CIT Tyco Revealed

CIT Tyco staff has been doing great.  They have a real corporate identity.

To further understand this, and what they have to work with, here is

a comment from a reader that puts this all into prospective:

We worked with CIT and their Atlanta office for 4 years before it

closed and had an excellent relationship.  At that time the programs and

rates were effective.  We are now working with CIT out of their Tempe

location, supposedly same programs and rates, however, the credit window is

much smaller - which is understandable considering the state of the

industry, however, the rates are impractical for the credit requirements,

i.e.  $500,000 at a buy rate of 9.0%.

The information given to us, and also available in the news, is that CIT

/Tyco cannot obtain the long term funds it needs to compete at market rates,

thus they are offering a new product.  This new product sounds intriguing

but is nothing more than a "Band-Aid on a bullet hole."  The product is a

lease which has a fixed payment for the term, offers a lower buy rate, say

8.0% (still not great for a $500,000 lease), however, even though the

payment is fixed the rate floats for the entire term, based on short term

T-Bills and CIT will bill the Lessee at the end of the term for any

increases in the overall rate calculated from time of lease inception to end

of term.  We still don't have a full understanding of this product, nor have

we attempted to calculate what the potential "Balloon" payment liability for

the lessee would be.  Have you ever heard of a product like this?

It appears CIT is reacting as best they can to their lack of access to long

term competitive funds, as well as trying to PUMP UP THE VOLUME immediately,

with short term money to try to make themselves more attractive to potential

buyers.

-dedicated reader-

CIT Tyco Floating Rate/Fix Payment

In response to the CIT structure of a floating rate/ fixed payment, I

was taken back to my E.F. Hutton/Chrysler Capital days of the mid 80's. 

Though I don't believe we actually closed a deal with such a structure

we did offer a fixed payment /floating rate options.  At the end of each

12 month period, the "float" impact would be calculated and the lessee

would make an adjustment payment or possibly receive a refund or credit

on the next payment.  In reality it is not as bad as it sounds.  The

structure is intended to give the lower rates normally associated with a

"float" yet provide a consistent payment for the lessee.  On the other

side, the lessor can book and amortize the deal just like any other with

the yearly adjustment.

The difficulty was getting the lessee to understand the concept.  In

addition, an agreement on the interest method used to calculate the

adjustment sometimes became complicated since both the lessee and lessor

were looking for the advantage. Documentation was not a real issue.  I

believe that this structure would be appealing to larger corporations in

larger, very competitive transactions but may be too complicated for

smaller deals.  

Len Sperl, CLP

Onyx Capital Corp

Pittsburgh, PA

---  

Regarding the story about CIT and their fixed payment-floating rate

leases. We did floating rate leases back in the early 1980's when I was at

MNB Financial Corp.(Merchants National Bank). We had several structures, but

in one plan the payment was fixed for the term of the lease. If the

underlying index changed up or down, the term was lengthened or shortened

accordingly. In another plan a lump-sum adjustment was made annually.

There is, of course, no way to predict what the adjustment will be. However,

the payment doesn't change. CIT is obviously trying to recover some yield by

only moving the rate upwards.

If you will recall, rates were historically high and there was a big demand

by the lessees for floating rates in hopes that the rates would decrease. Now

the demand for floating rates is coming from the lessor. Interesting.

Bob Teichman, CLP

Teichman Financial Training

3030 Bridgeway, Suite 213

Sausalito, CA 94965

Tel: 415-331-6445

Fax: 415-331-6451

e-mail: BoTei@aol.com

"Providing education and training to the equipment leasing and financing

industry."

Learn About the 2002 UAEL/EAEL Spring Conference!

May 2-4, Las Vegas, California

First Timers: $425   Invitation to all who were previous

members under a company no longer in business, merged,

acquired, or no longer employed there.  You are invited

at the “first timer” fee.

Contact Joanie Dalton directly at (510) 444-9235 x27

or joanie@uael.org for rooms at Caesars Palace.

Not to late to come to the conference and also

ask John Kruse of CapitalStream for a “Leasing Wallbanger.”

Fred is Back!!!

Fred St Laurent has joined MSI International, leaving the leasing

brokerage business, after a short stint.

MSI is a great firm. They have been around 34 years..

I let Spencer Richman of American Financial know I was being recruited and

told him today when I finally decided. It was a difficult decision but I do

love recruiting and let's face it, I must humbly admit that I am a good

recruiter.

The website for American Financial is almost done and can be seen at

www.afnleasing.com We are still adding text and graphics and I fully intend

on completing this for Spencer in the next few weeks. I had a lot of fun

designing and building the site. I have to say that Spencer Richman is one

of the best guys I know in the business and over the last few months I have

received some great training and mentoring from him and have developed a

real friendship with him. He is a great guy to work for.

The recruiter comments of this week have been intriguing.

I have a lot of respect for Teri Gerson and Hal Horowitz, they are two of

the top recruiters in our industry and the comments they made were incisive

and relevant to the issues faced by recruiters today. The leasing industry

has been a difficult industry to recruit in over the last year for many.

Other industries have been hit much harder though. The tech industries have

been in real trouble over the last year, engineering has been hard hit as

well as many others.

I have to disagree with these two fine professionals on the issue, even

though I believe they are both correct in their observations, and I was

really impressed with Mr. Horowitz's "bad paper" comment;

"A short term placement to us (recruiters) is tantamount to a bad lease."

and "If you don't hire the person who meets all of those qualifications,

you're buying your own bad paper."

(I plan on using Hal's example often...)

The issue that I must address here is the perception that the Companies or

Clients have somehow forgotten or have become confused about what a

recruiter does and therefore is missing out on the true value of what it is

we do as recruiters.

The error in this is: I believe that WE as recruiters have forgotten or

become confused about what it is WE do!!! Let me explain.

1) Recruiters have taken on the role of a "glorified Human resource

department" filling jobs for companies, using the Internet, reducing fees

and basically offering to outsource what most companies have done for

themselves for decades. The boom economy helped to facilitate this; the

"normal economy" of this last year should be a wake up call for us as

recruiters.

2) Client companies do not need a recruiter to fill or backfill jobs, in a

market where there are so many people on the street. People need jobs and

will do what they must to find jobs and feed their families. Companies can

find them in all "the usual places" why do they need to pay fees? Just to

qualify people beyond the resume? Believe me when I tell you that a good HR

team can do it a lot cheaper than a recruiter on a fee-per-placement basis,

and be just as thorough and effective.

3) Recruiters have always been most effective in finding the GREAT

candidates that have a job now!!! A company that needs TOP people not JUST

people will always be more than happy to pay a fee for a HIGH QUALITY

candidate who is working now at a competitor who was not looking for an

opportunity until the recruiter called.

We, as recruiters need to focus more on finding the RIGHT clients. I don't

believe that anyone can educate a CEO, President or Owner about what it is a

recruiter can do for him or her. They either; know and don't care; or they

know and can't afford it; or they are using recruiters effectively.

The more we drop our fees and try to be an extension of HR the more we will

frustrate ourselves as recruiters.

Recruiters can identify, locate, engage and entice top people working for a

competitor, and get them to consider an opportunity with a client company.

That is what we do. We can help companies take the quality of their

employees "up a notch". We are not order takers and we are NOT an extension

of Human Resources.

Does that make sense?

Please put me back on your list of recruiters.

Fred St Laurent

MSI Intl Inc

Member of ELA UAEL NAELB

321-952-1422

fstlaurent@cfl.rr.com