Why Did Key Buy the American Express Leasing Unit?

     by Kit Menkin

Friday Leasing News sent out a “flash” to all those on our

mailing list, plus the official announcement to employees and internal

memo posted it on our web site:

http://www.leasingnews.org/archives/October%202004/10-22-04a.htm

The last few weeks we were getting e-mails that began:” American Express is for sale, but you did not hear it from me.” Each time with more “inside” information. For the last six months we have been told by people in the know that the unit was up for sale.  The RW Professional (they have a $20 million law suit on hold, waiting for the criminal prosecution case to be resolved), First Sierra/Sierra Cities, Rockford portfolio's finally caught up, then letting salesmen go, other changes; the written definitely was on the wall.

Reaction so far has been “so what else is new?:”

“I am ex AMEX from the closed office in Santa Ana this past June. Key bank seems like a good fit, at least they will know what they are doing. Rich Tambour admitted to us he didn't know leasing when AMEX took over Rockford and Sierra.”

   (name with held)

There are other indications of more changes to come. We  predicted the former Republic Leasing of Southern California sale about the time they came out with the name change. All the usual signs were plain to see.  It started with cutting off brokers, changing direction, restricting types of leases and loans, the bank getting more involved in what could be done and not done. Volume down. NetBank was about to make the announcement tomorrow, but not everyone was going to be available as we reported on Friday with a copy of the memo.

 As we have written about this same set of sequence for almost five years, seeing it happen from "The List" posting, the sale of the American Express Business Finance Unit was easily seen.  The same happened to UPS Leasing and Washington Mutual's venture into equipment leasing. First they cut-off the non-producing and/or poor performing brokers, then they cut special deals with certain brokers to pump up volume. Then they open the credit window, again to pump up volume. Salesmen making top commissions find themselves let go and their accounts worked without salesmen remuneration. They then either spin it off or close it down.

It is not secret the leasing division of American Express was

having not only trouble with the portfolio's that purchased

to buy into the equipment leasing business, but salesmen

were running to conflicts with American Express direct loans

and credit card operations.  In addition, coordination of

various offices, and unhappiness in performance was taking

its toll.

Just as UPS realized they should not be in the equipment leasing

business because of some of the credit and documentation problems,

the main thrust of the business was not this avenue for rate of

return versus the investment required.

Presently we are working on a story that Greater Bay Bank is for sale and this may affect the Matsco Companies, plus Sky Financial  management promised MBNA a lot bigger numbers than they are getting.  The “off” and “on” important meeting for Dwight Galloway's operation at NetBank is a foreshadow of a new development. And what about Orix Financial?  Don't ask any of their “ex” or even current employees.

The current atmosphere reminds me of the beginning of "The List," which originally came from an "in house" memo from Tom Depping to his sales managers that there was a lot of opportunity "out there" because of the changes going on, leasing companies closing down or sold for the value of their portfolio.

http://www.leasingnews.org/list.htm

KeyCorp affiliate Key Equipment Finance last week announced that the company now manages an equipment portfolio in excess of $10 billion.

"Reaching $10 billion in assets is an exciting milestone in our company's history," says Key Equipment Finance President and CEO Paul A. Larkins. "The real accolades go to all of our professionals who are dedicated to providing best-in-class products and services to our clients around the globe."

Key Equipment Finance is an affiliate of KeyCorp (NYSE: KEY) and provides business-to-business equipment financing solutions to businesses of many types and sizes. The company focuses on four distinct markets:

•      businesses of all sizes in the U.S. and Canada (from small

        business to large corporate);

•      equipment manufacturers, distributors and value-added resellers

        worldwide;

•      federal, provincial, state and local governments as well as other

       public sector organizations; and

•      lease advisory services for manufacturers' captive leasing and

        finance companies.

