Lender Advisory Case Study

Client Profile
Middle market furniture importer and distributor

Facility
$25 million asset-based facility

Engagement parameters
Projected four-day collateral field examination

Situation
CoMetrics partners (CMP) was engaged by a money center bank to provide a collateral field exam. During the course of the examination, CMP conducted several tests that revealed that the company was out of formula and in an underlying over-advance condition. Subsequently, further examination revealed that there were assets on the borrowing base that were not true assets of the company, which resulted in an over advance. At this point of the examination, CMP alerted the lender of a possible fraudulent transaction.  As a result of the findings, the lender requested CMP to extend the collateral field examination to include quality of earnings testing, which over a two-month period, validated the fraudulent transaction.