opportunity to build EverBank Capital Equipment Finance. In time, Rowland and Walter’s experience at Emigrant would eventually fit the bill when, in 2015, EverBank senior executives sought to add an ABL platform within their existing suite of businesses.

“Part of the strategy was that there would be synergies with our equipment group … and in particular with our group, EverBank Capital Equipment Finance.”  This approach allows Business Capital to provide a broader set of structured financing products and better serve the capital needs of middle market companies.

In the larger context of EverBank’s Commercial Division, Walters explains that the company’s other businesses, Vendor Equipment Finance, Specialty and Lender Finance, and Commercial Real Estate,  continue to work synergistically with EverBank Business Capital to help drive a unified commercial strategy in the marketplace. “Our group was initially created to complement the vendor business. That group is more of a small-ticket flow business whereas we are doing deals $5 million and above.”

Creating a Holistic Approach

Since the announcement earlier this year, Walters’ first order of business has been to draw on the team’s existing talent, and at the same time, begin creating a highly experienced sales force equipped to sell the combined group’s product offerings. “We’re now offering ABL revolvers and term loans as well as equipment loans and leases in this group and we’re working on a new ABL stretch product that we’re hoping to introduce sometime this summer. Our desire is to be a solutions provider to our clients and help them to manage the entire right-side of their balance sheet with our full suite of products.”

Walters notes that internally, experienced account officers will quarterback clients’ transactions through various processes and serve as liaison between EverBank Business Capital’s various groups and ultimately with the client as well. As he goes about assembling his staff, Walters is looking to hire people who have a deep understanding of both asset-based lending and equipment finance products. These account officers will be situated in various markets nationwide calling on middle-market companies with $25 million to $250 million in annual revenues.

He adds, “We’ll do larger deals and we’ll also participate in larger syndicated transactions on both the equipment side as well as the ABL side.” Walters also sees the unit leading transactions as well. He says, “As we build out the business, we’re looking to do more direct business and we’ll be able to syndicate back and build reciprocal relationships that we think will help drive our expansion.”

As noted, from the market’s perspective, Walters and his team will approach potential middle-market financing opportunities with one sales force. Operationally, Walters notes that the unit will have two credit leaders: one for underwriting deals and the other for portfolio management. He explains, “By having a leader for underwriting and one for portfolio management handling both product lines will, in my view, help pull the teams together more quickly. At the same time, there will be specialists under each of these leaders that have ABL or equipment finance expertise who we’ll cross train to learn both sides of the business.”

Looking out at the landscape of both the equipment and ABL marketplaces, Walters notes the following: “Both markets are extremely competitive and at EverBank Business Capital, we’re attempting to fill a niche. We focus on the B- and BB- equivalent credits and we look to the collateral on both the equipment side as well as the ABL side as protecting our downside. We think that we’re on the back end of the credit cycle, so we’re being cautious as we approach deals. We’re making sure that if there is a problem, we maintain a very strong position through our collateral and structure.”

In Walters’ case, his caution does not displace his confidence. “We feel that if the economy weakens in the next 12 to 24 months… it will benefit our business in that we’ll be able to get better rates and structures than are currently available in today’s environment.”

“So we’re excited … we anticipate our two businesses will do somewhere between $500 million and $600 million in combined new business this year and that’s just terrific considering our ABL business was started only about one year ago and Capital Equipment Finance launched two years ago.”