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About Pulse
Publisher Ron Caruso has been reporting on the equipment financing industry for more than 25 years. Pulse features his knowledgeable analysis of news, trends and current economic or regulatory issues having an impact on commercial financing.
Pulse also features people in the news, business opportunities and Ron's personal wine recommendations.
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Recent Editions
Business News Impacting the Leasing Industry
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GE Capital Found Guilty in Fraud Suit |
| A federal jury in Houston has found GE Capital broke an agreement to
raise financing for a Houston-based energy developer and forced it out
of a proposed British electric power and gas-storage project. The jury
awarded the developer, Canatxx Energy Ventures Inc., a closely held
corporation, $136.8 million in actual and punitive damages. It
determined that GE Capital had acted with malice toward the plaintiff,
which was co-developing with GE Power Systems a $1 billion electric
power and gas storage project in the U.K. The jury found that GE Capital had breached its fiduciary duties, committed fraud, conspired with unnamed others and committed acts of “unfair competition”. The award was composed of $136.1 million for actual damages and $700,000 in punitive damages. The punitive damages were based on a finding that GE Capital had acted with malice toward the developer. In its original complaint brought in 1999, Canatxx alleged that GE had conspired to turn the power-plant project into a test bed for a newer model GE gas-turbine generator, and that GE Capital had failed to seek financing for the older style turbines that were specified by the co-developers and by its actions squeezed the company out once it found an alternate test site. The jury in its decision found in favor of GE Capital on several allegations. It determined that GE Capital did not fraudulently induce Canatxx to enter into the original financing agreement, was not unjustly enriched by its dealing, nor did it make negligent misrepresentations to Canatxx. |
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POPULAR LEASING ACQUIRES CERTAIN ASSETS AND ACCOUNTS OF RICHLUND & ASSOCIATES |
| Popular Leasing USA (PLUSA), a subsidiary of Banco Popular North
America (BPNA), recently announced that it has acquired certain assets
from Richlund & Associates located in St. Charles, Missouri. “The acquisition of certain assets and relationships of Richlund continues our core growth strategy of adding quality assets and companies to Popular Leasing,” said Fred Van Etten, President Popular Leasing. “We are actively seeking more acquisitions which will be accretive to our portfolio and that of our parent Bank.” “As part of our Shared Agreements with BPNA we are focusing on significantly growing our assets by utilizing our servicing and origination platforms,” added Van Etten. “That, coupled with leveraging the strength and growth plans of our parent bank, will continue us on the path we have outlined for the future.” |
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| Airlines/Aircraft Orders and News |
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Airbus Announces ‘06 Deliveries |
| Earlier this week, Airbus disclosed it has delivered 253 new planes so far this year and taken 200 new orders, aided by what it termed “strong interest” at the Farnborough International Air show last month. The company said it plans to deliver 430 planes this year, up from 378 last year. Airbus has sold more planes that its rival, Boeing, for the past five years and delivered more aircraft for the past three years. |
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Aircastle Completes IPO Raises $209 Million |
| Aircastle Ltd., an aircraft leasing company, raised $209 million in
an initial public offering that priced at the top of expectations,
according to a news release. The share offering sold for $23 per share,
which was at the high end of its forecast of between $21 and $23. The
offering price gives the company an initial market capitalization of
about $1.15 billion. JP Morgan, Bear Stearns & Co., and Citigroup were the lead underwriters. |
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Court Approves Northwest's $1.38 Billion Debt Refinancing Plan |
| Judge Allan Gropper approved the Northwest Airlines motion to
refinance an existing $1.125 billion loan and to take an additional $250
million in debt so the company can have greater liquidity. He called it
a "highly beneficial transaction" that would help the company on its way
to be healthy and competitive. In its filing, Northwest asserted the loan "will enable the debtors to continue financing their operations, pay their employees, vendors and suppliers, and operate their businesses at a substantially reduced cost, thus preserving and enhancing the value of the enterprise for the benefit of all parties-in-interest." It also indicated the refinancing would save Northwest about $34 million a year in interest payments and another $900 million in debt repayment through 2010, the company wrote in a filing. Northwest also asked the court for approval to convert the loan into exit financing once it completes its restructuring plan to emerge from bankruptcy. Before completing its reorganization plan, the company must resolve its pension funding obligations. |
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| Economic News |
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Credit Index Shows Current Economic Strength |
| The U.S. economy continues to show expansion with gains in the
manufacturing and service sectors, according to the latest economic
study produced by the National Association of Credit Management (NACM).
