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Kit Menkin’s Leasing News
www.leasingnews.org Friday, May 10, 2002 Accurate, fair and unbiased
news for the equipment Leasing Industry Headlines— The Leasing Rag----MSM Capital Photo Credit Scoring---from our leader Bob Rodi Another Wow!!! about LincCapital Top Leasing Technology Sunrise International Leasing Corp. #1 and #2; (Their Press Release) PDS Gaming Announces Renewal of $3.5 Million Line of Credit Leasing Industry Pleads Its Case To FASB Comdisco Accepts $1 Million Settlement From CIT AOL Bonds Reduced to Just Above Junk ### Denotes Press Release Say,
Hey!, Al Gamper, I have
not forgotten about you. Monday:
“Letter to Mr. CIT.” Kit Menkin, editor _____________________________________________________________
The
Leasing Rag---It’s About Time I have been a fond reader of Leasingnews since its near inception. I wanted to let you and your readers know about a new Yahoo group/bulletin board I have created. The idea is to create a board where brokers can be blunt, honest, crude, entertained, informed, and empowered. the Board will probably become a mix of the old BTOB bulletin board and a legitimate industry guide. The board is free, anonymous, and can be found at; http://groups.yahoo.com/group/theleasingrag I will do my best to include relevant industry links and information to all members. The official site description reads as such: The Leasing Rag will provide an anonymous forum for American equipment leasing professionals and brokers to share information and insider news on the equipment leasing industry. The group will provide members with relevant links and information dealing with the leasing industry. Members will be able to voice their concerns without fear of reprisal and exchange insight with other brokers. Sincerely, The Leasing Rag (Wow!!! I logged on, signed up, and responded to the e-mail about the Republic Group of Anaheim.} Welcome to the group Kit! I just wanted to remind you that when you post a message to the group that is a reply to a previous one, make sure to press the reply button. Otherwise you are creating a new thread. I don't know if in the future anyone will realize that option or not (my guess is they won't, most people in this industry don't know what a message thread is anyway) but I wanna give it the good ole college try. Also, FYI if you wanted to remain anonymous you might want to change your user name and not show your email. I only mention this because you speak in the third person in your post. As of now, I will remain anonymous. I designed the group to be un-moderated (to a reasonable extent) so that people will not be afraid to exchange ideas or insults. With this type of forum, certain things might be said that others may object to legally. I have seen the result first hand so I know that this is no joke. I won't let anyone post anything too stupid, like that jerk that posted Charlie Lester's phone number on the old BTOB board. I am not looking for any recognition so I think it would be better if I remained anonymous. Most people know who I am, its not that big of a deal. I am simply a broker just like everyone else. Perhaps I will say hello at the next convention. I am grateful for any word you might mention about the group. If the forum degrades into dirty insults then at least we will be able to get a good laugh. Happy Leasing! (It is a habit as a writer to speak in the third person, rather than first person. MSM Capital Photo (The Wow was the picture of MSM Capital Not Being Fair to Employees. There was a photo on line. You can post photo’s, as well as comments. The photo has been making the rounds of the internet. It is hilarious. On Monday, MSM Capital was taken to the Labor Commissioner. Leasing News has heard about this for quite some time, but does not report such things as it is a dispute. If there is a judgment, perhaps it may be news. Don’t know. There are other issues, but the fact that this has been circulating the leasing industry and now is on the Leasing Rag, makes it news.....but it is not from the “disgruntled ex-employees.”) From: Doug Milnor <DMilnor@MSMCapital.com> Subject: RE: pass it on Date: Thu, 9 May 2002 16:18:24 -0700 To: "'kitmenkin@leasingnews.org'" <kitmenkin@leasingnews.org> Kit I'll fax you a copy of the pamphlets they're disbursing, its incredibly funny. The dispute settles around us being a tenant in a brand new building owned by the Irvine Company that sub out the dry walling contract that stiffed the union employees. We had no knowledge, our contract is with