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IMBEDDED JOURNALIST REPORTS FROM
ELA FRONTLINE WITH EXCLUSIVE
COVERAGE OF INDUSTRY BATTLES Bylines: Capturing “Hearts & Minds” is Critical to
Success
Search is
on for WMDs (Weapons of Mass Demand) Supply Lines
are Open despite coming under Heavy Attack By PAUL MENZEL, CLP LEASING NEWS CHICAGO,
IL - Despite assurances from
the Iraqi Minister of Information that “Business has never been better
and companies are experiencing triple digit growth with virtually no
delinquency or losses”, three different and distinct themes emerged
from a gathering of around 500 loyalists at ELA’s National Funding Exhibition.
The Fairmont Hotel
at Grant Park served as the theater of engagement as 42 funding sources
met with the elite forces of the leasing industry. Under chilly but crystal clear skies, a frenzy
of meetings occurred over a Wednesday afternoon and full day on Thursday.
The meeting room was efficiently laid out and well appointed
for the series of 20 minute meetings between funders and originators.
The schedules were set up in advance through the ELA website
or on-site booth. Serious discussion sought targets of opportunity to
set up coalitions for success. New
relationships were pursued and celebrated at well-attended receptions
at the end of each day. Although total attendance
(500+) was down 10% from the prior year and well below the annual exhibition’s
highpoint of 738 in the spring of 2000, the number of Funding Source
Exhibitors (42) increased by 20% over 2002. CentCom (ELA Staff) theorized that the increase
in Exhibitors, along with a higher than usual ratio of Funder to Originator
attendees, suggests a turning point in the economic war being fought
in cities all around the country. “Business is tough,”
said Mike Fleming, President of ELA. “The showing at this conference reflects the exact same reaction
our industry had to the last Gulf War and economic downturn ten years
ago.” This is the second economic
cycle the Funding Exhibition has experienced since it was established
in the late 80’s. The Exhibit
remains one of the most successful gatherings of industry professionals
that the ELA sponsors. “The difference
this time around is that low interest rates are having a positive impact
on the cost of debt which is so critical to the survival of leasing
companies holding portfolios”, added Fleming. Edward Dahlka, Chairman
of the ELA and President of LaSalle
National Leasing Corp., reminded everyone that “Our industry always
does better in a rising interest rate environment and it doesn’t look
like we will start seeing that until the end of the war.” For the first time
in several years, the Funding Exhibition Committee scheduled two 90
minute breakout sessions on Thursday morning.
The attendance at both sessions was so good that a few exhibitors
complained that there was a noticeable drop in activity in the exhibit
hall during that period. A high-energy
atmosphere quickly returned for the remainder of the day. The speaker’s panel
for the first breakout session, titled “The Bank Market: What are they
doing and what do they expect?” was moderated by Scott Gates of Diversity
Capital and included Michael Evans, SVP of Sterling Bank Leasing, Dennis
Roesslein, VP of MB Financial Bank, and yours truly. The follow-up session presented the lessor’s
perspective on how the Best in
Class of independent leasing companies present
themselves and manage their funding relationships. The second session was moderated by William Verhelle, CEO of First
American Equipment Finance, and included Chris Czaja, VP of Relational
Funding Corp., and Tom Howard, EVP of Eplus Group, Inc. An impressive cadre
of leasing special forces went out of their way to capture the “Hearts
and Minds” of the captains of capital. There was unanimous agreement
on both sides that the key to success today and in the future was for
leasing companies to take the time to get to know and understand their
bankers and funding sources. Lessors described the extent to which they
communicated with their bankers and the type and depth of information
they provided to maintain the trust in the relationship. The Bank sources emphasized
how important the depth and quality of applications, term sheets, and
credit packages has become in today’s business environment. The concern over asset quality and the increased
regulatory burden were the primary reasons cited for this enhanced scrutiny.
The spirit of the U.S. Patriot Act will require all financial
firms to “know your customer”. Banks that provide non-recourse funds emphasized
how important “attitude” toward the relationship and asset quality was
in deciding with whom they will deploy their capital in the future. The times of “transaction risk transference”
are being replaced by funding relationships in which the originator
provides ongoing service as the intermediary. A clear and present
challenge facing the industry was finding “WMDs”. Weapons of Mass Demand
are the only missing ingredients in the success equation for leasing
companies and capital sources. The absence of “cap ex’ was on everyone’s mind
and the subject of every conversation. “When are businesses going to start spending
to replace their equipment?” was the question of the day. Much speculation focused on when the economy
might pick up or if we were facing a second dip into recession. The optimists were predicting a much better
second half of 2003. Everyone
agreed that the length of the war would be an important factor. The first signs of
spring in the Midwest interestingly coincided with a report that the
Consumer Sentiment Index increased to over 83 in April from a ten year
low of just above 77 in March. This
possible sign of an emerging economy was followed over the weekend with
a report of the first increase in retail sales in seventeen months. The lessons of the
first Gulf War may give us insight into economic prospects today. The one parallel in the war comparison that
is hoped for is that the same prosperity emerges that persisted through
the 90s. Intelligence sources
active at the Exhibition reported that substantial “chatter” was being
detected between Funding Sources. Every
Funding Source interviewed by this reporter revealed in private that
they are anxious to lend and are struggling to meet growth goals. Even though it was acknowledged that portfolios
were shell shocked, those Funders in attendance had clearly survived
heavy attacks on credit quality over the last couple of years. The present assessment is that
“Supply Lines are Open”. A major difference from the first Gulf War recession
is that we are not in a credit or liquidity crunch this time around.
The supply side of the equation is not the greater challenge. Thursday’s luncheon was highlighted by the leadership
insights and secrets of Michael Abrashoff, former Commander of U.S.S.
Benfold and former military assistant to the Secretary of Defense under
the Honorable Dr. William J. Perry.
Mr. Abrashoff was involved in critical missions during the Gulf
War. There are many lessons
Mr. Abrashoff took from his military leadership experiences that are
vital to success in business as well.
He reminded the audience that, “We are all playing to win”. When he was first assigned to take over the
U.S.S. Benfold, which won the prestigious Spokane Trophy for having
the highest degree of combat readiness, morale was low and turnover
was high. He discovered that they “…were spending more
time fighting amongst ourselves than preparing to fight the enemy.” Mr. Abrashoff advised
our industry to attract and retain the best and the brightest; get employees
to take ownership by empowering them to make decisions; find the rust
in your organization; and allow your employees to have fun. His leadership
anecdotes are the subject of his recently published book, It’s Your Ship. While some prominent
members of the leasing industry chose to stay home and not participate
in the rebuilding of the funding landscape, the committed loyalists
were busy in establishing coalitions for success in the future. Those in attendance were certainly counting
on the adage that “to the victors go the spoils”, as they went home
content that their attendance at the 2003 ELA Funding Exhibition was
an important step in winning the battles for future prosperity.
Paul J. Menzel, CLP Senior Vice President / General Manager Leasing Division SANTA BARBARA BANK & TRUST P.O. Box 60607 Santa Barbara, CA 93160-0607 1 South Los Carneros Road Goleta, CA 93117 Dir Ph# (805)560-1650 Email PaulM@sbbt.com
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