The Combined Credit Manager’s Index (CMI) showed an increase for July, with all three indices increasing on a month-over-month and year-over-year basis. According to commentary and analysis provided by Euler Hermes ACI Chief Economist Dan North, the CMI indicates continued economic expansion and had few “dramatic swings” in July with the exception of a 4.6% increase in favorable components for the manufacturing sector. “The survey once again describes an economy which has had enough strength and momentum to overcome the obstacles of a tightening Fed, inflation fears, high energy prices, a weak stock market, and a wobbly consumer,” said North. These challenges continue to cloud the nation’s future economic picture, particularly the uncertainty of whether or not the Federal Reserve will raise interest rates. Manufacturing Sector The manufacturing sector index for July rose on a seasonally adjusted basis 0.9%. The rise was driven mostly by an increase in the sales component of 5.8% and an increase in the amount of credit extended of 9.6%. Both of these top-line oriented indices bode well for future growth. Services Sector The July service sector index rose only 0.1% on a seasonally adjusted basis. There were no particularly notable movements which would suggest a significant shift or pattern, but six of the ten components rose. July 2006 vs. July 2005 On a year over year basis, the combined CMI rose 1.3%, while the Manufacturing sector rose 0.8% and the Services sector rose 1.8%. Eight out of ten components for the combined CMI rose, while seven of ten rose in both the manufacturing and services sectors. Overall, the indices reflect the strong economy of the past several quarters. The CMI, a monthly survey of the business economy from the standpoint of commercial credit and collections, was launched in January 2003 to provide financial analysts with another strong economic indicator. A complete view of the index can be viewed online at www.nacm.org. |
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ELA Survey: New originations of commercial equipment leases and loans spiked 20 percent in June |
| New originations of commercial equipment leases and loans spiked 20
percent in June over the prior month according to the Equipment Leasing
Association /1 (ELA) Monthly Leasing Index (MLI-25) released earlier
this week. The MLI-25 is a monthly survey of commercial equipment lease
and loan activity and performance as reported by 25 equipment finance
companies. Portfolio quality deteriorated slightly, however, with receivables over 90 days increasing to 1.0 percent. Charge-offs as a percentage of net lease receivables also increased to .59 percent from .39 percent in the prior month. June's credit approval ratios dropped very slightly from May, coming in at 78.7 percent compared with 79.3 percent. Total headcount rose to 10,931, the sixth consecutive rise in employment for the MLI-25 companies. The participant companies in the MLI-25 represent a broad cross section of the equipment finance sector including small ticket, middle market, large ticket, bank, captive and independent leasing and finance companies. Because the same companies participate in the survey each month, the MLI-25 provides a consistent trend analysis of current industry activity. |
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THE FED PAUSES |
| The Federal Reserve after seventeen consecutive 0.25% increases has
stopped, at least momentarily, the increases in the fed funds rate. Its
actions primarily under Alan Greenspan, the prior Fed Chairman, had
resulted in the fed funds rate going from a 46-year low of 1.00% in June
of ’03 to its current rate of 5.25%. This hiatus was triggered by what
the Fed termed a “moderation” of inflation pressures, which however left
the door open for a resumption of increases if “new data” indicated a
resumption of inflation beyond a moderate point. The Fed's preferred inflation gauge, the core personal consumption expenditures price index, which excludes food and energy, rose 2.4 percent in the year through June – which is significantly above the Fed’s “comfort zone” believed to be between 1& 2%.. Any further increases in this key indicator could trigger renewed increases by the Fed. The Fed’s move to the sidelines is now in contrast to recent developments around the globe. In the past month alone, 15 central banks around the world have tightened monetary policy, including the European Central Bank and the Bank of England last week. Additional increases are expected in Europe and in Japan. |
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People in the News
