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July 16, 2001
Comdisco Pulls The Plug---Full Story-Hopes to Recover from #13 by 2002. --Fitch Lowers Senior Debt Lowered To `DD' ( See 50%-90% Recovery ) Progress Financial to Reduce Lending to Early Stage Technology Companies. Electronic Financial Group Ltd. secures $3.5 Million in Equity Financing
Ethics-"Blow the Whistle"----- Dialogue
######## ################# ############## Comdisco on Monday said it is filing for bankruptcy protection, cutting jobs, selling its technology services unit and has received financing commitments for $600 million
Comdisco and 50 Domestic U.S. Subsidiaries File "Fast-Track"
Chapter 11 Reorganization /Targets Emergence from Chapter 11 by Early 2002
Salomon Smith Barney Inc. and J. P. Morgan Securities Inc. Arrange 600 Million Secured DIP Financing Facility to Support Continued Operations
Comdisco's International Subsidiaries Not Part of Chapter 11 Cases; 100 Million of New Secured Facility Reserved for International Subsidiaries
To Support Operations in Ordinary Course of Business Company Seeks First Day Orders to Support Employees,
Customers and Vendors; Seeks Court-Sanctioned Auction Bidding Procedures for Leasing Business as Part of Strategic Alternatives Assessment
Further Cost Savings Measures Announced
Full Story .
Rosemont, Ill.-based Comdisco says the parent company and 50 domestic U.S. subsidiaries have filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Court for the Northern District of Illinois. Comdisco says it expects to emerge from Chapter 11 during early 2002.
The company reached a deal to sell its technology services unit for $610 million to Hewlett-Packard, including its U.S. assets and the stock of its subsidiaries in the United Kingdom, France and Canada. The sale excludes German and Spanish operations.
Comdisco also says it has received commitments for a $600 million senior secured financing facility led by Citibank as administrative agent and out of which $100 million will be exclusively used to support international operations. Comdisco says it is reducing its workforce by 200 positions, or less than 10 percent of its North American work force, more than half of which will be at the corporate level.
COMDISCO'S TECHNOLOGY SERVICES BUSINESS TO BE ACQUIRED BY HEWLETT-PACKARD
ROSEMONT, IL, - Comdisco, Inc. (NYSE: CDO) announced today that, as a result of the strategic review commenced in April, it has reached a definitive agreement with Hewlett-Packard Company to sell substantially all of its Availability Solutions (Technology Services) business for $610 million. The sale includes the purchase of assets of Comdisco's U.S. operations and the stock of its subsidiaries in the United Kingdom, France and Canada. The sale excludes the purchase of the stock of subsidiaries in Germany and Spain, as well as other identified assets, including Network Services and IT CAP Solutions. In addition to the sale of its services business, Comdisco is continuing to pursue other strategic alternatives to create value for its stakeholders, including evaluating the possible sale of certain of its leasing assets to several interested buyers. Norm Blake, Chairman and Chief Executive Officer, said: "As a result of our comprehensive strategic review, which we commenced upon my arrival four months ago, we decided that the sale of our technology services business was in the best interest of Comdisco and our stakeholders. We established clear criteria for selecting the most appropriate buyer: expertise and experience in the industry; global presence; a reputation for outstanding customer service; a culture that values people and the development of their employees; and the resources to grow this business. Hewlett-Packard unambiguously fits this criteria."
