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February 5, 2001
Headlines---- Conseco Closing Office as Reported Last December Advanta Announces 150 Laid Off CIT Sees Lumber Industry Decline--due to economy Finova--Situation Continues to Deteriorate ("With significant debt maturities due in May 2001 and Leucadia National Corp's $350
million investment withdrawn, Finova's ability to operate as a going concern
faces United Capital, Austin, Texas--No good news to report( story to follow this week ) We hope to have reaction to the EAEL/NAELB Atlanta Joint Meeting Happening as You Read This ------------------------------------------------------------------------------------------ Symposium This Friday in Dallas, Texas United Association of Equipment Leasing 2/9, 2001 Funding Retreat Sheraton Dallas Brookhollow 1241 W. Mockingbird Lane Dallas, Tx. 75247 214.630.7000 for further information, go to: http://www.uael.org/events/retreats/
----------------------------------------------------------------------------------------- WELLS FARGO FINANCIAL BUYS CONSECO----- AS REPORTED BY LEASING NEWS in DECEMBER Conseco Finance Vendor Service ( 12/2000 purchased by Wells Fargo Leasing http://www.leasingnews.org/list.htm ) PARAMUS -- Conseco Finance Vendor Services, a leasing company on Route 17, has been purchased by a subsidiary of Wells Fargo & Co., the $272 billion San Francisco-based financial services giant. The purchase, announced Thursday by Wells Fargo Financial in Des Moines, Iowa, includes owned and managed leases valued at $960 million. No firings resulted, said Patrick Corcoran, a Wells Fargo spokesman. Conseco Finance Vendor Services, formerly known as Green Tree Vendor Services, has 180 employees, including 100 in Paramus and 60 in Bloomington, Minn. Wells Fargo Financial is a $14.1 billion company that provides installment, home equity, and auto loans, commercial equipment leasing, credit cards, and other financial services in addition to a commercial equipment leasing arm with $1.4 billion in assets including the Conseco addition. On Friday, 30 to 50 employees were given formal notice with severance packages to move to Des Moines, or elsewhere in the Wells Fargo Leasing system, according to a Wells Fargo Press release, but employees who did not want to be named, said the "count was higher.". Allegedly the employees were surprised, as per the official Wells Fargo press release, as they were originally told there would be no changes, no one let go; however, moving across country or applying for position in other parts of the country was not mentioned. No one wanted to talk on the record. This closing down of the operation was no surprise to regular readers of Leasing News who have been tracking the slowdown and major changes in the leasing community the last nine months. ---------------------------------------------------------------------------------------------- Advanta Corp. eliminates 150 jobs in Voorhees By Joseph N. DiStefano INQUIRER STAFF WRITER Advanta Corp. has cut 150 jobs from its Voorhees equipment-leasing finance business that the company had been trying without success to sell. On Jan. 23, Advanta announced as part of its year-end earnings report that it would stop making new leases. That day, the sales department and other workers were dismissed. The workers will be paid for the next two months, even though many of them have been told they no longer need to report to work, spokeswoman Catherine Reed and others familiar with the situation said Friday. They will be granted severance when the paychecks stop. About 100 workers will remain at the center, servicing existing leases; the number will likely drop as the leases expire. Further cuts are in the works. Advanta also plans "to substantially reduce" its remaining corporate operations after the pending sale of its mortgage business, to J.P. Morgan, Chase & Co., according to a document filed with the Securities and Exchange Commission last week. We also reported this on January 23rd, with employee reactions in the next few days about how they were told and what had happened. We announced in September that Advanta was for sale. Due to the condition of the stock market and leases secured with equipment, not real estate, the great majority of these companies have been having problems for over a year ( see our List ). Here is the announcement about Advanta: http://www.leasingnews.org/archives/january01/jan-23-01.htm --------------------------------------------------------------------------------------------- UAEL/Advanta Leasing's former V-P I wanted to wish Jane Hackforth good luck on her impending wedding and I am happy to know that she wants to keep in touch with us in the leasing business. I