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Butler Capital Appoints Blody Vice President |
| Butler Capital Corporation, has named Donald Blody a vice president
at the $250 million-asset firm. Mr. Blody joined Butler in 2003 and
since that time has been responsible for review of loan and lease
applications from businesses nationwide. Prior to joining Butler Capital, he served as vice president of syndication at Sovereign Bank. Mr. Blody earned bachelor's degree in business administration with a marketing concentration from Adelphi University. |
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Capital Trust Appoints Ruffing as Chief Credit Officer |
| Capital Trust, Inc. recently announced the he appointment of Thomas C. Ruffing to the newly created position of Chief Credit Officer. Mr. Ruffing, who joined the company in 2001,currently serves as a Managing Director and Head of Asset Management. In his new role, he will continue his prior responsibilities for the Company's asset management and special servicing functions and will take on the additional responsibility of managing underwriting and credit for new investments made by the Company and its private equity funds. Mr. Ruffing will continue to report to Stephen D. Plavin, the Company's Chief Operating Officer. Prior to joining Capital Trust, Mr. Ruffing was a Vice President at JP Morgan Chase, where he worked in various capacities from 1990. Mr. Ruffing holds undergraduate and graduate degrees from the University of Virginia and an MBA from Columbia Business School. |
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George Hamlin joins mba |
| MBA recently announced the appointment of George W. Hamlin to Vice
President of Business Consulting. Hamlin, as head of MBA’s Business
Consulting unit, will lead the firm’s work in industry analysis and
financial modeling. Hamlin’s previous experience includes senior consulting positions at MergeGlobal and Global Aviation Associates. He has held other significant management positions with aviation entities such as Lockheed, Airbus and TWA. |
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ORIX Appoints Standifer Director, Indirect Origination & Syndication |
| Terry Standifer has been appointed as Director - Indirect
Origination and Syndication for the Commercial Finance unit of ORIX USA
. He is based in their Atlanta office. In his new role, he will be
responsible for the development of key buy/sell side relationships for
Commercial Finance focusing on new business origination and the
execution of syndication opportunities. Terry joined the company in 2000, as a VP-Credit Manager. He has been in middle market lending for over fourteen years with experience in receivables financing and, for the last ten years, structured financing in a variety of industries and asset types including marine, railcars, mining, machine tools, corporate aircraft, restaurants and convenience stores. Prior to joining ORIX, Terry was a Senior Credit Analyst with Transamerica Equipment Financial Services' Structured Equipment Finance Division and Heller Financial, Inc.'s Commercial Equipment Finance Division. |
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Other News
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Forbes Sells A Minority Stake –Buyers Include Bono |
| Forbes magazine, the self-proclaimed “Capitalist Tool” has a new minority owner, Elevation Partners. Although specific terms were not revealed it is believed that the private equity group which includes Bono, the lead singer of the legendary Irish rock group U2, paid between $250 and $300 million for a minority interest of more than 40 percent of the company. |
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IN VINO VERITAS |
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ENJOYING THE UNIQUENESS OF REGIONAL WINES |
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Winemaking is now an active industry in almost every state. In many of
these areas it is also an attractive tourist destination, adding many
millions of dollars in tourism revenues. Areas such as Sonoma and Napa
in California have long established reputations, but newer areas such as
Temecula and ___ are providing interesting alternatives. Similarly on
the East Coast, especially in areas near to my home in Buffalo, wineries
are expanding in regions such as Niagara-on-the Lake and the Finger
Lakes. They are delightful areas to visit from a tourist perspective
(have you taken your family to Niagara Falls?), and offer a diverse
group of wines that provide what I will call distinctive regional
styles.