Ann Livermore, President, HP Services, said, "Comdisco has built a strong, profitable business for delivering availability services including backup and contingency planning services and disaster recovery services. Through its industry-leading solutions, talented employees and proven commitment to customer service, the Availability Solutions team has established deep relationships with a large and loyal customer base of more than 3,000 businesses in North America, Europe and Asia." Simultaneous with entering into the Hewlett-Packard transaction, Comdisco announced that the parent company and 50 domestic U.S. subsidiaries have filed voluntary petitions for relief under chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Northern District of Illinois. This filing will allow the company to provide for an orderly sale of these assets, which will be subject to higher or otherwise better bids in a bankruptcy court auction process, while resolving short-term liquidity issues and enabling the company to reorganize on a sound financial basis to support its ongoing businesses. To facilitate the company's ongoing evaluation of its leasing businesses, the company said that it had filed a motion seeking the approval of bidding procedures to conduct a sale auction process for one or more of its leasing business units. The company also announced its intention to reorganize its remaining businesses, including Comdisco Ventures group, on a "fast-track" basis and has targeted emergence from chapter 11 during early 2002. The previously announced discontinued operations of Prism Communication Services are included in the filing and represent approximately 35 of the 51 debtor cases. The company said that Comdisco's operations located outside of the United States are not included in the chapter 11 reorganization cases, and are continuing normal business operations. Comdisco also announced that it had received binding commitments for a $600 million senior secured DIP financing facility led by Citibank, N.A. as Administrative Agent, The Chase Manhattan Bank as Syndication Agent, and Heller Financial, Inc. as Documentation Agent. The $600 million facility, which remains subject to bankruptcy court approval, was arranged by Salomon Smith Barney Inc. and J. P. Morgan Securities Inc. The company said that $100 million of the new secured financing facility has been reserved specifically to support international operations and is expected to be available this week pending interim court approval. "We are gratified by the vote of confidence from such world-class financial institutions in supporting our strategic efforts and vision for maximizing business enterprise value for our stakeholders. This vision includes the thorough assessment and completion of strategic divestitures and the quick reorganization of our remaining business units in order to promptly emerge from chapter 11 early next year," said Mr. Blake. The company said that it had filed 30 first day motions to support its employees, customers and vendors; to obtain interim financing authority and maintain existing cash management programs; to retain legal, financial, real estate and other professionals to support the company's reorganization cases; and for other relief. The company also said that the parent and all of its subsidiaries will conduct normal business operations and continue to make customer service a top priority during the restructuring of its remaining core businesses and the transition process surrounding divested business units. The company will continue to be ready to support Availability Solutions' customers testing programs and recovery needs should they experience a disaster. During the restructuring process, which will facilitate the completion of the Hewlett-Packard transaction and the completion of the company's strategic assessment program, Comdisco's employees will continue to be paid in the normal manner and their health benefits will not be disrupted. Vendors, suppliers and other business partners will be paid under normal terms for goods and services provided during this restructuring period. In accordance with applicable law and court orders, vendors and suppliers who provided goods or services to the U.S. based companies before today's filing may have prepetition claims, which will be frozen pending court authorization of payment or consummation of a plan of reorganization. In addition, as part of its ongoing cost reduction program, the company announced today a further rationalization of costs to enhance the company's competitive position. Accordingly, Comdisco will reduce its workforce by approximately 200 positions, more than half of which will be at the corporate level. This reduction represents less than 10% of its North American workforce. Mr. Blake said, "We appreciate the continuing support of our customers, lenders and suppliers and the dedication of our employees. Today's court filings are challenging. However, coupled with the Hewlett-Packard transaction, our strategic assessment program and related restructuring steps, they will, in the long term, serve the interests of all of our stakeholders, including our customers, employees and creditors, by making our businesses healthier overall. The filing is the vehicle that enables us to accomplish these objectives. " "We intend to proceed quickly with the sale of the technology services business announced today. Additionally, we will continue to evaluate the possibility of selling a significant portion of our leasing assets. At the same time, we will operate Comdisco's other businesses to achieve their full potential. I expect that Comdisco will end its financial restructuring process and exit chapter 11 by the end of the first quarter of the 2002 calendar year," concluded Mr. Blake. The sale agreement is subject to, among other things, higher or otherwise better offers, Court approval, antitrust approval, any other such approvals as may be required by law, and other customary conditions. Given these conditions, there can be no assurance that the proposed transaction will be consummated.
