Equipment Leasing Association Newsletter Highlights---The New ELA

The lights dimmed in the Hyatt Monterey Regency Room as a spotlight focused on Chief inquisitor Jeffrey J. Wong, Esq.(pictured above left). Narrating “The Inquisition, “ Wong, attorney, Cooper, White & Cooper, rattled off one-liners with all the ease and panache of an Elizabethan Jay Leno. Fully costumed in 18^th Century Inquisition-wear, an all-WAEL cast of brokers, lessors, and attorneys entertained WAEL Spring Conference attendees for a fun information-packed hour and-a-half mock trail/horror show that featured the gruesome details of what can go wrong in a lease transaction. The talented ensemble included : (l to 4r) Wong; Ron Mitchell, account exec., ITT Capital Finance, Pleasanton, California ( hidden in the above photo), Kenneth Greene, Esq., Partner, Keck, Mahin & Cate, San Francisco, California; Ray Garwacki, Jr., Esq., partner, Hemar, Rousso and Garwacki, Encino, California; Bob Teichman, senior vice president Belvedere Equipment Finance Corp., Redwood City, California; Richard Walker, president, Capital Equipment Leasing, San Diego, Californian; Stephen L. O’Neill, president, F.I.T. Leasing(center).

Lenna Currie, owner, L’n D Leasing & Financial Services, Van Nuys, CA, gets tortured for the sins of a misguided broker.

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First Paid Classified Help Wanted Ad---Chase Industries, Grand Rapid, MI

Sales: National "UAEL"

10 year national company with 7 offices specializing in the medical and IT

markets. Other equipment considered. Seeking professionals with a solid

book of business and high ethics. Exceptional support, rates, and commissions.

Some expenses paid. Locate anywhere .

Email:gsaulter@chaseindustries.com

Gary Saulter

Chase Industries, Inc.

109 Ottawa Avenue

Grand Rapids, MI 49503

800-968-5000

Mr. Saulter is our first “paid” Help Wanted advertiser. In fact, he has chosen

the three month plan. His company is expanding. He believes he will be

hiring for the next three months.

Job Wanted, Outsourcing, attorneys are still free at Leasing News Classified.

There are no more “free” help wanted ads effective today. As a courtesy,

the current adds will run through November 14^th.

Effective November 15, there are no restrictions on maximum of 25 words, plus

belonging to a leasing association will no longer be a requirement.

http://65.209.205.32/LeasingNews/PostingFormWanted.htm

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IDS and Summit---Kenneth E. Duffy, Sr.

“Leasing News is received by over 40 valid Summit email addressees and is

forwarded to many of our clients and other friends as a service. The

information that you initially received was without management

authorization.

“While financial and other information regarding IDS is made

public via the London Stock Exchange, information regarding Summit's

strategy to merge with or acquire IDS is not.

“On 10/23 IDS announced that "The Board has resolved to undertake a strategic review of all options open to the company". Also on that date, the London Stock Exchange tagged the stock with a "bid situation" flag and so the matter of a potential

acquisition by Summit or some other third party is now public knowledge.

“While some of the information in the earlier unauthorized email may be

accurate, we regret any inconvenience this may have caused to Messrs.

Quilling and Franco, both of whom have our highest regard.

“In light of the fact that we have not yet confirmed the source of the earlier email, this

is it advise that Leasing News is not authorized to publish any information

regarding IDS which appears to emanate from Summit without approval of the

undersigned. This response may be published. Thank you. “

Kenneth E. Duffy, Sr.

President

kduffy@summitnational.com

( Mr. Duffy asked for our source and we would not divulge it. Again, there

were no names mentioned in the original e-mail, and while we did not believe a correction was needed, we did accommodate the request. Editor )

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Direct Capital Corp. Executive Recommended to UAEL Board

PORTSMOUTH - Direct Capital is pleased to announce the election of

Vice President, John Donohue to the UAEL (United Association of

Equipment Lessors) Board of Directors. With nearly 12 years experience

in the finance industry, Donohue brings a wealth of knowledge to the

Association. He looks forward to working with the Board and UAEL members

towards the betterment of the Industry.

Since 1993 Direct Capital Corp., based in Portsmouth, NH specializes in

equipment and technology financing for businesses nationwide. Since 1993

Direct Capital has risen to the top of the industry. Named as Fastest

Growing Company in the U.S. and NH by both Inc. 500 & Business NH Magazines,

Direct Capital has become a first-class provider of simple, fast and cost-

effective financing solutions.