The Irvine Company and Insigna -- they're responsible for their subs. They're out front simply to put pressure on us to call the Irvine Company to pay the union drywallers as a tenant. If you want a copy of the leaflet they're handing out call me and I'll fax it over. Don't know how it would reproduce as its on yellow paper. DM (I told him if he wanted to send it, I would try to reproduce it. In the meantime, the ex-employees who took MSM to court said it was not from them, although they did make some other “observations.” (About the Leasing Rag—It is about time the industry had a “free” bulletin board. Let the good times roll!!!!! Editor ) _____________________________________________________________________ Credit Scoring---from our leader Bob Rodi I wanted to address some comments regarding credit scoring technology and the use (or abuse) of that technology over the past few years. At the EAEL/UAEL joint conference in Las Vegas it was evident, to me at least, that it is time to re-visit the prospects of educating the lessor population at large, along with many of the funding sources regarding the use of this technology. I observed the "for and against" camps in the commentary at the conference, but, like the scoring models themselves, there is a lot of "gray area" regarding the use of this technology. Many of those coming out against the use of scoring models either showed a lack of understanding of the technology or they have been the "victims" of those who have misused the technology thereby producing a negative effect on their respective businesses. In my opinion, the credit scoring systems, both generic and custom developed, were abused by many lenders over the past several years. There were those that saw credit scoring technology as the "Holy Grail" of efficiency. Many abandoned common sense operational philosophies in favor of the volume driven marketing philosophy with the thought that the credit scoring system was "watching their backs", so to speak. The desire to increase market share outweighed the controls of sound portfolio management and underwriting philosophy. Some feel that credit scoring was the culprit which, to me, is like arguing that guns do the killing. Guns, and credit scoring systems are tools. You can use the tools to do harm or do good. I spent several of my younger years as a Baltimore City Police Officer and there were many, many times that I was happy that I carried a gun. It was a tool I used to protect the lives of others as well as my own. Over the past 6 years I have deployed and used credit scoring with tremendous success. It was a tool. We controlled it and used it appropriately. We took care in choosing lending partners who did the same. Credit Scoring technology is destined for wide use in our industry just as it is widely used in other segments of financial services. In the coming years it will be difficult to compete without it. Those companies that are in a position to do so should acquire the technology. Those that are not should position themselves to leverage partners who have the technology. Because of technology and the continuing growth of the Internet, the lines that remain between various segments of financial services will blur even further. We have already seen mortgage companies, title companies, credit card companies, insurance companies and banks, invading our traditional turf in the leasing industry. Ignoring advancements in credit scoring and fostering an attitude that blames a useful technology for the excesses of the past few years will set equipment leasing on a destructive path that could finish the job that was started by the offenders of the past several years. Take the time to learn the benefits of this technology and learn how to leverage this knowledge to enhance your value proposition in the marketplace. Bob Rodi, CLP President LeaseNOW, Inc. drlease@leasenow.com www.leasenow.com 1-800-321-LEAS (5327)x 101 Another Wow!!! about LincCapital FleetBoston to Pay $2.4 Million in Bankvest Bankruptcy Ruling ( Hello, John Colton!!! ) By Rachel Layne, Bloomberg FleetBoston Financial was ordered to pay more than $2.4 million for violating bankruptcy rules that prevent creditors from actng on a debtors' assets, the Boston Herald reported, citing a bankruptcy judge's ruling. Assets of Bankvest Capital, an equipment-leasing company that went into Chapter 11 bankruptcy in 2000, were protected by an automatic stay, Judge Joel Rosenthal wrote in his order, the paper said. Between December 1999, when Bankvest ended leasing operations and converted