just have one comment that I hope we can classify as a "Freudian Slip". Were we all really a source of "inspiration, excrement, and stimulating humor? Jane did meet a lot of bullshitters in this business, yours truly being one of them. All kidding aside, Jane and all the people at Advanta were always great supporters and contributors to the UAEL. I certainly wish them good luck and continued success in whatever they do. Jane, May the road rise to meet you.... Bob Rodi Immediate Past President UAEL ( as a side note, many of the non-profit leasing associations will see a drop in membership this year both to the companies no longer around, and those that cannot afford to join. Now is the time to re-join, support your industry...and if you are doing well, join two assocations. Many successful leasing companies belong to several leasing associations. editor ). + + + Bob on Orix Although Orix closing its rediscount group was no big surprise some of this stuff is really starting to hit home. Steve Geller and his staff have always been excellent to work with. I have done a fair amount of business with them over the years and He, Joan Kahn, Lauri, Marlee, and Charlie have always been helpful, friendly people to work with. Steve was always the kind of guy who would listen and help you figure out a way to put a deal together. He never looked in a brokers pocket as long as there was a way for you and he to make money on a deal. I certainly wish all of the people at Orix the best of luck and I hope that they will re-surface when this crazy business returns to some semblance of normalcy. While Steve was a New Yorker (I never held that against him) and a long time member of EAEL, he was also a great supporter of the UAEL. Last year his assistance in establishing the CLP foundation was invaluable. He is a good man and I am certain that he will continue to make a contribution to the equipment finance community. The bigger point here is that we are no longer losing upstarts, newcomers, or strangers that were never really a part of the "inner circle" of the Association community. This is no particular reference to any one association. Advanta and Orix did their part for all of the associations. They were our friends, we did business with them and we partied with them at many functions and gatherings over the years. While I almost hate to admit it, a great deal of my social life is tied up in my involvement with this industry. That's because I really like most of the people who are associated with the industry. That's probably a big reason why we all join an association, classifying the above referenced activity as "networking". While there has been general upheaval in this business for nearly a decade our friends that were on the funding side moved around, but most of them stayed in that area of the business. Because of the personal relationships that we developed we could move, with them, to their new company if we didn't like the people who took over at the old company. As I look out over the landscape I see fewer of these familiar faces. While I have always been a proponent of change I am having a hard time coming to grips with this part of the changes that are happening in our industry. I love to make new friends but my old friends have always been my best friends because those are time tested relationships. Our business has always been a "relationship" business. "Who" you knew, was as important as "What" you knew, if not more so. I'm pretty sure that the business will settle down, there will be new funding sources emerging and I have already heard that a few of the old Colonial brokers, who have non-competes that are about to expire, are considering getting back into the business. It would be good to see some of these movers and shakers get back in. I hope that we don't lose too many more of our old and trusted friends in this business and I hope that some of those that have been victims of consolidation or closure find homes that will allow them to stay active in the association community. Their experience is valuable to our industry and besides that, I never did like to drink alone. Bob Rodi <drlease@leasenow.com> (If you want to contact Steve Geller--- I am considering starting a consulting business to help out any broker, lessor or funder who may need assistance in structuring deals, working out problem accounts or any other lease related matter. I can be reached at 845-354-1270 or by e-mail at geller44@optonline.net ) ---------------------------------------------------------------------------------------------- Dennis Doyon I want to add to all the other comments coming in that I appreciate all your time and effort you put in every day to keep us informed. There