About Comdisco
Comdisco (www.comdisco.com) provides technology services worldwide to help its customers maximize technology functionality, predictability and availability, while freeing them from the complexity of managing their technology. The Rosemont, (IL) company offers a complete suite of information technology services including business continuity, managed web hosting, storage and IT Control and Predictability Solutions SM. Comdisco offers leasing to key vertical industries, including semiconductor manufacturing and electronic assembly, healthcare, telecommunications, pharmaceutical, biotechnology and manufacturing. Through its Ventures division, Comdisco provides equipment leasing and other financing and services to venture capital backed companies. Sites of Reference: http://www.comdisco.com For Comdisco Investors: 866/757-7750 or For U.S. Media: Comdisco, Inc. Mary Moster, 847/518-5147 or Kekst and Company Fred Spar/Jeremy Fielding 212/521-4800 ######### #################### ########################## KEYWORD: ILLINOIS INTERNATIONAL CANADA UNITED KINGDOM FRANCE ### ############ ###### ##########
Electronic Financial Group Ltd. secures $3.5 Million in Equity Financing Vancouver, B.C., Canada -- Electronic Financial Group Ltd. (EFG) announced today that it has secured $3.5 million in equity financing from Working Opportunity Fund, Growth Works Access Fund Limited Partnership, and BDC Venture Capital. "Investment proceeds will be used to expand our North American presence with equipment dealers, to continue development of our leading edge point-of-sale financing technology and to add key personnel to our marketing and call centre platform," said Hugh Swandel, President of EFG. "To receive equity financing from two of Canada's leading venture capital firms in today's environment is an endorsement of EFG's management team, technology and our explosive growth potential." Founded in April 2000, EFG has become a Canadian leader in providing instant credit decisioning and financing solutions to equipment manufacturers and dealers. EFG's state of the art, proprietary technology delivers real-time access to multiple funders across a complete credit profile, for both consumer and business transactions. A fully staffed team of experienced professionals who assist with all aspects of financial transactions complements the efficiency of EFG's technology. "EFG is a strong addition to the GrowthWorks portfolio of investments," said Donna Bridgeman, Senior Vice President of Corporate Affairs and Investments at GrowthWorks. "We believe EFG has the technology and depth of management experience to become a leader in this new market." "EFG has the potential to revolutionize the delivery of point-of-sale financing in North America's multi-billion dollar commercial and consumer equipment finance industry. We believe companies that leverage the Internet to extend business reach such as EFG will help drive the next wave of economic growth", said Jenny Yang, Director, BDC Venture Capital.
About GrowthWorks Capital Ltd. GrowthWorks invests equity capital in and provides practical business advice to ethical, innovative, rapidly growing, entrepreneurial companies. GrowthWorks manages several funds with a combined $550 million in assets and has investments in 55 companies in the province's emerging sectors: technology - 39%; biotechnology - 25%, advanced manufacturing - 21%; film & entertainment 5%; tourism-related - 2%; environmental - 4%, other 4%. (www.growthworks.ca)
About BDC Venture Capital BDC Venture Capital is a major venture capital investor in Canada, active at every stage of the company's development cycle, from startup through expansion, with a focus on technology-based businesses that have high growth potential and that are positioned to become dominant players in their markets. BDC Venture Capital has been involved in venture capital since 1975 and has to date invested in more than 270 companies. It currently manages over $400 million in venture capital assets and more than 80% of its portfolio is invested in the areas of telecommunications, enterprise software, Internet technologies, electronics, and biotechnology. (www.bdc.ca)
About Electronic Financial Group At EFG, our prime focus is to provide the North American market place with a unique service to enhance sales by providing instant credit and financing solutions. Applications are processed and immediate credit decisions granted. Upon approval, documentation and funding is also completely automated. EFG provides comprehensive service, support and training to address customer issues quickly and efficiently during regular business hours. (www.efgroup.ca)
Contact: Donna Bridgeman GrowthWorks Capital Ltd. 604-609-5377 donna.bridgeman@growthworks.ca
Jenny Yang BDC Venture Capital 604-666-2657 jenny.yang@bdc.ca
Sites of Reference: http://www.efgroup.ca http://www.bdc.ca http://www.growthworks.ca
CONTACT: Hugh Swandel Electronic Financial Group Phone Number: (604)646-6988 Fax Number: (604)646-2401 E-mail: hugh@efgroup.ca or Suzanne Donald suzanne@efgroup.ca
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Progress Financial to Reduce Lending to Early Stage Technology Companies.