to voluntary bankruptcy on Jan. 25, 2000, Fleet got $2.2 million in proceeds from a lease portfolio sale and from payments, the Herald said, citing court papers. Fleet used that to pay down Bankvest loans, the paper said. Boston-based Fleet is appealing the decision, the paper said, citing an unidentified spokesman.Fleet claimed Bankvest owed it $15.6 million, the paper said, citing court papers. (Are former officers involved? Perhaps more of the story will come out in the appeal, as banks generally like to not tell all. This may be an exception, due to the appeal process. ( LincCapital may find themselves in a similar boat in bankruptcy, it is rumored. Editor.) Here are a series of “memos” and messages as a result of this article on Fleet Bank and BankVest which referred to LINC Capital in a paranthetical. Reader No. 1 writes as follows (NAME WITHHELD) Set forth below is an article from today's edition of leasingnews.org which mentions LINC Capital in the final paragraph. VERY INTERESTING! Fleet Bank was also LINC's primary secured lender and may very well have exposure for similar acts. Further, remember that: 1) Fleet was paid a $1,000,000 fee by LINC management to obtain the famous "Forebearance Agreement" in the Fall of 2000, which allowed LINC senior management to profit from LINC assets that should have gone to all creditors. 2) Fleet acted in a negligent manner in dealing with the LINC Loan Agreements. 3) Fleet allowed Cash Recovery Co. to operate rent free in the LINC offices;
4) Fleet allowed LINC to rent much too much office space and purchase a brand new phone system when the existing one would have worked. 5) Fleet would not sign the approval necessary to sell LINC/Quantum to WynnChurch in Chicago for $20,000,000+ (read WynnChurch's letter withdrawing from the purchase based on this exact issue of failure to approve), which led to the deal with MTS PARTNERS (where a $300,000 fee was taken by MTS and LINC management took fees as well), and then ultimately a sale to LINC/quantum management at a bargain basement fire sale; 6) Fleet may have consented to improper sales of U.K. Residuals to friendly parties; 7) Etc., etc., etc........
Reader No. 2 writes (NAME WITHHELD): The case mentioned deals with these issues because the sale of assets took place during the stay period. The forbearance transaction was done before the bankruptcy if I am not mistaken. Having said this, I have always felt Fleet, in many instances, acted "in conflict". Reader No. 3 writes (NAME WITHHELD): They did and continue to act 'in conflict' with Blue Keel and mingling of assets.... Reader No. 4 writes (NAME WITHHELD): Leasing News must have been reading my mind .... I'd wondered a couple of days ago what ever happened on this thing, and was thinking of asking.. Anything new on ________'s whereabouts ... the scientology connection, etc? I noticed nothing new on the Reed Slatkin website just now. (Leasing News is gathering material to answer many of these questions, and more, as the LincCapital bankruptcy is not over. Editor) Top Leasing Technology Composite scores for top-placers within the leasing technology sector were: McCue Systems 79%. Seismiq 69% IFS 66% Capital Stream, Inc. 62% LeaseTeam, Inc. 57% Thoughtworks 52 Story on Monday ################ ############################################### Recent Survey Rates Sunrise International Leasing Corp. #1 and #2; Company Ranks First in Growth and Second in Sales Per Employee Productivity GOLDEN VALLEY, Minn / -- Sunrise International Leasing Corp., (SILC) ranked first in growth and second in sales per employee productivity in City Business's recent survey of Minnesota's 100 largest private companies. City Business, the business journal for the state of Minnesota, measured several characteristics of this group and recently published a survey with its results.
With $189.0 million in sales and a 56.6 percent compound annual growth rate over three years, SILC scored first in growth. The company attributes its successful year-over-year growth to simultaneous vendor program affiliations with Cisco Capital, Sun Microsystems Finance and GE Capital. With $2.8 million in sales per employee, SILC scored second in productivity.
"I'm pleased with SILC's top ranking in City Business's annual survey and I attribute much of the success to our dedicated and loyal employees," said Peter King, CEO of SILC. "In addition, our asset management systems, developed over many years, respond to the need to efficiently support the ever-growing demanding requirements of our vendors."