Headquartered outside Boulder, Colorado, Key Equipment Finance has  annual originations of approximately $3.9 billion, and as noted earlier, manages a $10 billion equipment portfolio. The company has major management and operations bases in Toronto, Ontario; Albany, New York; London, England; and Sydney, Australia. The company, which operates in 24 countries and employs 675 people worldwide, has been in the equipment financing business for 30 years. Additional information regarding Key Equipment Finance, its products and services can be obtained online at

KEFonline.com.

Cleveland-based KeyCorp (NYSE: KEY) is one of the nation's largest bank- based financial services companies, with assets of approximately $85 billion. Key companies provide investment management, retail and commercial banking, consumer finance, and investment banking products and services to individuals and companies throughout the United States and, for certain businesses, internationally. The company's businesses deliver their products and services through KeyCenters and offices; a network of nearly 2,200 ATMs; telephone banking centers (1.800.KEY2YOU); and a Web site, Key.com(R), that provides account access and financial products 24 hours a day.

Paul A. Larkins, President and Chief Executive Officer of Key Equipment Finance, serves as the vice chairman of the board of directors for the Equipment Leasing Association, and as chairman of the ELA Government Affairs Council.

http://www.kefonline.com/

Here is the official Press Release:

#### Press Release #################

Key Equipment Finance to Acquire

American Express Business Finance

Key Equipment Finance and American Express announced the signing of a definitive agreement to acquire American Express Business Finance Corporation (AEBF), the equipment leasing unit of American Express' small business division. With a portfolio of approximately $1.5 billion at September 30, AEBF is a leading commercial finance company that provides capital for small and middle market businesses, principally in the health care, IT, office products and commercial vehicles/construction, and industrial segments. AEBF lease solutions range from $20,000 to $75,000 for capital purchases such as commercial vehicles; dental, surgical and medical diagnostic equipment; telecommunications and IT hardware; and point-of-sale equipment at national restaurant chains. AEBF operates across the U.S. with major hubs in Houston, Chicago and Parsippany, NJ. It employs approximately 400 sales and service associates. Key Equipment Finance is presently the nation's third-largest bank-based equipment financing company, managing a portfolio of approximately $10 billion. The acquisition will move KEF into a leadership position in the "small-ticket" lease segment. The combination will increase KEF's office network for small-ticket lease solutions to over 70 markets across the country -- the widest geographic reach of any provider in that segment. KEF currently conducts business in 25 countries.

"This is a strategic combination. It elevates Key Equipment Finance to a prominent position in this client segment. Further, AEBF's principal business areas align very well with KeyBank's commercial banking focus areas, in terms of company size and industries," said Paul A. Larkins, KEF president and chief executive officer.

"American Express Business Finance has demonstrated a commitment to its vendor leasing partners by implementing a state-of-the-art technology infrastructure, exceptional customer service and strong financing solutions, characteristics we share at KEF. AEBF's Express Financing, Vendor Manager, LeaseWARE and CreditWARE proprietary offerings are certain to advance Key's ability to serve the complex vendor distribution models inherent in small ticket leasing." Larkins noted that AEBF clients will have access to KEF's wide range of products and services, a team of industry-leading leasing experts, and more than 20 years of experience customizing vendor finance programs. Clients also will benefit from KEF's multinational reach.

KeyBank's small business and corporate and investment banking business groups advise more than 220,000 companies and institutions across the U.S., he added.

"We are excited to add capabilities and professionals of this caliber to the Key family," said Larkins. "American Express Business Finance is built on a foundation of service and process excellence. Both of our companies share a commitment to providing best-in-class products and business equipment financing solutions to businesses of many types and sizes."

Susan Sobbott, president, OPEN: The Small Business Network from American Express, the Company's division dedicated to providing payment solutions to small business owners, said, "Our Business Finance unit has been successfully serving business owners through our vendor leasing partners strategy. At this point in AEBF's business development, we believe it makes more strategic sense for it to grow as part of a company where equipment leasing is a core focus, and for OPEN from American Express to concentrate on our strength - the small business payments business, where we have been the leader in providing charge and credit cards to business owners for nearly two decades."