For additional information, visit their Award-Winning Site: www.DirectCapital.com

Direct Capital Corporation

Contact: Robyn Gault, Director of Marketing

Phone: 603-433-9476

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PDS Gaming loss from continuing operations of $486,000... compared to income of $2,519,000,,in the first nine months of 2001.

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 reported its operating results for the third quarter and first nine months of 2002.

For the three month period ended September 30, 2002 ("third quarter 2002"), the Company reported income from continuing operations of $24,000, or $0.01 per diluted share, compared with income of $650,000, or $0.16 per diluted share, for the three months ended September 30, 2001 ("third quarter 2001"). Revenues from continuing operations were $7.3 million and $11.5 million in the third quarters 2002 and 2001, respectively. The decrease in revenues is primarily attributable to a decrease in equipment sales and sales-type leases of $2.0 million and a decrease in fee income, which is generally non-recurring in nature, of $1.6 million. The Company completed $7.5 million in originations during the third quarter 2002, compared with $4.0 million in the third quarter 2001.

Selling, general and administrative costs declined approximately 34%, or $570,000, in the third quarter 2002 as compared to the third quarter 2001, reflecting head count reductions and non-recurring legal fees incurred in the third quarter 2001.

Casino operations resulted in a pre-tax loss of $66,000 in the third quarter 2002, compared to pre-tax income of $42,000 in the third quarter 2001. The loss reflects generally unfavorable conditions in the Reno gaming market.

At the end of the first quarter 2002, the Company discontinued operations of its Table Games division and certain components of its Casino Slot Exchange division, due to unacceptable operating results. Accordingly, the Company has reclassified these activities as discontinued operations in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. For the third quarter 2002, the results of discontinued operations were a loss of $348,000, or $0.10 per diluted share, compared to a loss of $264,000, or $0.07 per diluted share, in the third quarter 2001.

For the nine month period ended September 30, 2002, the Company reported a loss from continuing operations of $486,000, or $0.13 per diluted share, compared to income of $2,519,000, or $0.65 per diluted share, in the first nine months of 2001. Revenues from continuing operations approximated $25.6 million in the first nine months of 2002, compared with $32.2 million in the same period last year. The higher level of revenues in 2001 is primarily the result of non-recurring finance and fee income. The Company completed $37.4 million in originations in the first nine months of 2002, compared with $25.3 million in the same period of 2001 (the year earlier period also included a purchase of a lease transaction from a third party for $17 million). Approximately 2,600 and 4,900 gaming devices were shipped to customers in the nine-month periods ended September 30, 2002 and 2001, respectively.

For the nine months ended September 30, 2002, the results of discontinued operations were a loss of $2,224,000, or $0.59 per diluted share, compared to a loss of $1,141,000, or $0.31 per diluted share, in the same period in 2001.

"In the third quarter 2002, we made significant progress in restructuring our operations to focus on our core business--finance and lease originations. I am pleased that the efforts of our team have resulted in a profit from continuing operations. During the quarter, which historically is a low quarter for originations, we completed $7.5 million in new financing originations, up from $4.0 million in the comparable quarter last year. We have worked our inventory levels down another 13% this quarter and have grown our backlog of new business to a record high level, which should benefit us in the future," stated Peter D. Cleary, President and Chief Operating Officer of PDS Gaming Corporation.

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:

Peter D. Cleary

President and Chief Operating Officer of

PDS Gaming Corporation

(702) 736-0700

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The Fed Approves Major Changes to Bank Lending

Reuters

(Perhaps anticipating problems the first of the year?)

The U.S. Federal Reserve on Thursday approved sweeping changes in the way it makes short- term loans to banks, lowering hurdles to borrowing but at the same time raising the cost of the loans.

The new rules, which go into effect on Jan. 9, 2003, are intended to reduce swings in the federal funds rate in times of market stress, such as occurred in the period after the Sept 11 attacks.

The federal funds rate, which is the price banks charge each other for overnight loans, is the central bank's primary tool for managing the economy.

"The measure represents a technical change in the discount window policy only and does not represent any change at all in the overall stance of monetary policy," Federal Reserve Board Governor Edward Gramlich said.

Under the revamp, approved by the Fed board on a unanimous 7-0 vote, banks in sound condition will be able to borrow from the central bank at a so-called primary rate that would initially be set 1 percentage point above the federal funds target, essentially setting a ceiling on upward spikes.

Afterward, the primary rate would be set by the Fed board using the same procedures that have been used to set the discount rate.

In addition, under the revamp, a so-called secondary rate would be set for banks that are less sound. That rate would be initially 1.5 percentage points above the federal funds target.

