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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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GATX Renames European Operations To Seek Common Market Identity |
| GATX Corporation has announced that the Company's 20,000 railcar
European tank wagon leasing operations will operate under a common name,
GATX Rail Europe. The former KVG Kesselwagen Vermietgesellschaft m.b.H.
(KVG) companies are now called GATX Rail Austria GmbH and GATX Rail
Germany GmbH. The former DEC Sp. z o.o. (DEC) is now GATX Rail Poland
Sp. z o.o. The three companies form the GATX Rail Europe group.
The 20,000 cars in the GATX Rail Europe fleet are leased to major shippers throughout Europe. The former KVG companies were established in 1991, headquartered in Hamburg, Germany and Vienna, Austria. GATX made its initial investment in KVG in 1997 and acquired 100% in December 2002. DEC, formerly Poland's national tank wagon fleet, was acquired by GATX in 2001 and is headquartered in Warsaw. Apart from its tank wagon operations, GATX also owns a minority interest in AAE Cargo, a growing European rail operating lessor with a fleet of over 20,000 freight wagons. |
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GE Capital Solutions Announces Consolidation |
| GE Capital Solutions, which was formed last year by combining
commercial equipment financing, vendor financial services and fleet
services as part of a restructuring of GE Capital, has announced it is
consolidating various operations centered in Danbury, CT. The consolidation will involved six locations in the Danbury area employing approximately 1,000 people. Initially, GE indicated it is closing one site and moving its 75 employees to one of its other locations. |
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GMAC and Citi Have $10 Billion Financing Pact |
| General Motors Corp.'s finance arm, GMAC, announced the completion of a $10 billion funding facility with a subsidiary of Citigroup. The funding is part of a $25 billion financing agreement associated with the sale of a 51% interest in GMAC to a consortium led by Cerberus Capital Management L.P., and which also includes Citigroup, Aozora Bank Ltd., and a subsidiary of PNC Financial Services Group Inc. The underlying assets are U.S. auto finance loans originated and funded by GMAC, which will continue to service the assets. |
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HP:Largest Tech Company in Revenues? |
| HP reported earlier this week that its revenues for the third quarter rose 5 percent, to $21.9 billion. Mark Hurd, the company’s CEO said he expected revenue of $92.1 billion for the year. Analysts have projected that IBM’s full-year revenue will be $89.9 billion. If these projections are accurate, HP would surpass IBM as the world’s largest tech company. On a trailing 12-month basis HP already leads with revenues of $90 billion compared to $88.5 billion for IBM. |
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Legislation Proposed To Expand Freight Rail Capacity |
| The Freight Rail Infrastructure Capacity Expansion Act, was recently
proposed by Senators Trent Lott and Kent Conrad. The purpose of the bill
is to assist the expansion of freight rail capacity, which is projected
to grow 67% in traffic volume over the next 15 years. If passed as
proposed, the Act will provide a 25% tax credit for businesses investing
in new rail track, intermodal facilities, rail yards, certain
locomotives, or other rail infrastructure expansion projects. Railroads,
ports, shippers, trucking companies, and other transportation-related
businesses would be eligible for the credit, as well as lessors.
Stay tuned-this may be a breath of fresh air for a relatively dormant big ticket leasing sector, if it is passed as proposed |
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NACM Launches Campaign To Repeal New Tax On Business |
| The National Association of Credit Management (NACM) recently
launched a campaign to repeal a little-known provision of H.R. 4297,
known as the Tax Increase Prevention and Reconciliation Act of 2005 (P.L.