is nothing else like it in the leasing industry or any other industry that I know of. This started out as a little sideline for you and now I'm sure it takes most or all of your spare time. Your format and information keeps me linked to the 'real world'. After reading your daily news letter, I think we can all agree, that there is always someone else with more troubles than what we have. I for one do appreciate you and the service you provide. Thanks Dennis Doyon, CLP Commercial Money Center ddoyon@inetmail.att.net --------------------------------------------------------------------------------------------- Finova Senior Debt Lowered to 'CC'--May,2001 To Watch Fitch has lowered Finova Capital's (Finova) senior debt from 'CCC+' to 'CC'. Additionally, Finova Finance Trust's preferred stock rating is lowered from 'CCC-' to 'C'. Finova's debt ratings remain on Rating Watch Negative. Ratings in the 'CC' category indicate that default of some kind appears probable. Approximately $6.7 billion of debt securities were affected by this rating action. The rating actions reflect Finova's extremely limited financial flexibility and the heightened uncertainty relating to the company's ability to successfully restructure its outstanding debt. The company's cash-on-hand and projected net operating cash flow will not be sufficient to meet near-term senior and bank debt maturities. Additionally, attempts to boost liquidity through asset sales have yielded modest results to date. With significant debt maturities due in May 2001 and Leucadia National Corp's $350 million investment withdrawn, Finova's ability to operate as a going concern faces serious challenges. If the company is unable to restructure outstanding debt, Fitch believes that Finova will likely be forced to seek bankruptcy court protection. Future rating actions by Fitch will be driven by the outcome of Finova's debt restructuring negotiations, as well as the terms and conditions derived thereunder. --------------------------------------------------------------------------------------------- CIT Lumber Industry Outlook Predicts Continued Decline Through 2002; Hopes a Proposed Tax Cut Measures May Fuel Future Growth for the Industry
NEW YORK--(BUSINESS WIRE)--Feb. 5, 2001--A slowdown in economic activity and the home building industry will contribute to a continued decline for wood products, according to the annual Lumber Industry Outlook, released today by CIT (NYSE:CIT)(TSE:CIT.U), a leading global source for financing and leasing capital. During the next two years, slower home building and improvement activity will contribute to a downtrend in both production and consumption of lumber. During the last decade's economic expansion, the housing industry's stellar performance coupled with strong home improvement activity fueled solid growth in lumber consumption. This, however, did not translate to an equal gain in production at U.S. mills. Declines in overseas markets, growing imports and falling lumber usage rates, reflecting the impact of high prices were the main factors curbing lumber production in U.S. mills. However, after a 5.7 percent increase in 1999, production remained flat in 2000. After reaching a cyclical peak of 54.5 bbf (billion board feet) in 1999, softwood lumber consumption dropped 1.5 percent in 2000, according to the Outlook, and demand for hardwood board (exterior siding and interior grade) pulled back an estimated 4.2 percent to approximately 8 , (billion square feet). CIT forecasts that demand will continue to retreat over the next two years, dropping a respective 4.5 percent and 5.9 percent for softwood lumber and hardboard during the 2000 - 2002 period. Softwood plywood consumption, after sliding 1 percent in 2000 to 17.1 , is expected to decrease an average of 6 percent during the next two years. On the other hand, demand for oriented strand board (OSB) should remain relatively consistent, rising just above 3 percent in 2002 to 18.9 after declining 1.1 percent and 1.5 percent in 2000 and 2001, respectively. "Stability in the OSB markets, despite weaker end-use demand in the upcoming years, will be a factor of its ability to continue capturing a growing portion of the structural panel market," said Malory Volpi, assistant vice president of economic research for CIT. "Just in the last decade, OSB doubled its share of the U.S. structural panel market and we expect it to reach more than 55 percent in 2002. Thus, it is no surprise that OSB production capacity in the U. S. grew by more than 5.4 , while imports (mostly Canadian) rose 5.1 between 1992 and 2000. However, there is more OSB capacity expansion planned throughout North America, so we could see another 5.5 to 6.0 of capacity added by