The changes will also make it easier for banks to borrow from the Fed by scrapping a requirement that they first exhaust other reasonably available sources of funds.

The central bank also put in place special procedures for quickly lowering the primary credit rate to the federal funds rate target in the event of financial emergency.

FED LOOKS TO REDUCE VOLATILITY

Historically, banks have borrowed at a "discount rate" that was set below the federal funds rate. The current federal funds target is 1.75 percent, while the discount rate is 1.25 percent. Even though the discount rate is lower, analysts say banks have been hesitant to borrow from the Fed, fearing increased scrutiny from regulators and markets.

Such hesitance can lead to a scramble for funds in the market that pushes the federal funds rate up sharply, despite the Fed's best efforts to keep it close to the target set by policymakers. The plan is intended to address such volatility.

Under the plan adopted on Thursday, the current discount window program would cease to exist with the advent of the new one, which is similar to the so-called Lombard facilities employed by many central banks around the globe.

Under the new lending program, banks borrowing from the Fed could loan the funds back into the market, which would further reduce volatility by making funds available even for banks that might not qualify for the direct loans.

The changes also eliminate any incentive banks might have under the current discount window lending program to try to borrow at a below-market rate just to lend the funds at a higher rate and pocket the difference.

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“Consumer Spending Hits Brick Wall in September”

By DANIEL ALTMAN—New York Times

The economy grew at a moderate 3.1 percent rate in the third quarter, the Commerce Department estimated yesterday, but there were indications that growth may be slowing as the year comes to an end.

Consumer spending accounted for virtually all the growth during the summer months. And though gains in personal income remain healthy, the capacity of households to spend is starting to show signs of strain.

"Consumer spending hit a brick wall in September," said Ethan S. Harris, one of two chief economists at Lehman Brothers. "If you took the first two months of the quarter, they're probably consistent with something like 4.5 percent growth. If you take the last month of the quarter, it's more like zero."

The overall growth rate fell somewhat short of expectations. If today's employment report for October confirms that the economy is losing momentum, many analysts expect the Federal Reserve to cut interest rates when it meets on Wednesday, the day after the election.

Government spending and spending on housing, both of which helped prop up the economy late in 2001 and early this year, rose only slightly in the third quarter.

On the bright side, however, business investment in buildings, equipment and software increased 0.6 percent, reversing a steep downward trend that had run through seven consecutive quarters.

The trade deficit continued to hamper growth. It ballooned to $437.3 billion at a seasonally adjusted annual rate, or 4.2 percent of the entire economy.

Forward-looking data hinted at slower growth. Initial claims for unemployment benefits stayed high last week, at 410,000. Wages rose by just 0.5 percent in the third quarter, compared with 1 percent in the second. And investors' forebodings deepened yesterday when the National Association of Purchasing Management-Chicago announced that its index of manufacturing activity, often a reliable predictor of nationwide figures, fell sharply in October.

Measures of consumer confidence by the University of Michigan and the Conference Board have also fallen sharply, according to reports published earlier this week.

The series of mildly disappointing reports could help pave the way for the Federal Reserve to lower short-term interest rates for the first time since last December. According to Bridgewater Associates, an investment manager, interest rates now imply that traders are giving the Federal Reserve a 90 percent chance of lowering the federal funds rate on overnight loans among banks to 1.5 percent from 1.75 percent next week. In the middle of October, the estimated probability was 23 percent.

Despite that, David Malpass, chief economist of Bear, Stearns, cautioned against reading too much into yesterday's report. "This report probably is a neutral for the Fed," he said, adding that today's report on employment from the Labor Department should have a stronger influence on the board.

Other economists predicted that the Fed would wait before lowering rates again. "My guess is that they'll probably stick to their guns, unless they know something we don't know," said Mark Gertler, a professor of economics at New York University. "They have to be vigilant, but the situation doesn't seem desperate."

Indeed, the rate of economic growth in the third quarter fell to a range that would have been considered quite healthy before the Internet boom of the late 1990's.

But despite strong improvements in crucial economic matters like productivity and corporate profits, worries about accounting scandals and a possible war with Iraq have eclipsed economic fundamentals in the minds of some consumers, Mr. Harris said. "This is nervousness well beyond what the official data on the economy suggests they should have," he said.

Mr. Harris added that the allure of interest-free financing for cars and other big-ticket items was beginning to fade. Detroit's Big Three offered those deals through the summer, and sales of cars, trucks and parts increased 10 percent. Now, Mr. Harris said, "they can't even get sales up to normal levels."