109-222). The impact of this provision, which is contained in section
511 of the Act, escaped the attention of much of the media and most
members of Congress when President Bush signed it into law on May 17,
2006. Section 511 of this law imposes a new 3 percent withholding tax on the value of most contracts for goods and services between businesses and federal and state governments, as well as local political subdivisions with contracting expenditures of $100 million or more. NACM contends that this 3 percent withholding tax will impose a significant financial strain on all businesses that provide goods and services to government. "We believe this new 3 percent withholding tax will be especially burdensome to many small- and medium-sized businesses that exist on very tight cash flows and simply can't afford the cash flow reduction this tax would impose," said NACM President Robin Schauseil. "However, the financial hardship this new tax imposes affects all businesses that do business with governmental entities - no matter what their size." NACM formed a work group to study this issue last year that later resulted in the full NACM Board voting unanimously to oppose this new 3 percent withholding tax. "When it appeared last year that section 511 would not be part of any enacted legislation, efforts by NACM to oppose it were placed on hold," Schauseil said. "However, now that the section unexpectedly found its way into a Bill passed by Congress this year, and signed into law by President Bush, a program of opposition to it must be kicked into high gear." There would be costly administrative burdens placed on the government agencies collecting this tax as well as on those businesses that have to pay it, Schauseil pointed out. "In addition to the financial burden this places on many government contractors, we have not yet seen any explanation from the federal government regarding how this tax is to be forwarded, to what agencies and how it's to be accounted for by the IRS," she said. "Furthermore, the Congressional Budget Office (CBO) reported that the withholding provision is an unfunded mandate on state and local governments because it exceeds the allowable $50 million annual threshold. These are just some of the administrative and accounting issues that would have to be worked out in order to collect the tax." Although the tax doesn't take affect until December 31, 2010, Schauseil said it's important to spring into action now to increase awareness of this new 3 percent withholding tax so that those affected by it can join the campaign to repeal it as soon as possible. She noted that the same day as President Bush signed the bill into law, U.S. Sen. Larry Craig, (R-ID), introduced S. 2821, the Withholding Tax Relief Act of 2006, which repeals section 511 of the law, effectively eliminating this new 3 percent withholding tax. "Thanks to Sen. Craig's bill, we now have a convenient and decisive way to repeal this unnecessary tax," Schauseil said. "We have urged all NACM members to support S. 2821, and will work hard to encourage all businesses negatively impacted by this impending new 3 percent withholding tax to support Sen. Craig's bill." |
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| Airlines/Aircraft Orders and News |
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Boeing Signs JV with Russian Titanium Supplier |
| Boeing recently announced it has entered into a joint venture with a
Russian supplier of titanium parts for its 787 Dreamliner aircraft. The
company, VSMPO-Avisma, has been providing part for Boeing for nine
years. The titanium it will supply for the Dreamliner’s lightweight
airframe is one of the reasons for the plane’s fuel efficiency, which is
becoming a critical issue in a time of soaring energy costs.
Avisman, now controlled by management, is being sold to Russia’s state weapons-trading company, Rosoboroneexport, which was one of seven companies recently sanctioned by the US State Department for its sale of military technology to Iran. . The sanctions prohibit U.S. government agencies from doing business with the companies, but private companies are exempt unless they export military technology. The sanctions will remain in place for two years. Michael Cave, a vice president for Boeing’s airplane programs in a statement last Friday said “Boeing will continue to work closely with all government agencies to ensure our joint venture and all other activities in Russian remain compliant with U.S. and international obligations, including the sanctions recently announced.” |
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| Economic News |
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CONSTRUCTION MATERIALS COSTS HEAT UP DESPITE PPI COOLING, AGC ECONOMIST SAYS |
| Owners Should Not Assume Inflation Is Going Away,' Simonson Warns,