BLUE BELL, Pa Progress Financial Corporation (the "Company") (Nasdaq: PFNC) and its principal subsidiary, Progress Bank (the "Bank") announced today that their Boards of Directors approved a resolution to comply with the terms of a directive issued by the Office of Thrift Supervision ("OTS") that requires the Bank to (i) reduce its lending to early stage technology companies; (ii) increase its leverage capital ratio to no less than 8.0% and its total risk-based capital ratio to no less than 14.0% by April 1, 2002; and (iii) increase its valuation allowance and implement improved credit review and monitoring programs. In addition, the Company will not pay cash dividends on its capital stock until the Bank achieves the required capital levels and has implemented an acceptable capital plan. As such, the Company has suspended the quarterly cash dividend on its common stock and its stock repurchase program effective immediately and will undertake to achieve capital compliance as promptly as possible.
The OTS has indicated that these higher capital levels are necessary due to the level of business lending, particularly in the technology sector, that the company has engaged in. The increased capital and reserve levels to a large extent reflect concerns over the direction of the economy and the recent growth of the Company's commercial loan portfolio, particularly in loans to technology and growth companies. W. Kirk Wycoff, President and CEO commented, "the level of capital and reserves required by this directive are prudent for Progress Bank to continue to support its middle market business, SBA and real estate lending initiatives. At this time, the Bank will focus its attention on core banking and continued development of its retail franchise. With the support of the Company, the Bank expects to comply with all of the OTS requirements in an expeditious manner."
For the quarter ended June 30, 2001, the Company recorded a $3.6 million provision for loan and lease losses and wrote down its equity investment in NewSprings Ventures, L.P., by $616 thousand. As a result, the Company anticipates reporting a net loss for the quarter ended June 30, 2001, of between $1.3 million and $1.5 million, or $.22 to $.26 per diluted share. The increase in provision, which is expected to bring the Company's allowance for loan and lease losses to $10.3 million or 1.82% of total loans and leases at June 30, 2001, was undertaken due to increases in non-performing loans and leases, loan and lease growth and continued economic concerns. The Company's book value per share is anticipated to be approximately $8.92 per share at June 30, 2001, and the Bank remains well capitalized with core capital in access of $61 million. The Company expects to announce its second quarter results on July 25, 2001.
The Company and the Bank also announced today their intention to exit the business of lending to pre-profit companies and to wind down their technology-based portfolio of loans to pre-profit clients by December 31, 2001. The Bank has been an active lender in the technology and growth company area, building a portfolio of $62 million in loans and warrant positions in 39 companies. Mr. Wycoff said, "the continued slump in venture funding available to smaller companies and the inability of these small companies to attain profitability contributed to the Bank's decision to reduce its exposure in this market segment. As a $900 million bank, it is important to dedicate our resources to more traditional lines of business which have a more predictable earnings level and can lead to appropriate returns for shareholders. We will continue to be an active lender to small and middle market companies that have strong balance sheets and earnings histories." The directive includes, among other things, the following requirements:
--Regulatory Capital. Beginning on April 1, 2002, the Bank is required to maintain its leverage capital ratio at a level of no less than 8.0% and its total risk-based capital ratio at a level of no less than 14.0%. The directive permits gradual compliance with these higher regulatory capital levels with leverage ratios of 7.25% and 7.5% required beginning on September 30, 2001 and December 31, 2001, respectively, and a risk-based ratio of 12.0% required beginning on September 30, 2001. The directive requires that the Company and the Bank develop a capital plan that addresses, among other things, capital levels, credit concentration, commercial lending risks, classified assets and retained earnings. The Company is also required to take all necessary actions to assist the Bank in accomplishing the goals of the capital plan. At March 31, 2001, the Bank's leverage capital ratio was 6.95% and its total risk-based capital ratio was 11.86%.
--Capital Distributions, Repurchase and Redemptions. The Company may declare and pay a cash dividend on its equity securities only if (i) the Bank has a leverage capital ratio of at least 8% and a risk-based capital ratio of at least 14.0% and the Company and Bank are in compliance with their capital plan or (ii) receives the prior written approval of the OTS Regional Director. The directive immediately restricts capital distributions by the Bank without the prior written approval of the OTS Regional Director and requires that any purchases or redemptions of Company stock be consistent with the terms of the capital plan approved by the OTS Regional Director.