the end of 2002," added Volpi. "While our current economic outlook remains generally pessimistic, CIT remains confident that the lumber industry will recover and continue to move forward," said Volpi. "We hope that the proposed tax relief measures will jump start the lumber industry." Single and multi-family home construction, which account for roughly 40 percent of total U.S. lumber consumption, fell to an annualized 1.54 million units in the fourth quarter of 2000 from 1.73 million in the first quarter. With the apparent slowdown of the economy and less buoyant consumer confidence, residential building is expected to retreat further. Housing starts should average 1.51 million during the 2001 - 2002 period, down about 8 percent from 1.63 million average of the last three years. Likewise, the Outlook expects home improvements to trend slightly lower in the next two years, creating added pressure. Industrial production, with a projected growth rate of 3 percent over the next two years, remains the only bright spot among key drivers of lumber demand. Prices The past decade brought extreme volatility to the lumber and structural panel markets. After gaining ground in early 1999, lumber prices have remained in a downward path, falling nearly 20 percent by the end of 2000. According to CIT, a rebound in prices is not expected, with softwood lumber prices predicted to fall 8 percent to 10 percent annually through 2002. U.S. structural panel prices are also expected to remain weak during the forecast, with delivered plywood and OSB prices expected to drop 4-5 percent and 15-18 percent respectively. Exports & Imports After reaching a peak in the late 1980s, U.S. lumber exports have been falling at an 11 percent annual rate from 1991 to 1998. Lumber exports did recover modestly in 1999 after hitting bottom at 1.0 BBF in 1998, but remaining flat in 2000. Going forward, lumber exports are expected to see modest gains resulting from more competitive lumber prices. The Outlook predicts a 6.5 percent annual increase in the 2001 - 2002 period. Structural panel exports have seen weak demand over the last several years, despite growing acceptance of OSB by the overseas markets. Due to the Asian financial crises, panel exports fell more than 50 percent to .8 in 1998 followed by another 16 percent drop the following year. 2000 did see a notable turnaround with an estimated 36 percent increase, but remained below 1991-1997 levels. The panel markets should see better export demand over the forecast period, reaching 1.1 by 2002. However, much of the growth will be focused in the OSB sector. While plywood trade remains minimal, panel markets have seen OSB imports grow rapidly, reaching 7.3 bsf in 1999 from about 2.0 in 1992. However, here too growth has leveled off and increases should be limited to just above 1 percent through the forecast. Impact of the Softwood Lumber Agreement Growth in lumber imports has stabilized in the past couple of years after rising rapidly through most of the 1990s. Softwood lumber imports have risen nearly 45 percent since 1992 reaching a peak of 19.3 BBF in 1999, but pulling back slightly by 1 percent in 2000. The Softwood Lumber Agreement (SLA) reached in 1996 and set to expire in April 2001 not only failed to curtail Canadian exports to the United States, but had other damaging implications, increasing Canadian exports to overseas markets at the expense of U.S. suppliers. As a result, support for renewal of the SLA has waned. While this is good news for Canadian producers, their exports to the United States will not necessarily increase in the near future, due to generally weak domestic demand but also due to increasing competition from South American and European exporters. Over the next two years, even as non-Canadian exports to the United States continue to grow, total imports are expected to fall about 3.5 percent per year. About CIT CIT is a leading, global source of financing and leasing capital for companies in more than 30 industries. Managing more than $50 billion in assets across a diversified portfolio, CIT is the trusted financial engine empowering many of today's industry leaders and emerging businesses, offering vendor, equipment, commercial, factoring, consumer and structured financing capabilities. Founded in 1908, CIT operates extensively in the United States and Canada with strategic locations in Europe, Latin and South America, and the Pacific Rim. For more information on CIT, visit the Web site at www.cit.com. CONTACT: CIT Ann-Margret Crater, 212/536-9310 ann.crater@cit.com or Stanton Crenshaw, for CIT Naya Kolarova, 203/359-8772 naya@stanton-crenshaw.com www.leasingnews.org
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