Since joining Katten in June 2020, Dallas commercial finance partner Erin England has helped launch the firm’s private credit practice and was named one of the Dallas Business Journal’s 40 Under 40 this year.
In addition to representing some of the world’s largest organizations in capital commitments financing, England is involved in a variety of professional and civic organizations, including the North Texas chapter of the National Association of Corporate Directors and the YMCA.
The advancement of women in both law and commercial finance is a passion of England’s and, to that end, she is active in Women in Fund Finance and serves on the advisory board of Bold Women Society. She is also a former board member of the Dallas Association of Women Lawyers and was co-chair of the Women Attorney Initiatives Committee at her prior firm Haynes and Boone.
The Texas Lawbook visited with England about what she is seeing in her finance practice, what concerns are front of mind for banks and corporate directors and which community organizations have been especially impactful to her.
The Lawbook: What do you predict for deal activity heading into 2022? Are you seeing more activity in particular industries?
Erin England: At Katten, we represent creditors and debtors in hundreds of finance transactions annually and work with many of the most active investors in the market, so we know the demands of competitive processes and have seen less turndown in our work than others in the industry during these uncertain times.
As has been well-documented, the commercial finance M&A market generally ground to a screeching halt when cities across the globe shut down last year along with many businesses. Then loan balances were down dramatically from borrowers taking PPP funds to pay down their high-cost borrowing. Things picked up a bit in late spring of this year when hope blossomed re an end to the pandemic but not a great deal; among other things, buyers were not eager to pay big during the still-uncertain times of an ongoing pandemic.
Now, with the new, more contagious COVID variant having developed, the outlook is understandably not as positive as it had been earlier in the year. However, the outlook is not all bad. While our industry has struggled alongside many others, we have also seen some remarkable staying power. Many experts predict a significant re-emergence of M&A transactions involving asset-based lenders and factoring companies spanning the gamut, observing that the M&A market for commercial finance companies has become a “seller’s market.” Another good sign for capital markets is all the liquidity resulting from lack of activity during the pandemic and the resulting government stimulus, in many cases relatively generous.
I think you can also reasonably expect to see more M&A announcements involving banks in the ABL and factoring space just as there has been more in the equipment finance and residential mortgage sector lately. Things are starting to feel more normal as the hesitance among lenders has softened. The money is still there, but lenders are being a lot more careful.
The Lawbook: What are the most important or noteworthy trends or developments in your private credit practice?
England: 1) A large percentage of private equity investors and lenders in the private credit industry expect deal flow to increase in 2021 and are optimistic about several deal categories and sectors; 2) Many private equity investors and lenders said loan documents are more flexible than they were before the pandemic; 3) Both private equity lenders and investors agree that potential areas of growth can be found in sectors like financial services, information technology, communications services and health care.
There definitely are trends in private credit that borrowers would do well to remain aware of as the pandemic continues. Borrowing is more difficult than before the pandemic because, again, lenders are being more careful, looking for smarter investments; they surely will remain mindful of how, say, a real estate property performed during the pandemic.
I have deep real estate finance experience, including representation of borrowers and lenders in construction loans and other real-estate secured loans involving virtually every type of property use — raw land acquisition, industrial properties, hotels, and office and retail space.
In the area of office space, for instance, a question remains about whether WebEx meetings will become the norm, eliminating the need for as much physical presence in an office as before. In the area of hotels, while business and leisurely travel has rebounded some, we still don’t know how soon it will return to pre-pandemic level.
Bottom line: lenders are always looking for smart investments. It seems that wholesale lending is on the rise – In the past, borrowers were hesitant to use mortgage brokers. But now, because brokers are better licensed/regulated and because brokers can often provide lower cost funding, the fees are lower, and the work for the borrower is reduced. Also, it seems lenders are looking to see more modern, clean, properties that still will be appealing in 5 or 10 years from now.
Finally, properties that may have some ups and downs can now find lenders that offer more flexible styles of commercial finance, with similar costs but a structure that makes sense for your business’s needs.
The Lawbook: Have financing strategies changed coming out of 2020? If so, how?
England: Some have suggested that today’s financing strategies bear resemblance to ones developed before 2007 and 2008: Essentially, a lot of private debt has accumulated around the world, and dangerous levels of financial leverage as well as high asset prices bear the risk of bubbles — the bursting of which can become yet again a heavy burden on markets worldwide.
The Lawbook: What concerns are front-of-mind for banking institutions?
England: It has been said that banking institutions will never be the same as before the global pandemic hit as many banks, having had to close brick-and-mortar branches due to the pandemic, have shifted many services to an online platform, causing a big uptick in digital transactions. So, changes in the ways that customers do their banking will necessarily cause shifts in how banks provide services and has to be top of mind for bank executives.
The Lawbook: You currently serve on the advisory board for the North Texas chapter of the National Association of Corporate Directors. What’s keeping corporate directors up at night?
England: The mission of NACD, not just in North Texas but in all of the more than 20 chapters nationwide, is to educate directors about the latest challenges and best practices, provide directors with a forum for sharing experiential knowledge and to enhance responsible boardroom leadership.
My friend and mentor, Margot Carter, is vice chair of the NACD and put it best when she said that, “It truly is an unprecedented time with such rapid change and challenges from the standpoint of diversity, equity and inclusion, employee recruitment and retention, to cybersecurity and digital disruption, and not to mention supply chain and sustainability concerns.”
The Lawbook: You have been actively involved in the community through various professional and nonprofit organizations. How have those experiences shaped you as a lawyer? Are there one or two organizations that have been especially impactful to you?
England: Being involved in community organizations has helped me become a well-rounded person. Exploring interests outside of my 9-5 helps me avoid burnout and in turns makes me a better employee.
I created an online resource called PlaySource in an effort to ease the burden on parents for finding fun stuff to do with their kids. After the birth of my daughter (now 5), I quickly realized that the existing online resources like Google and Yelp were inadequate, and I thought, “It shouldn’t be so hard to figure out where to take my kid to play.” I couldn’t find what I needed, so I made it. PlaySource (www.playsourcedallas.com) is a website and social media presence (@playsourcedallas) that helps parents find kid-friendly activities in North Texas. Check out our searchable database of over 1,000 things to do in and around Dallas.
I serve on the board of the YMCA Semones Branch, where I participate in everything from organizing greeting card drives for senior YMCA members to providing free swimming lessons to residents of local multi-family housing communities. As an attorney, I believe you must meet clients where they are and work with them to help shore up skills, identify efficiencies and bring new thinking that brings them more value. These are principals that guided my work when I was a board member of the Dallas Women Lawyers Association, when I worked with the Women’s Finance Exchange of Dallas and with the Texas Women’s Foundation.
I am deeply passionate about the advancement of women in both law and commercial finance, two primarily male-dominated fields. I wholeheartedly share Katten’s commitment to diversity and inclusion which is evident in the firm’s active involvement in several organizations committed to the hiring, retention and advancement of women and other diverse attorneys.
Similarly, I am active in Women in Fund Finance, a global group focused on the increased engagement, recognition and promotion of women in the alternative investment fund finance industry. This is similar to my work on the advisory board of Bold Women Society, a start-up company that spotlights women with inspiring stories of courage in an effort to instill confidence in women and push them to pursue their dreams, and on behalf of Baylor Law Women’s Legal Society, where last year I gave a presentation about how to successfully leverage LinkedIn and Facebook to grow relationships in the legal field in a new world where most networking occurs online.
Publisher’s Note: Katten is a sponsor of The Lawbook’s Corporate Deal Tracker page. This Q&A is an associated thought leadership piece.