--Higher Risk Loans. Beginning on September 30, 2001, the Bank's higher risk loans (as defined in the directive) shall not exceed 75% of the amount of the Bank's Tier 1 regulatory capital. Higher risk loans include certain commercial business loans and other credit relationships that (i) the Bank originates through its Tech Banc/Specialized Lending Division, (ii) involve the receipt by the Bank or an affiliate of warrants or other equity interests; (iii) are made to a pre-profit company or a company reliant on venture capital funding, or (iv) are otherwise determined by the OTS to have a higher than ordinary degree of credit risk. In order to comply, the Bank must develop and submit to the OTS Regional Director a written plan, that includes (i) methods used to identify concentrations of direct and indirect credits to a specific industry or line of business; (ii) procedures to be utilized to achieve the plan's goals; and (iii) procedures for the monthly monitoring of the plan by the Bank's board of directors based on management prepared reports.
--Classified Assets to Capital Ratio. Beginning on March 31, 2002, the Bank's classified assets-to-capital ratio (classified assets divided by the sum of the Bank's Tier 1 regulatory capital and allowance for loan and lease losses) shall not exceed 20%. The directive permits gradual compliance with this ratio through the imposition of an interim required ratio of no more than 25% as of December 31, 2001.
The OTS has also advised the Company and the Bank that it intends to implement the higher regulatory capital requirements through the establishment of an individual minimum capital requirement for the Bank. The imposition of the directive and the individual minimum capital requirements were the result of concerns raised by the OTS during a recent review and examination. Progress Financial Corporation is a unitary thrift holding company headquartered in Blue Bell, Pennsylvania. The business of the Company consists primarily of the operation of Progress Bank, which serves businesses and consumers through eighteen full service offices. The Company also offers a diversified array of financial services including equipment leasing through Progress Leasing Company, with offices in Blue Bell, Pennsylvania, and financial planning services and investments through Progress Financial Resources, Inc., headquartered in Philadelphia, Pennsylvania; and asset-based lending through Progress Business Credit. In addition, the Company also conducts commercial mortgage banking and brokerage services through Progress Realty Advisors, Inc. with locations in Blue Bell, Pennsylvania, and Woodbridge, New Jersey. The Company also receives fees for construction and development of activities through Progress Development Corporation; fees for venture capital management services provided by Progress Capital Management, Inc.; and financial and operational management consulting services for commercial clients through KMR Management, Inc. located in Willow Grove, Pennsylvania. The Company's common stock is traded on The Nasdaq Stock Market under the Symbol "PFNC."
Comdisco Inc.'s Senior Debt Lowered To `DD' ( See 50%-90% Recovery ) NEW YORK--(BUSINESS WIRE)-- --Fitch lowered Comdisco Inc.'s senior unsecured debt rating to 'DD' from 'CCC' following the company's announcement that it and 50 of its domestic subsidiaries had filed voluntary petitions for relief under chapter 11 of the U.S. Bankruptcy Code. These bankruptcy filings exclude the company's international operations. While expected recovery values are highly speculative and cannot be estimated with a high degree of precision, Fitch's 'DD' rating indicates potential recovery in the range of 50%-90%. Additionally, Comdisco's 'C' commercial paper rating has been withdrawn as there is no commercial paper outstanding at this time. Comdisco's senior debt rating has been removed from Rating Watch. At March 31, 2001, Comdisco had approximately $3.5 billion of unsecured public debt outstanding. The rating change reflects Fitch's belief that Comdisco intends to suspend principal and interest payments on its pre-petition unsecured debt obligations immediately. A $600 million debtor-in-possession facility arranged by Salomon Smith Barney Inc. and J.P. Morgan Securities Inc. will be used to help support Comdisco's continuing operations. This facility is subject to bankruptcy court approval. The company projects that it will emerge from bankruptcy in early 2002. Comdisco also announced this morning that it had reached an agreement with Hewlett-Packard Company to sell substantially all of its Availability Solutions (Technology Services) business for $610 million. This sale is subject to bankruptcy court and regulatory approval. Based in Rosemont, Ill., Comdisco Inc. is a worldwide company engaged in information technology leasing, technology services and venture loans and leases. CONTACT:
or John