Mr. King subsequently commented that while he is pleased with the company's growth rate, he expects sales to be lower during 2002 due to the decline in the high technology industry where SILC has been a major player. SILC continues to search for additional vendors to diversify its leasing activities and the company recently announced a vendor program affiliation with Sharp Electronics Corp.
About Sunrise International Leasing Corp.
SILC's business consists primarily of the development of market-oriented vendor programs emphasizing the formulation of customized lease and rental programs for vendors of high technology and other equipment. The lease options offered by the company generally focus on short-term, fair market value leases. SILC is also a competitive reseller of high-quality used equipment. #### #################################### ###################### ========================================================= PDS Gaming Corporation Announces Renewal of $3.5 Million Line of Credit LAS VEGAS--PDS Gaming Corporation (Nasdaq: "PDSG"), a diversified gaming company that finances, leases, and sells gaming equipment for the casino industry and operates Rocky's Sports Pub and Grill in Reno, Nevada, today announced it has renewed its $3.5 million working capital line of credit with its U.S. Bank, Nevada. This continues the business relationship, which began in 1997. PDS Gaming Corporation provides customized finance and leasing solutions to the casino industry in the United States. The Company also operates Rocky's Sport Pub and Grill in Reno, Nevada. PDS Gaming Corporation is headquartered in Las Vegas, Nevada, and its common stock trades on The NASDAQ Stock Market under the symbol "PDSG". CONTACT: PDS Gaming Corporation, Las Vegas Martha Vlcek, Chief Financial Officer, 702/736-0700 Leasing Industry Pleads Its Case To FASB By Carol S. Remond, Dow Jones Newswires Leasing industry specialists pleaded their case to the Financial Accounting Standards Board amid mounting worries that new consolidation guidelines now under consideration would stifle leasing transactions. "We would like you to look at our comments and concerns," Bill Bosco, head of products development for Citicapital's equipment finance division. Citicapital is a commercial finance unit of Citicorp. FASB is in the process of finalizing tougher guidelines that will govern when special purpose entities, or SPEs, used by companies to keep liabilities off their books should be consolidated back on their balance sheets. Several types of leases, including synthetic leases often used by the equipment and real-estate industries, use SPEs, and leasing specialists have been worried that the new consolidation rules could spell the end of at least some lease transactions. Among transactions especially at risk, Bosco told FASB board members, are "high dollars real estate transactions, built-to-suit transactions, that might not get done," if the SPEs used to set them up need to be consolidated by a party to the transaction. In the wake of Enron's accounting scandal, FASB has been working to quickly adopt stricter rules guiding when SPEs should be consolidated. Those new guidelines so far include a proposal that companies should bring SPEs on their balance sheets, if those entities have less than 10% in outside equity investment, up from a current 3%. But now that the accounting board is coming closer to adopt its new standards, several interest groups representing different sectors of the market have been lobbying FASB to minimize the impact of the changes on transactions conducted by their constituents. Pressure mounted last month after an early draft of the new guidelines was leaked to a broad audience, resulting in a large number of unsolicited comments being sent to FASB. Lobbying by the structured finance industry lead to FASB's decision to consider excluding multi-seller/multi-lease conduits from its new consolidation rules. The board is scheduled to meet next week to further discuss whether those SPEs used to structure asset-backed commercial paper and collateralized bond obligations should be exempt. In February, Edmund Jenkins, chairman of FASB, had told Dow Jones Newswires that the new rules under consideration would likely result in the consolidation "of a vast majority" of synthetic leases. That's part of what appears to be worrying the leasing industry. "We think that most of (existing synthetic leases) will be consolidated. We don't think that it would be economical to restructure them," Citicapital's Bosco told the board. --------------------------------------------------------------------------------------------------------- Comdisco Accepts $1 Million Settlement From CIT By Mary Wisniewski, Bloomberg A U.S. bankruptcy judge approved a $1 million settlement between Comdisco, a technology services company now in bankruptcy, and the CIT Group, which withdrew its bid to purchase certain Comdisco assets. In January, Tyco Capital, a financial services company now known as CIT Group, made a bid for Comdisco's information technology assets. Tyco gave Rosemont, Ill.