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February 27, 2001 On Line Request A Proposal: Everything You Always Wanted To Know But Didn’t Know Who To Ask by W. Russell Runnalls, CLP ------------------------------------------------------------------------------ Headlines-- Finova Bailed Out by Buffett-Led Group eFinanceWorks Bites the Dust United Capital Survives---They Say. Advance Rentals and/or Committment Fees? VenServe Gets New CFO-- R. Jeff Macartney --formerly Balboa/Col.Pacific/LB Credit
Sixty-Two Percent Of The $1 Million Plus
Homes Sold In 2000 Were Located In Viking Capital Enteres China Arena--- Bob Rodi to Give Special China Leasing/finance Report in March--- March 14,2001 The Los Angeles Venture Association: -- More than $100 billion in capital sources to be represented amongst the 65 speakers from leading firms in the investment capital field.... full story and agenda near end of report = = = = = We are receiving many more reports about deals not getting funded by U.S.Capital, Santa Barabra, California. We are told the address is a "mail drop." We are working on this story and hope to have additional information by tomorrow. editor -------------------------------------------------------------------------------------- NEW YORK (VENTUREWIRE) -- Efinanceworks, an investment company launched a year ago with $300 million from General Atlantic Partners and Capital Z Partners, has shut down, according to Silicon Alley Daily. General Atlantic and Capital Z, which founded efinanceworks to invest exclusively in financial services companies, have laid off its 27 employees and will take over its portfolio of 13 companies, according to the report. McKinsey & Co. and Internet consultant Proxycom were also involved in the founding of efinanceworks. Representatives from efinanceworks, General Atlantic Partners, and Capital Z Partners couldn't be reached to comment on the report. ------------------------------------------------------------------------------------ United Capital Insider I've been a reader for quite some time and really appreciate the work you do. I'm a former employee of United Capital's. I left of my own accord in mid-January to pursue better options. I had been the .............. I'd prefer to remain anonymous to your readers, but for your records and verification.........................., I don't have a lot to tell you at this time. The thing that struck me, however, was your post about having been hacked (pasted below). I don't have a lot to tell you, as I'm now out of the loop, but I do want to let you know that Peter was very unhappy with your coverage (he doesn't like the truth getting out). He had all office emails monitored for quite some time; he read every single one to try to figure out who was talking to you. Seemed a bit silly to me, as anyone in their right mind wouldn't write you from their work address. I know it's a leap, but not a huge one, to place my suspicions on Peter with regard to your hacking. I don't know what you want to do with this, but I think you ought to keep an eye on him. Keep up the good work, Kit. Name With Held ( The overwhelming majority of our readers do not have company ISP addresses. We have quite a number of AOL, hotmail, yahoo, to name a few. I am sure the communications come from their house or elsewhere, not the office. I don't want to believe the spammer and hackers are pre-meditated. There are other companies not happy with us, and I personally don't think Steve Dallas would do something like that, or even authorize it, or put up with it. I don't know who Peter is, but I can tell you, the truth ultimately prevails about what is happening. It may not be today or next week, but the good you do is fleeting, but the bad lingers on forever. editor ) + + + + + Information Leasing Corporation yesterday: They are not buying any more of our portfolio than the low 8 figure sale from late last year, but, at the request of Lehman Brothers, they are taking over the servicing of the leases funded through the $75 million Lehman facility ( balance owed Lehman is not known at this time.) We hope to dig ourselves out of this. ( This came from a highly reliable source inside United Capital. editor ) + + + Rick at United Capital informed me that selling pieces of their portfolio is part of the business. It does not indicate a problem. They saw the comments in your news letter but I am surprised they have not commented. Per Micki and Rick, "we are almost there" referring to negotiations with Lehman Bro's. They expect fundings by 3/1 possibly. It appears the delays are due to negotiating over small rate percentages. Who knows!! I look forward to their resurrection. -Paul Capital Funding Group Paul von Bruck <paulv@leaseapp.com> + + + Late this afternoon: Information Leasing Corporation / Provident Bank is indeed engaged by United to service their portfolio through ILC's Portfolio Servicing Unit. ILC has also been a buyer of portfolio from United in the past. R. M. Martinez Vice President, Credit and Operations / COO Information Leasing Corporation / The Provident Bank 1023 W. 8th Street Cincinnati, OH 45203 513-763-2216 513-708-3337 Cellular 513-977-8746 FAX ------------------------------------------------------------------------------------