S. Olert, #### ####################### Monitor Industry Forum Formal Announcement: "We've reviewed the content of the postings listed on our Industry Forum page over the past 60 days or so. Essentially, what we found was that it no longer appeared to serve the purpose for which it was originally intended. "We have decided to disable the Industry Forum until we're able to complete an upgraded version that is currently in the works. "Stay tuned - we're hoping to make a more formal announcement regarding this value added service by the end of the summer." ( Perhaps a screen process to halt fraudulent postings. Leasing News has talked to the person named, and received e-mail from the person who allegedly sent the posting, and the person who admitted to sending the postings. The Monitor is taking positive and appropriate action. editor ) _________________________________________________________________ Ethics-"Blow the Whistle" Dialogue-Chronological Order-as received. I would like to respond to the comments that were evidently fostered by my message on ethics a few days ago. Some of these comments will be directed to the respondent and some of them are general comments. To Russ Runnals, CLP, I would like to say that you are right that the associations probably don't do enough to sanction unethical behavior. I wish we could do more. We have tried to put "teeth" in the "toothless" standards. Every time this comes up, however, we are advised by the members of our legal committee that we may be violating "anti-trust" laws that could create a liability for the association and, possibly the officers of the association. Since the boards and officers of the associations are volunteers there is only so far we can go with "enforcement" of standards. Last year I convened an ethics task force to examine this issue once again for the UAEL. The task force came back with some excellent recommendations and these are on the agenda for the summer board meeting. We will once again attempt to make the standards a little more "toothy". The changes that were proposed, however, were not met with the overwhelming support of the members with whom I've spoken about them. As I wrote in Leasingnews a couple of months ago, most people want more teeth in the standards, as long as they never get bitten. While I fundamentally disagree with Hal Horowitz about inviting "government regulation", his point is well taken that the industry hasn't done a good job of policing itself. This is primarily because of the business model that has been prevalent in the "third party" segment of this industry since it's inception. The funding source does not fundamentally trust the broker/lessor. Why? They cite a lack of loyalty and the fact that the broker will go wherever they can to get the lowest price and the most compensation. Well, of course they do. The business model has encouraged that until just lately. How many of us fondly remember the "bonus programs" of yesteryear with the stories of super brokers who had enormous checks sent to their home addresses. Were the funding sources promoting quality and loyalty, or were they training brokers to understand that "volume" was more valuable than the quality of the product they delivered? We all know the answer to that. So, getting back to Hal's point that we didn't do a good job of policing ourselves; no kidding, there was absolutely no percentage in it because your volume might drop off a couple of ticks and you wouldn't get your bonus. This behavior created an atmosphere where greed and "making" the month or the quarter became more important that the relationship between the broker and the customer or the broker and the funding source. The newest members of our industry were never exposed to the way it used to be before the" volume god" became the deity of choice. What they saw was a business model that rewarded avarice and greed, where you could walk the ethical line or even cross it. Not only would you not be sanctioned, you would probably be rewarded with a bonus check. Why not take the path of least resistance when it is also the path that's paved with gold? I will never forget the time, that a high ranking individual from one of the funding sources I dealt with, called me on the phone because I had withdrawn a transaction due to a poor bank reference. The transaction was approved on the automated scoring system and the funding source did not require a bank reference. It was our internal policy, however, to obtain a bank reference on every transaction we did. When the bank came back unsatisfactory I did, what I thought was the right thing and withdrew the application. I was literally scolded, like a school kid, first by the analyst and then by her boss. The message to me and my staff was "Quit calling the bank". That single anecdote illustrates my point. No Hal, government regulation is not the answer but I think, as Joe Bonanno points out, licensing is. Mark Speros, asked "are we second class citizens", "why can doctors, lawyers, CPA's and others, sanction members of their industries and we can't". Well, Mark while I'm not near as Old a Fart as you are, I have been around a while and we are second class citizens in the finance industry. The leasing industry and probably commercial finance in general, is and always has been the "bastard stepchild" of the banking industry. While I believe that this is destined to change, with the repeal of Glass-Stiegel, the advent of the Internet and increased competition for banks, the public perception of