Many forecasters expected the economy to expand by 3.5 percent or 4 percent in the third quarter, far outpacing the second quarter's meager rate of 1.3 percent, before weakening in the fourth quarter. That said, the summer's lower-than-expected growth could suggest a slight lift for the future.

Mr. Malpass said that corporate inventories shrank by less than 0.1 percent after two quarters of strong gains. "The lowness of inventories coming out of the third quarter ends up being a timing shift," he said. "You subtract some from third quarter, and you add it to the fourth quarter." Mr. Malpass had expected growth of 3.7 percent in the third quarter.

It may take more than a small boost to loosen corporate purse strings, Mr. Harris said. "Every component of business behavior is slowing instead of accelerating. They're just saying: `We don't want to buy. We don't want to get out there and hire.' "

Although overall business investment is no longer declining, investment in commercial buildings like factories, offices and warehouses fell 16 percent during the summer, the fourth consecutive double-digit quarterly decline.

Companies may be content to sit on their current assets, Professor Gertler suggested, so the lag before the recovery appears robust may be longer than those after previous recessions. In any case, he said, "it's way too early to panic."

Christmas decorations at retail stores were very early this year, early October for

many department stores.

3rd Q Foreclosures Up-But Repo Houses Sell Quickly

By Ellen Lee

CONTRA COSTA TIMES

The number of East Bay homes going into foreclosure jumped a remarkable 27 percent in the third

quarter, a real estate information service reported Wednesday, and the rate is likely to increase between now and the spring.

But industry experts were divided on the meaning of the data.

Some saw them as a sign that the technology bust is catching up with homeowners stretched too thin by high mortgage payments.

One analyst even speculated that the increase in foreclosure notices is a sign that home prices will decline for the first time in years because foreclosed homes that go on sale tend to depress the market.

But at least one expert urged caution. Foreclosure notices in the most recent quarter hit about 3,000 in the Bay Area, but that number would need to double before hurting the real estate market, said John Karevoll of DataQuick Information Services, which provided the figures.

In Contra Costa County, 716 struggling homeowners received a notice of default in the third quarter, the first step of the foreclosure process, up nearly 22 percent from 587 for the same quarter a year ago, according to DataQuick.

In Alameda County, the foreclosure rate was up more than 32 percent to 817.

In Santa Clara County, epicenter of the high-tech boom and bust, the foreclosure rate was up more than 36 percent to 619, the highest jump in the nine-county area. In the entire Bay Area, 3,043 homeowners got foreclosure notices, up nearly 21 percent.

The Bay Area's figures stood in stark contrast to California's. Foreclosure notices statewide dipped slightly, down 4 percent to 17,925. But that's close to the bottom and will probably increase in the coming months, DataQuick said.

In the beginning of the foreclosure process, lenders send notices of default after homeowners have missed their mortgage payment, often after two to three months. Homeowners then have a period of time to fix the problem, such as securing a loan or selling the house, before the house goes on the auction block.

Once the house is repossessed, it's quickly sold, usually at a price lower than the market value. That could start a trend of declining home prices, said Alexis McGee, president of Foreclosures.com, if the number of foreclosures increases.

"We're starting to see the first stages of a declining market," McGee said. An increase in foreclosures, she says, "starts a domino effect of a down market."

But others say the Bay Area's real estate market is far from taking a plunge.

Even as the number of foreclosure notices is poised to increase between now and the spring, it is still low on a historical basis, said Karevoll of DataQuick.

"We shouldn't be concerned about foreclosures in the Bay Area until they get significantly higher," he said. Rather, the increase in foreclosure notices relates to the leveling off of home prices, Karevoll said.

When home prices were skyrocketing, homeowners were able to refinance and secure enough cash based on their home's increased price to help pay what they owe. That has become more difficult as home appreciation settles into a "healthy" pace of about 9 percent to 10 percent in the Bay Area, he said.

Jason Freskos, owner of Sequoia Mortgage Capital in Mill Valley, said he has received a huge jump in calls from homeowners swimming in overdue mortgage payments. Many have lost their jobs or found new jobs that pay much less than their old ones.

The increase in foreclosure notices is "indicative of the troubles in the economy," he said. "If you're not employed, you're going to have a hard time making your mortgage payments."

It could also mean that lending standards have become too lax.

"If you're 18 years old and breathing, we can get you a 100 percent loan," he said. "The foreclosures may mean that we need to tighten the lending standards."

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MARINA DEL REY LEASING CONFERENCE