Advance Rentals or Committment Fees Mike Meacher National Association of Equipment Brokers on "Advance Rentals" You have published a variety of responses on the issue of securing advance fees. There are serious questions about the ethics and the legality of the most egregious forms of this practice. Permit me to tell your readers about a telephone call I received recently. The callers identified themselves as a Special Agent for the Federal Bureau of Investigation and a Special Deputy Sheriff for the White Collar Crimes Task Force. The callers assured me they were not calling to investigate our business or any transaction in which I was involved. As my heart rate returned to normal, they did ask a variety of questions about the ways advance fees are secured. Most of the Leasing News readers understand more about the issue than these officers. Their purpose in contacting me, as NAELB President, was to arrange a meeting to educate themselves as to the standards of the industry, current thinking of legal experts in the industry and my opinion about the methods these practices are abused. These guys were sharp, took detailed notes and followed up with written confirmation to make sure they were clear on the issues. I am relating this to your readers to let them know that the FBI and various local law enforcement agencies have made this very subject a focus of regional white collar crimes task forces. They won't catch all the bad guys and some they catch will come back reincarnated doing the same game. But consider, would you like to have received this call if the subject of the investigation was you or your business practices? If not, perhaps your anonymous author, and others who perceive this activity as a "free lunch", might want to think again. Happy hunting FBI. Mike Meacher President, NAELB meacher@bankgrouponline.com 800-403-0422 ------------------------------------------------------------------------------------------ NAELB Attorney Barry Marks Responds to Barry Reitman I appreciate Barry Reitman's comments (any guy whose email address is "baldguy" is OK with me!). I will answer both Barry and Charlie Meaker ("legalese", indeed!)by saying that Barry's overall approach is what I had in mind. The broker should spell out clearly what will be done with the advance rentals: when they will be returned and when they will be kept. I might even add to Barry's letter that the advances will be retained if the lessee furnishes false financial or other information. So far as I'm concerned, if the lessee knowingly delivers a deposit which is not refundable if it refuses to accept the lease it requested and then defaults the question is one of contract: is it a clear statement to which the lessee agreed? As Charlie rightly points out, however, some discretion should be exercised in retaining the deposits. There are times when, even with a binding contract, the better part of valor is to hand back the cash and write the bad experience off. Also, there will be ambiguous situations, highly technical deals, unclear funder requirements, honest misunderstandings, etc. My problem is the broker (or funder!) who keeps the cash because the lessee "should have known" or because "it's only fair" WITHOUT A CLEAR AGREEMENT. Legally, this is weak. Ethically, it is not much better, even if the lessee is wasting the broker's time. Long-winded answer shortened to business terms: don't take and never try to keep advance rentals if the lessee hasn't signed an agreement along the lines Barry Reitman described. You will probably lose in court and you make us all look bad. Barry Marks www.leaselawyer.com ------------------------------------------------------------------------------------------ If "Advance Rentals" are a "Committment Fee".... Having read the comments from many industry professionals regarding the propriety of retaining advance rentals, I have to agree with the policies and protocols adopted by Barry Reitman at Keystone Leasing and John Craine at PowerNet Financial Group that you may, under appropriate circumstances, retain "advance rentals" (though "commitment fee" is a far better term). If the parties agree, and the reason for the deal not going forward is solely the lessee's decision, it may be appropriate to compensate the broker or lessor for his or her work. Other scenarios may be more suspect and less likely to withstand judicial scrutiny. And the "bait and switch" policies to which all have taken offense are NEVER acceptable, but are tantamount to fraud per se. Ken Greene Kenneth C. Greene Associates