non-bank lenders is re-enforced by the type of stories that prompted my original e-mail. While I don't know what it would take to have a state or national licensing program I believe that the CLP program and foundation is a good start. If the association leadership got behind this program and assisted in giving it a strong foothold in our industry we would begin to create some educational barriers to entry into our business. Furthermore, having to qualify for a license will undoubtedly run a fair number of the bad apples out of the business. You see Russ, education is important if it is leveraged in a way that helps us clean up the industry. While Joe Bonanno is right that there are bad people, even in licensed or regulated businesses, I would be willing to bet that there are far less, on a per capita basis than we have in the leasing business. Last but not least, Bob Baker nailed it when he said "You are the problem". I often wonder what would happen, if the top ten "ethical" broker/lessors, doing business with a certain funding source would get together and threaten a boycott if that funding source were "looking the other way" and allowing a known offender to continue to send them business in the name of volume. Do we have the guts it would take to make that kind of stand? I bet we would only have to do it one time. If it happened, and volume dropped like a rock, how would that be explained to the "parent Company? "Our top ten brokers took their business elsewhere, Mr. Big, because we were doing business with an unethical, scum bag broker who is delivering tons of volume that will help us have the best quarter ever. We know a lot of that paper will go bad, but don't worry sir, we'll have the company sold for big bucks and then it will be somebody else's problem". I think Bob Baker might be the "most right" of all. We may indeed be the problem if we don't step up and use whatever tools or methods we have to blow the whistle loud and clear t keep our industry clean. If we don't I'm sure we'll eventually learn the cost of "looking the other way" Bob
Rodi, CLP ~~ Hal, I'm on the verge of leaving after 18 years. It is hard to be part of an industry that many companies (customers) look upon as shysters, shylocks, thieves and "used car salesmen." Do you know how to tell the difference between a copier salesman and a leasing salesman in New York City? If one throws a rock off the top of a tall building and hits one of those salespeople in the head, the leasing guy will get up and keep going. Sad, sad commentary on the perception people have of our industry. I was proud of my business. We created jobs, increased competition and enhanced profitability. Because of our efforts, lower middle market and highly leveraged small businesses were able to secure financing, often custom structured around their cash flow, for new production equipment. Equipment that made things, generated more profits, often created jobs (though sometimes eliminated workers due to technological efficiencies) and allowed the little guys to compete with the big guys. These businesses were often shunned by banks or couldn't tolerate the timeline for a bank to understand and approve their financing needs. Our industry, funded by companies like GECC, AT&T Capital, Tilden, Col-Pac and numerous other funders could see the light. We provided a real service, delivering equipment financing options to companies that needed it. How times have changed. People (who work for companies - but it is still people) lie about rates, mis-quote and confuse customers. Purchase Options go out as PUTS, FMV's aren 't disclosed, no-penalty pay-offs sound to the uninformed ear to be something akin to simple interest but it just means PV the remaining payments at 5% and add no other charges. A salesman was losing a deal because the competitor had a lower interest rate. It took some doing for him to convince the customer that if his payment was lower than the competitor' s, how could his interest rate be higher than the competitor? People understand simple interest, so trick them by quoting add-on interest rates. The $2,036 payment gets sent out as $3,206. Ooops, sorry. As much as government regulation would $*@!, it could weed out many of the unethical participants. Self-regulation would require the support of the funding community and that will likely never happen. I remember 10 years ago when a top tier funder was told that one of their brokers were feeding them a lot of bad paper and hiding the derogatory references, their reply was "Yeah, but they give is a million a month in volume." Who cares if the broker (or small lessor) stretches the truth to generate the volume as long as we (the funding source) can book it. Self-regulation