-based Comdisco a $50 million deposit. The two sides failed to reach an agreement on the sale, and Tyco withdrew its bid. Robert Lackey, chief legal officer for Comdisco, decided the company had little chance of winning a legal action against Tyco to retain the entire $50 million, so it accepted a $1 million settlement and returned the deposit. CIT Group is based in New York City. "There was no breach of contract because there was no contract," said U.S. Bankruptcy Judge Ronald Barliant, in approving the settlement. The lawyer for a committee representing Comdisco shareholders, Mark Baldwin, argued that Lackey hadn't sufficiently analyzed Comdisco's chances of winning, and that Tyco had essentially won $49 million and "didn't fire a single shot." Comdisco filed its Chapter 11 recovery plan April 26 to repay bondholders and other unsecured creditors about 87 percent of the $4 billion they're owed. Comdisco filed for bankruptcy protection last July after putting about $3 billion into hundreds of startups such as e.Piphany Inc. and Vignette Corp. that failed to repay loans or turn profits. The company lost about $339 million in 2000 and 2001. The next Comdisco hearing is set for July 15. Bermuda government lobbies Washington ahead of tax debate (Tyco) By Matthew Taylor, Associated Press HAMILTON, Bermuda (AP) Bermuda's finance minister, Eugene Cox, is visiting Washington to try to speak with U.S. lawmakers as they consider legislation aimed at taking a bigger tax bite from American companies that set up shell corporations overseas. The visit comes as shareholders at tool maker Stanley Works approved a plan Thursday to move the company's legal residence to Bermuda. A three person team from the Finance Ministry flew to the United States for meetings to ''assess and ... influence the discussion on the proposed new tax legislation being considered by the U.S. Congress,'' a Cabinet statement said. Cox was accompanied by Financial Secretary Donald Scott and Assistant Financial Secretary Ifor Hughes. Bermuda recently has come under attack from U.S. legislators as the ''tax haven of choice.'' The legislators have said they are trying to discourage American companies from reincorporating overseas. The bulk of the collapsed power giant Enron's subsidiaries were located in countries other than Bermuda; just eight of 881 were incorporated on the island. A number of large companies including Stanley Works, Tyco and Ingersoll-Rand have incorporated in Bermuda or stated their intention to incorporate off the mainland. The proposed legislation seeks to close the loophole whereby a company incorporates overseas and avoids taxes on the company's overseas income. On Thursday, a plan to move the legal residence of tool maker Stanley Works to Bermuda was narrowly approved by shareholders amid criticism of corporate tax havens. The move is expected to shave about $30 million off Stanley Works' annual tax bill. Stanley executives argue that will improve Stanley's ability to compete worldwide and retain thousands of U.S. jobs. But with lingering economic uncertainty and the U.S. involved in a war on terrorism, there is rising pressure in Washington to stop the tax-shelter exodus. =============================================== AOL Bonds Reduced to Just Above Junk By Jonathan Stempel NEW YORK (Reuters) - AOL Time Warner Inc. AOL.N has a gaggle of high profile brands under its roof, ranging from Internet giant America Online to cable TV network Home Box Office and the Warner Brothers film studio, yet bond investors say the company is only a notch above junk level. "It's a very complex company," said Daniela Spassova, managing director of fixed-income research at Principal Capital Income Investors in Des Moines, Iowa. "Investors think AOL is much riskier than Disney and Viacom." Since early