Wine making has become very, very sophisticated. As an example, Merryvale Winery in California hired Intel to develop a special chip that would enable it to calibrate when its vineyards needed watering and soil enhancement!! Winemaking today it is a mega-billion dollar industry, and a truly multinational competitive opportunity for wine lovers. Because of the widespread diversity of winemaking, take advantage of the opportunity this affords you when you travel. Do your homework and investigate the area you plan to visit. The Web as well as wine retailers are excellent resources, as well as the Wine Spectator, to learn about the local wineries in any given area. What is even more important is the enjoyment! Going into a new geographical area is a trip into a new terroir-different soil and different growing conditions provide new interpretations of standard wine varietals such as Chardonnay, Pinot Noir, Cabernet Sauvignon, etc. Additionally, the winemakers may vary the end product by the diversity and concentrations of other grape varietals with the primary grape in a very different manner than you are used to. Is this bad? Not necessarily. But it does require the person being exposed to this different interpretation to be able to enjoy the stylistic differences. As not every car is a Rolls Royce, so too not every wine is a first growth French Bordeaux. As long as your palate does not expect this, don’t ruin the enjoyment by attempting a comparison that is impossible. Simply enjoy the uniqueness and stylistic interpretation-who knows, you may find it more pleasing to your palate than what you are used to drinking. Remember too that harvest time is fast approaching. Late Fall is a wonderful time to take a trip to either your favorite or a new wine area. For those of you planning to attend the upcoming ELA Annual Convention in Palm Desert, why not take a few extra days and explore one or more of the many wine regions along the Pacific Coast? Just remember-Rolls Royce’s are wonderful cars, if you can afford them!! |
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ANOTHER VICTORY FOR CONSUMERS!! |
| Costco Wholesale Corp., a national chain of discount warehouse clubs
that is the largest wine retailer in the U.S. had sued the Washington
Liquor Control Board in 2004, arguing that the state’s liquor
regulations were anticompetitive. In other states, Costco had been able
to buy wines in bulk directly from producers, passing on the savings in
its pricing to consumers. In dispute were Washington laws that required
distributors and retailers to mark up prices at least 10 percent and
post those prices in advance with the state. This practice prevented
retailers from buying on credit as well as preventing distributors from
giving volume discounts to retailers. The judge in this case, Marsha Pechman, declared these restrictions violated Federal antitrust laws and struck them down. Washington plans to appeal the decision, which means the case could spend years in the courts. Ultimately, if the State loses its appeals or if the state Legislature decides to rewrite the regulations to comply with the judge’s decision, Costco and other retailers would be able to buy wine directly from producers and reduce the retail price to consumers. |
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WINE RECOMMENDATION |
| I admit to a strong preference for red wines, in particular pinot noirs and amarones. Among the pinots, I seem to favor those which could be termed Burgundian in style. In this regard, I recently had a bottle of the 2002 Pinot Noir Rosella’s Vineyard . The color is an intense ruby red, but it is the taste that is really wonderful-it combines a diverse fruitiness with notes of cherries and plums, with a mouth-filling, long lasting taste. Give it a try. |
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UPCOMING WINE FESTIVALS |
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There are numerous wine festivals/auctions coming up that lend themselves to a great deal of fund and enjoyment. They include: Northport, Mich. Red, White and the Blues Festival; Aug. 12; 231-271-9895; www.michiganwines.com Overland Park, Kan. Kansas City Festival of Wines; Aug. 26-27; 913-652-1907; www.kcwinefest.com Red Hook, NY Hudson Valley Wine Fest; Sept. 9-10; 845-658-7181; www.hudsonvalleywinefest.com San Antonio, TX. New World Wine & Food Festival; Nov. 7-12; 210-223-2881; www.nwwff.org |
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