+ + + + The Last Word on this Subject I have been following all of the e-mails on the retention of advance rentals (bait and switch) scam and I am a little shocked that more Lessors/Brokers have not run into some of the scams we run into almost everyday. We are located in Southern California and there are a number of companies throughout the State (and I’m sure elsewhere) that are using all forms of deceptive techniques to get the deal or take it off the street. Following is a list of some of the “slick marketing techniques” we have run into that a growing number of leasing companies are using to get the deal: Sales Tax: You are quoted a lease payment on the total cost including sales tax, however, at time of funding you get a call from Customer Service and you are informed that your payment is being adjusted for sales tax because the previous payment was a “mistake” and did not include sales tax. Transposed Numbers: You are quoted a monthly lease payment of $301.00 but the lease documents show up with a monthly lease payment of $310.00. $1.00 vs. 10% Residual: You request a $1.00 residual but you are quoted a monthly lease payment based on a 10% residual (lower Payment). Residual Letter: You are quoted a residual of $1.00 but you never get a residual letter documenting this agreement. Another form of this tactic is to have a $1.00 residual letter in the documentation package but you never get a copy that has been signed by the leasing company; at lease termination you will be billed for 10%. Extended Term: You want a 5 year lease with the first and last in advance. The lease documents indicate that the lease term is 62 months. The leasing company just made 2 extra payments. Your Approved: You are told that you are pre-approved, or your Application has been approved (in a matter of minutes or hours) and they will have the documents (probably blank since they do not have a accurate equipment description) right out to you. In actuality, it may not have even been to their credit committee or bank for approval yet. They will do this after you have signed the documents and they have your money. Upon approval they increase the monthly amount. You accept it or they keep your front money. Vendor Deposit: You gave a 10% deposit to the vendor to hold the equipment but want to finance the total equipment cost. You are quoted a payment on the 90% still due the vendor. At time of funding the vendor is paid the 90% still due and you never get your deposit back. We are witnessing an alarming increase in these types of techniques. We quote a transaction and get the response that we are way to high. We calculate the other payment quoted and find that the implicit rate is ridiculously low. The Applicant has been tricked and we now have to try and explain (without embarrassing him) that there is something wrong with his quote. The problem is we are not sure which trick has been used and since the Applicant has been quoted a payment or interest rate he loves, he is hard to talk to at this point. The truth comes out sooner or later but it’s to late then. Our industry is being infiltrated by some very slick marketing types and they are going to ruin it for all of us if we do not figure out how to get rid of them soon. These companies are big and small, some are desperate to increase slumping sales, and others are just in it for a quick buck. They will bring high-level scrutiny to our industry and regulation will follow. They are not merely telling “little white lies” to the Applicants, they are just plain lying, deceiving and in a lot of cases defrauding the Applicant. I have attached an Information Sheet we provide to our Applicants if we feel we are competing against one of these scummy (leasing) marketing companies. W. Russell Runnalls, CLP Markay Financial Corporation russ@markay.com A copy of Mr. Runnalls Information Sheet may be found on line in our archives in HTML http://www.leasingnews.org/archives/February%202001/2-27-01.htm ----------------------------------------------------------------------------------------------- "Doesn't give a 'dam' about rent or Citicorp's Program" I really like the news letter but I do not give a dam about the rents in silicon valley or Citicorp's program with Dell computers. These articles are getting a bit too long. Gary Psaledas Western Equipment Financing Dear Gary: I appreciate your feedback.
First, you don't have to read everything that appears in any newspaper or newsletter or whatever we are. Skip it. You may not be interested about CIT, but we do have readers who are interested, or about the Farm Credit Bureau, or the latest leasing software, or whatever. Read only what you are interested in reading. I thought the significance of rent dropping in a major city is an indication of where the economy is going. Especially San Francisco, which the story was about, where many dot.com companies like the idea of the "City by the Bay." San Francisco and Los Angeles ( maybe Seattle ) are the financial capitals of the West Coast. One of my personal leading economic indicators are office rents available in an area, the trend, and my personal one centers of the apartment rents I see up on my way to work each day. I don't need to see the consumer confidence level, or trade deficit, or "book to build" ratios. I don't need Alan Greenspan, even, to tell me what is going on. For thirty years, I have taken the same route to work, even when I dropped the kids off to school. It takes me around the backside of Santa Clara University. There are seasonal times you see "for rent" signs posted, but normally you never see them as there is a very big demand to live in this area close to the University. Now, in the season, and I drive by the apartments and houses, and start to see more and more "for rent" signs out...it means to me more people are "doubling" and "tripling" up, moving back home, and the demand is down. It means a slowing of the