April, AOL bonds -- rated "Baa1" by Moody's Investors Service and "BBB-plus" by Standard & Poor's, the third lowest investment grades -- have badly lagged those of media rivals Walt Disney Co. DIS.N and Viacom Inc. VIA.N . Investors say they are skeptical because AOL has missed earnings targets, has too much debt, lacks a plan to move 34 million America Online subscribers to high-speed Internet access, and -- like General Electric Co. GE.N and Tyco International Ltd. TYC.N , whose bonds have been hurt this year -- is too hard to understand. The stock price in part reflects that. AOL shares closed Thursday on the New York Stock Exchange at $17.80, down 56 cents, or 3.1 percent. They have fallen 62 percent since the January 2001 merger. On top of this, investors said recent bond weakness afflicting phone companies Qwest Communications International Inc. Q.N and WorldCom Inc. WCOM.O is enveloping AOL. Moody's on Thursday cut WorldCom ratings to "junk" status. "It's one of those sympathy trades," said Steve Bohlin, who helps invest $2.2 billion for Thornburg Investment Management Co. in Santa Fe, New Mexico, and owns AOL bonds. "Any company that looks like it has a large debt load and is being hit on the revenue side is being hurt pretty hard." BONDS WEAKEN AOL on April 3 sold 10-year notes, part of a $6 billion bond sale, at 99.05 cents on the dollar to yield 7 percent, or 1.68 percentage points more than 10-year U.S. Treasuries. The bonds weakened immediately. By Thursday, they had fallen to about 94 cents, pushing their yield to nearly 7.7 percent, or 2.5 percentage points more than Treasuries. Investors say that gap suggests a mid- or low "triple-B" rating. The yield margin is marginally below the recent 2.7 percentage point gap on bonds of junk-rated Tricon Global Restaurants Inc. YUM.N , which runs the KFC, Pizza Hut and Taco Bell chains. In contrast, Disney's 10-year notes yielded 1.45 percentage points more than Treasuries, and Viacom's just 1.4 percentage points more than Treasuries, little more than they yielded in early April, investors said. Disney and Viacom are rated "A3" by Moody's and "A- minus" by S&P, one notch above AOL. "Viacom is a premier name, and is more economically sensitive because of large advertising revenues," said Spassova, whose firm owns AOL, Disney and Viacom bonds. "If you believe in an economic recovery, Viacom should benefit most." Disney, she said, "has less upside and more downside because of its incomplete business model. It needs more distribution, and needs to buy more assets." PROBLEMS, PROBLEMS AOL, in contrast, has many problems, analysts said. As it struggles to revive growth at the online unit, it is shelling out $6.75 billion to buy back Bertelsmann AG's BTGGga.D stake in money-losing AOL Europe. Wall Street also frets AOL may have to stretch its balance sheet further by paying to resolve two cable-related ventures with the Newhouse family and AT&T Corp. T.N . "A couple of years ago, when fast-growing companies bought slower dinosaurs -- Qwest bought US West and AOL bought Time Warner -- the markets viewed it unfavorably, thinking the new fast growers were sacrificing growth," said Gary Pzegeo, who helps invest $4.5 billion as vice president for Gannett Welsh & Kotler Inc. and does not own AOL bonds. "Those transactions turned out in a sense to be lifesavers because (otherwise) the old AOL and the old Qwest might not be around today." That doesn't help AOL bondholders now, and at current prices even equity investors are valuing the online unit at zero. "People are having a really tough time valuing that (AOL) portion of AOL Time Warner," said Pzegeo, who works in Boston. Richard Parsons, who takes over as chief executive at AOL's May 16 shareholder meeting from the retiring Gerald Levin, has told investors not to expect AOL to write a check to resolve the AT&T issue and that AOL is looking at several options, including a possible spinoff of its cable operations. Bohlin sees room for AOL bonds to rise. "The current levels look a little cheap," he said ------------------------------------------------------------------------------------------------------------ via e-mail Leasing News is sent ONLY to people who have requested it. We do not spam. You register using our website www.leasingnews.org or contacting kitmenkin@leaisngnews.org. . Our subscriber list is NOT made available to the third parties. 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