Citing New School Index "Construction materials costs heated up in July, even as other producers eased up on price increases," Ken Simonson, Chief Economist for The Associated General Contractors of America (AGC), reported earlier this week. Simonson was commenting on the August 15 producer price index (PPI) report from the Bureau of Labor Statistics (BLS). "In July, the PPI for finished goods slowed to a 0.1 percent increase, seasonally adjusted, down from 0.5 percent in June," Simonson observed. "But the PPI for materials and components for construction accelerated to a 0.7 percent rise from 0.3 percent in June. Since July 2005, the overall PPI has risen 4.2 percent, while the construction materials index climbed twice as fast, rising 8.3 percent. "That gap actually understates the impact on nonresidential and multifamily construction," Simonson added. "Single-family building costs have been held down by falling prices for lumber and plywood, but these materials make up an insignificant part of the cost of other types of construction. "Major materials price increases over the past 12 months include: copper and brass mill shapes, such as pipe, wiring, faucets, and flashing, up 88 percent; wallboard and other gypsum products, 23 percent; plastic construction products like polyvinyl chloride (PVC) pipe, fittings, and membranes, 20 percent; steel mill products, 18 percent; aluminum mill shapes, 15 percent; and concrete products, 11 percent," Simonson noted. "Furthermore, the PPI for diesel fuel--which affects the cost of running offroad equipment, construction vehicles and fuel surcharges for delivering materials to job sites--soared 26 percent over 12 months. That means the delivered costs of many materials have gone up even more than their prices at the producer's point of sale, which is what the PPI measures. "Owners should not assume inflation is going away," Simonson warned. "For many of these materials, cost increases have been accelerating, not subsiding. Others show big increases in prices of the raw materials used to make them. "Public agencies and private owners alike should get realistic about budgeting for higher construction costs and not apply a general index, such as the finished goods PPI or the consumer price index, for construction," Simonson advised. "Construction depends on fixed quantities of materials, delivered to a specific physical location. Those facts make the industry vulnerable to supply-demand imbalances and high freight and fuel costs. "BLS issued a new index for school construction that is meant to show the completed cost of a school, not just the producer price for the materials," Simonson concluded. "That index climbed 5.3 percent in its first seven months, suggesting school districts should figure on annual inflation of 9 percent or more for new construction." |
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U.S. Machine Tool Consumption up 23.9% for First Six Months of ‘06 |
| A report compiled by AMT - The Association For Manufacturing Technology and AMTDA, the American Machine Tool Distributors' Association disclosed that machine tool consumption for the first six months of 2009 was $1.8 billion, up 23.9% from the same period in 2005. The United States Machine Tool Consumption (USMTC) report, jointly compiled by the two trade associations representing the production and distribution of manufacturing technology, provides regional and national U.S. consumption data of domestic and imported machine tools and related equipment. |
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People in the News
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Alter Moneta Names Warwick Business Development Manager, Vendor Finance |
| Alter Moneta announced that Brenda Warwick has joined the company’s
Vendor Finance Group as business development manager. In her new position, Warwick will be based in Raleigh, North Carolina and will be responsible for vendor and dealer sales efforts from Maryland to Georgia. Prior to joining Alter Moneta, she had been employed by Key Equipment Finance. |
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Greystone Equipment Finance Corp. Hires Michael P. Karman as National Sales Manager |
| Greystone Equipment Finance Corp., an affiliate of Greystone & Co.,
Inc.,has announced that Michael P. Karman has joined the company as EVP/National
Sales Manager. Mr. Karman was most recently COO of Solution Financial Network, Inc., and previously was senior vice president at BankVest Capital Corporation. Mr. Karman has two decades of experience in commercial equipment lease financing and extensive knowledge in all facets of the sales, credit and operational process. He was instrumental in building the sales force, as well as, aligning the credit and operations functions at BankVest in the late 1990s and most recently with Solution Financial. |
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Lepak Appointed Head of Citigroup's Asset-Based Lending Unit |
| Citigroup announced that Kathleen Z. Lepak has been promoted to head its middle-market asset-based finance business. Lepak was previously national sales manager of the unit. The unit is part of Citigroup's Commercial Business Group, which provides leasing, banking and real estate products and services to small and medium-sized enterprises across a broad range of industries. |
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Thompson Joins Ober|Kaler as Principal of National Commercial Finance Practice |
| Ober|Kaler announced that William J. Thomas joined the 128-attorney
firm as a principal of the firm's expanding national commercial finance
and financial institutions practice. Previously with Miles & Stockbridge, Thomas served as senior vice president and deputy general counsel for Allfirst Bank (formerly First National Bank of Maryland), where he was employed from 1991 to 2003. Thomas' practice focuses on commercial transactions, bank regulatory matters, and Uniform Commercial Code issues. While he has experience working on financings for a variety of industries, he has a particular emphasis in the health care, government contracting, international and trade sectors. Thomas also has extensive experience in representing financial institutions in the delivery of treasury management services in the context of forms development and workouts. Bill will continue representing financial institutions and other lenders. Thomas is the latest in a number of new additions to Ober|Kaler's growing commercial finance practice. Stuart Schabes, a prominent national tax transaction lawyer, joined the firm in June, and Steve Cordi, former Maryland Deputy Comptroller, joined the firm in July adding increased capability to the practice. |