economy to me. It means less demand. It means a down turn. The more signs up, the more the economy is slowing down. Other people may go on the internet, read magazines, books, and attend conferences. But when I see more "for rent" or rentals prices falling---watch out. That's one of the reasons why I included the story in Leasing News. Third, Dell. As American Leasing, we do about $100,000 a month, often, would like to do more, of course, with Dell Computer. Years ago we did more, when they did not have their own financing plan. Sometimes they even refer clients to us they can't finance any more. If they did not have their own financing, we would do more, you might be doing more, and the trend over the years is more "captive financing," especially on the smaller units. When I started in business 30 years ago we had dictaphone, AM Multi graph, and at one time, I did all of Apple Computer leasing, but they wanted a national company---that is another story---so by being aware of what is happening in our industry, especially from your competition ( or vendor ). The more you know about your competition or what they are promoting, the more information you have to present your advantages. To those of you, who remember the old sage advice, " Don't Look Back, because someone may be catching up with you." Baloney. One, this is not a foot race, so the analogy is not right as you should be aware of all you competition and adjust to it. Two, when I ran track, I tried to set my own pace, but at the end, I would glance to my side or back, and if I saw someone turning on the speed, I somehow found the ability to run faster. Keep on truckin' !!! -------------------------------------------------------------------------------------------- Finova Bailed Out by Buffett-Led Group The Finova Group, Berkshire Hathaway and Leucadia National announced that they have entered into an agreement for a $6 billion loan to Finova Capital, the principal operating subsidiary of The Finova Group, in connection with a restructuring of all of Finova Capital's outstanding bank and publicly traded debt securities. The restructuring will be accomplished pursuant to proceedings under Chapter 11 of the United States Bankruptcy Code. Finova expects to file a petition for reorganization under Chapter 11 in the near future. Subject to necessary approval of creditors and the court, Finova Capital will use proceeds of this $6 billion senior secured five year term loan to pay down, at par value, its existing bank and publicly traded indebtedness on a pro rata basis. The balance of Finova Capital's bank and bond indebtedness will be restructured into approximately $5 billion of new senior notes of Finova. The $6 billion loan will be made by Berkadia, an entity formed for this purpose and owned jointly by Berkshire Hathaway and Leucadia. Berkadia has received a $60 million commitment fee and, in addition to certain other fees, will receive an additional $60 million fee upon funding under the agreement. Berkadia's commitment for the loan has been guaranteed by Berkshire Hathaway and Leucadia and expires on August 31, 2001, or earlier, if certain conditions are not satisfied. Berkadia expects to finance its funding commitment and Berkshire Hathaway will provide Berkadia's lenders with a 90% primary guarantee of such financing, with Leucadia providing a 10% primary guarantee and Berkshire providing a secondary guarantee of Leucadia's guarantee. Upon completion of the reorganization as currently contemplated, Berkshire Hathaway and Leucadia together will receive common stock representing 51% of Finova's outstanding shares and the public will retain its existing shares. Berkadia will be entitled to designate a majority of Finova's board of directors. Finova currently has cash on hand of approximately $1 billion, which will be available in the bankruptcy proceedings to address commitments to customers, operating expenses, claims and expenses of the bankruptcy and expenses related to the consummation of the restructuring. In connection with the agreements, Finova and Leucadia have entered into a 10-year management agreement under which Leucadia is providing general management services to Finova in exchange for an $8 million annual fee. Lawrence S. Hershfield, an executive of Leucadia, has been appointed Chief Restructuring Officer of Finova and will work closely with a special committee of Finova's board of directors to complete the restructuring. Completion of the transaction is subject to negotiation and approval of definitive loan documentation, Berkadia's approval of the terms and conditions of Finova's restructuring plan and bankruptcy court and necessary creditor approval of the plan of reorganization. In connection with the agreements, Finova Capital announced a moratorium on repayment of principal on its outstanding bank and bond debt. The purpose of the moratorium is to help assure that all creditors are treated equitably in the debt restructuring process. It is the company's intention to schedule a meeting with creditors in the near future. -------------------------------------------------------------------------------------------- Viking Capital Group Signs Agreement With Chinese Privatization Authority