might work if… Funding sources would only do business with non-bank lessors and brokers that were members of a leasing association or agreed to abide by certain industry-wide ethical practices (that means several associations need to agree on the same ethical standards. If an individual violates the ethical standards, they get cut from the association and participating funding sources bar them from funding new business. Only with the support and participation of the funder will self-regulation work. Who cares if they get kicked out of the UAEL or the EAEL, just as long as one can still fund business. Sad, sad commentary on the perception people have of our industry. PS - Kit, if you print this, don't use my name. ( Name Withheld---This person is not a broker or salesman, but has been involved in the operation of several leasing companies and most readers will know he name, if we were to use it. editor ) ~~ I was asked to be an expert witness involving an ELA member a few years ago, regarding ethical issues. Upon examining ELA's statement of ethics, it was clear that it did not contain any enforceable language at all. Just nice, sincere sounding pillow talk. I am currently a member of a listserv for an organization called CAUCUS, which is a relatively new and rapidly growing (1,500 members with 500 expected at their Sept meeting in Orlando) association of technology procurement professionals. The organization membership cuts across many disciplines, and regular contributors include attorneys, IT, procurement, contract managers, accountants, etc. My point is that their listserve is a virtual community in which the members, planet wide, can and do communicate with each other on a daily basis regarding what vendors to avoid, which ones to pursue, likely concessions one can expect, and on and on and on. I believe a very effective method of weeding out predators in any industry is customer awareness. As these virtual communities continue to grow, I am optimistic that predators will find it increasingly difficult to operate. James
M. Johnson ~~~ I agree with Mr. Rodi & Mr. Runnalls regarding the lack of ethics in our industry (in fact world wide, not just in leasing). I am afraid the see it left up to the UAEL to police us when my experience with that organization should me they were lacking ethics themselves. I would not trust them to fairly regulate anything! Cary
Sue Lavan ~~~ I, too, would like to respond to Mr. Runnalls's complaints regarding the efforts of the associations to curb the rising tide (flood?) of unethical behavior. 1. Much "unethical" behavior results from lack of education. As one who has fielded ethics complaints for 10 years, I know that many issues result from different opinions as to what is ethical and from brokers (and funders) who simply don't know what is expected of them. Not all, not most, but very many problems fall into this category. 2. Many (maybe most) problems involve those who aren't connected with the broker/funder community through ACTIVE participation in associations. With no one looking over our shoulders, we all lean toward our self-interest and can rationalize things we could never explain or defend. 3. NAELB not only educates, it polices. We have and, with your help will continue to, sanctioned members and shined a light on miscreants. Yes, we can do more - IF more leasing professionals join and agree to share information and take action against unethical conduct. 4. The main thing is to communicate with one another. We need to continue to argue our way into the right behavior, identify the wrong behavior and adopt a zero-tolerance attitude toward proven unethical conduct. We should kick out the bad apples, but we also need to take proactive steps to lessen their numbers and focus on the borderline guys who push the limits of ethical behavior. You want a better leasing world? Make it so, don't wait for this association or that to do it for you. Mr. Runnalls has done a good thing in posting his thoughts, but complaining that the guys donating their time to promote improvement aren't doing enough doesn't help unless it is combined with a real commitment to pitch in and help. Barry
Marks, Esq. I especially like Barry Marks up-beat, positive, let's work together attitude. Leasing News did a series on Leasing Association "Ethics and Standards". The Equipment (Leasing Association and the United Association of Equipment Leasing did not expel any members in the time period, whereas both the Eastern Association of Equipment Leasing and National Association of Equipment Brokers had each expelled two members. The other leasing associations did not respond. It should be noted that Joseph Bonano, Esq., legal counsel for NAELB, main thrust of his article was not to view the procedure as "counting bodies that were expelled:" http://www.leasingnews.org/archives/March01/3-29-01.htm Victor Harris, Esq., Chairman of the UAEL Ethics and Standards Committee, wrote a special article for Leasing News on this topic: http://www.leasingnews.org/archives/April01/4-05-01.htm ELA Code of Ethics: http://www.leasingnews.org/archives/April01/4-25-01.htm Today's leasing industry conditions reminds me we have law enforcement to enforce not running through stop signs, red lights, excessive speeding, drinking and driving---why, because if we don't have law enforcement, it would be much worse than it is today. We obviously don't police ourselves on the city streets, the roadway, or the highway. Perhaps this applies to "ethics" and "standards" in the leasing industry. It appears the industry itself is not doing a very good job on its highway. editor.) www.leasingnews.org
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