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U.S. Bank Equipment Finance Names Kleinman Relationship Manager/Machine Tool Finance |
| U.S. Bank Equipment Finance has named Steve Kleinman as relationship
manager for its machine tool finance group covering Ohio and northern
Kentucky. Kleinman will replace Dennis Synecky, who is retiring. Prior to joining the U.S. Bank Equipment Finance, he was most recently with FCC Equipment Finance and prior to that, GE Capital and Society Equipment Leasing Co. |
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Vedder Price Opens Washington Office; Announces Ed Gross Has Joined Its Equipment Finance Practice |
| The law firm of Vedder Price will open a Washington, D. C. office
effective August 15. Edward K. Gross, formerly a principal at Ober Kaler
and a former Chair of that firm’s Lending and Leasing Group, will join
Vedder Price’s world-class Equipment Finance Group. Mr. Gross represents
bank-affiliated and large independent equipment financing companies in
all aspects of equipment finance, especially business aircraft
financings. This representation includes documenting, structuring,
negotiating, syndicating, and enforcing equipment finance transactions
for more than 20 years. Many clients rely on Mr. Gross in syndication
transactions, including large portfolio purchases, “one-off” sale and
assignments, discounting, back-leveraging and participation
transactions. He has prepared middle and capital markets lease, loan and
syndication forms for some of the largest equipment finance companies in
the industry. Mr. Gross has been involved in hundreds of such
transactions totaling billions of dollars. He counsels clients regarding the financing of all types of business aircraft, including large and small jets, turbo prop and smaller aircraft and helicopters. These transactions vary in structure, including managed and/or chartered aircraft, fractional and “pay card” arrangements, tax-motivated or synthetic structures and foreign registered aircraft, used by businesses, governmental entities or high net-worth individual users. Mr. Gross has worked on financings, syndications and portfolio sales involving aircraft having an aggregate value of billions of dollars. Mr. Gross is a graduate of the University of Maryland (B.A., 1978) and the University of Baltimore School of Law (J.D., 1981). He is a long-term and active member of the Equipment Leasing Association, having served on the Board of Directors (2000-2003) and the Legal Committee, and he presently serves on the Government Affairs Committee and as chair of the newly formed Cape Town Convention Subcommittee. He is a member of the District of Columbia and American Bar Associations and is admitted to practice in Maryland and the District of Columbia. |
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Wilmington Trust Hires Fischer as Structured Finance Specialist to Client Development Team |
| Wilmington Trust announced that its Corporate Client Services (CCS)
business is expanding its services to issuers, program managers, and
investors engaged in the tender option bond market. To drive this expansion the company has hired Eric C. Fischer, a structured finance specialist, to fill a new position on its CCS Client Development team. Through its CCS business, Wilmington Trust provides capital markets services that include trustee, agency, and administrative activities. These services support asset-backed securitizations, trust-preferred issues, capital equipment leasing, corporate restructurings, and other specialized financing structures, such as tender option bonds. Prior to joining Wilmington Trust, Fischer worked for eight years at U.S>.Trust Company in sales and marketing of structured derivative instruments. |
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IN VINO VERITAS |
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DON’T MISS IT!! |
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I have often referred to Wine Spectator as a wonderful source of
information and insight into the world of wines. The magazine is much
more than that. It also provides fabulous recipes to compliment specific
wines and also reviews of cities/regions to visit.
However, the Sept.30, 2006 issue goes several steps beyond this. It does provide the usual fine coverage of wines, with a comprehensive review of White Burgundy ’03 and ’04, and two interesting but divergent perspectives on wine futures. The cover story of this issue is world wide: it’s the world of wine and food, broken down by regions-Northeast, South, Western and Midwest in the U.S. and extending beyond this to include France, Italy, Spain and Portugal (poised for “culinary superstardom”), the Mediterranean, Northern and Eastern Europe, Asia and Latin America. Each area is given extensive coverage of not only the unique foods associated with them, but also the wines that are produced in these countries for pairing with these foods. This is one to add to your wine and food library for enjoyment and reference. |
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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: 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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