DALLAS--(BUSINESS WIRE)--Feb. 27, 2001--Viking Capital Group, Inc., (OTC:VGCP), announced today the signing of a strategic agreement with Oriental Enterprise Holdings Entrustment & Operation (H.K.) Co. Ltd., (Oriental) that makes Viking the representative in the Americas of any interested purchaser of a privatized company or asset in China. Oriental is a governmental entity organized by several national ministries of the People's Republic of China (PRC) including the Ministry of Foreign Trade and Economic Cooperation, the State Economic Restructuring Commission, the Ministry of Construction and the Ministry of Science and Technology. Oriental is responsible, among other things, for the coordination of privatization of assets and companies owned by the Chinese Government who last October was entrusted to handle all privatization in the PRC. Viking will act as a conduit through which Chinese companies are presented to investors in all of the Americas. Viking will receive a fee based on the purchase price of each entity that is privatized. Viking plans to contract with commercial brokers and investment banking houses wishing to participate in the sales of such Chinese privatized companies to facilitate locating interested buyers. As an indicator of the interest of investment in China, during the first 10 months of last year, according to statistics from the Ministry of Foreign Trade and Economic Cooperation (MOFTEC), the number of newly approved overseas-invested companies in the country totaled 17,493 with a contractual investment volume of US$ 43.516 Billion. According to other statistics from MOFTEC for the same period, the total number of overseas-invested ventures was 359,306 with contractual investment volume of US$ 657.577 billion. Direct investment volume from overseas was US$ 339.254 billion. William Fossen, chairman of Viking, said, "This agreement offers Viking a singularly unique opportunity to generate fee income in our corporate services business model. Our team's network of business contacts in the PRC and in the Americas provides an answer to Oriental's privatization challenges, and Viking is pleased to be a part of this historic process." Zengh Ming Lu, executive managing director of Oriental, said, "We are looking forward to building on the relationship with Viking Capital Group as our representative in the Americas. As China draws closer to WTO entry, we expect enhanced direct and indirect investment into China. We similarly expect that Viking will play a significant role as a catalyst in transactions between privatized Chinese companies and interested parties in the Americas." About Oriental Holdings Entrustment & Operation (H.K.) Co., Ltd. Oriental Holdings Entrustment & Operation (H.K.) Co., Ltd. (OEHEO) is based in Hong Kong and is a wholly owned subsidiary of The Parent based in Beijing, China. OEHEO (The Parent) is a Chinese government owned and controlled entity which is privatizing its corporations. OEHEO was entrusted last year with all privatization in China. See web site WWW.OEHEO.COM ---------------------------------------------------------------------- VenServ, Inc. Announces Appointment of New CFO
AGOURA HILLS, Calif., Feb. 27 /PRNewswire/ -- VenServ, Inc., ("VenServ") the premier provider of innovative, web-based product financing solutions, today announced that industry veteran R. Jeff Macartney has joined the company in the position of Chief Financial Officer. Mr. Macartney comes to VenServ with over 20 years of experience in the financial services industry. He has managed financial institutions, fast growth companies and companies undergoing mergers and acquisitions. He has held the Chief Financial Officer / Controller position in many segments of the leasing industry. He also has significant experience with designing and implementing control systems to support strategically focused operations. Prior to joining VenServ, Mr. Macartney was Controller for Pitney Bowes Financial Services (PBFS), Stamford, CT, which offers equipment and real estate leasing, mortgage servicing, credit cards and business lines of credit. PBFS is a SEC registrant which owns and operates a banking operation and a NASD-registered broker dealer. Mr. Macartney was also Chief Financial Officer of a PBFS subsidiary, Colonial Pacific Leasing, which was successfully sold to GE Capital. Prior to Pitney Bowes, Mr. Macartney's positions have included Chief Financial Officer for small ticket lessor Balboa Capital (Irvine, CA), Senior Vice President of Operations and Administration for a Bank Austria leasing subsidiary, LB Credit Corporation (San Francisco, CA) and Vice President of Finance for an Allied Signal equipment leasing and real estate financing subsidiary, Signal Capital Corporation (Hampton, NH). "It is with great pleasure that we welcome Jeff Macartney to the VenServ senior management team," says Robert D. Parker, President and CEO. "Jeff's leasing industry experience, professional financial management capabilities and experience with creating and operating many different business models are strengths which are vital to this company as it continues to grow rapidly and evolve." About VenServ: VenServ, Inc. is the premier provider of innovative, web-based product financing solutions. |