Ge Commercial Lending - PDF by ggu13321


More Info
									GE Commercial Finance

The Benefits of Industry
Specialization. How industry
acumen adds value when
securing finance.

        imagination at work
GE Corporate Lending

The Benefits of Industry
Specialization. How industry
acumen adds value when
securing finance.
By Craig Reynolds, Managing Director, GE Commercial Finance Corporate Lending

Meridian Technologies, Inc. is a specialty manufacturer of magnesium die cast
components for the automotive industry globally. The company enjoys distinct
competitive advantages. Nevertheless, when Meridian was seeking working capital
and acquisition finance, many lenders were reticent to underwrite a loan for a niche
manufacturer in a distressed sector. That’s when this specialty manufacturer turned
to a specialty lender.

A lender with deep industry knowledge will better understand        Clients appreciate having genuine experts who truly
borrowers, their industry and ultimately the collateral they will   understand the challenges CEOs and CFOs face. As such,
use to secure a loan. For borrowers, this understanding often       GE Corporate Lending has an extensive team of experts or
equates to smarter structures that provide greater liquidity and    “industry leaders” and industry research analysts who work
flexibility. For lenders, industry acumen often means a more        closely with loan underwriters to meet the individual needs of
patient approach to borrowers during market cycles because          clients company by company. In many cases, these experts
they are familiar with the ebbs and flows of each industry.         become advocates for prospective borrowers during the loan
Risk vs. Opportunity
Industry specialists often find opportunity where others only       Unique Perspective
see risk. Meridian ultimately secured a $150 million credit         Most industry leaders have broad finance and operations
facility from GE Corporate Lending. With specialists in both        experience in their respective sectors and a deep
automotive and metals, GE recognized quickly that magnesium         understanding of the market and corresponding trends. Loan
is lighter than both steel and aluminum and has the best            originators, borrowers and intermediaries often find significant
strength-to-weight ratio of all three metals. Demand for            value in the market and business insight these specialists bring
magnesium parts will likely increase as automakers seek ways        to every financing opportunity and challenge.
to make vehicles lighter and more fuel-efficient to meet new
regulations and consumer demand.

GE Corporate Lending   •   800-326-6342   •
GE Corporate Lending

                        Aerospace & Defense                           Ghosh has more than 15 years of corporate finance experience
                        With more than 20 years of experience         and recently helped provide $110MM to Milacron.
                        in international corporate and
                        commercial aviation risk management                                  Financial & Business Services
                        and loan origination, Steve Pierson                                  “Today it is very difficult for companies
                        sees both opportunities and challenges                               in the financial and business services
                        ahead for aerospace and defense                                      industries to institute price increases in
                        companies. “The aerospace and defense                                this hyper-competitive environment,”
                        industry should continue to benefit from                             according to Jerry Marcus, an expert in
     Steve Pierson      robust demand for aircraft stemming                                  the sector with over 15 years experience
from continued growth in global air traffic and exciting new                                 in debt and equity. “As a result,
model introductions in both commercial and business jets.                                    successful companies are employing
While defense-spending growth is expected to slow, ongoing                Jerry Marcus       process management, technology and
conflicts, the transformation of the U.S. military and potential      data analytics to improve service quality and they’re seeking
industry consolidation should create additional opportunities         acquisitions to gain scale and lower unit-costs.”
for defense suppliers. The primary challenges for suppliers will
be managing growth in the up-cycle, controlling costs and                                    Food, Beverage & Agribusiness
positioning themselves as risk-sharing partners as the original                              As the former CFO for Triumph Foods,
equipment manufacturers continue to streamline their supply                                  LLC and vice president of finance and
chain.”                                                                                      investor relations for American Italian
                                                                                             Pasta Company, Dennis Krause has
                      Automotive & Auto Parts                                                firsthand experience in the space.
                      “The challenges facing auto-supplier                                   Dennis recently helped secure $70MM
                      profitability today often depend on a                                  for Ocean Garden Products and $164MM
                      number of factors, which include the                                   in turnaround financing for The Penn
                      type of product they are providing, who             Dennis Krause      Traffic Company.
                      their customers are, the sales mix of the
                      products, raw material price increases,         “The food industry overall is not a high-growth segment;
                      healthcare costs and union issues,” said        therefore, successful food companies focus on being very
                      automotive specialist Beth Brockmann,           efficient at what they do,” said Krause. “Nobody wakes up on
   Beth Brockmann     a 15-year industry veteran. “Many               January 1 saying, ‘I’d like to eat more this year.’ One area that
suppliers have taken advantage of market liquidity to refinance       is growing at a very fast rate is the organic and all natural
and ride out these tough times.”                                      movement. It’s the fastest growing segment of the entire food
                                                                      industry, with almost 19 percent compounded growth over the
Beth was instrumental in providing $275MM to Standard                 last five years.”
Motor Products, C$150MM to Meridian Technologies, Inc., and
$150MM to Kumho Tires.                                                                       Forest Products
                                                                                             “For many of the paper and packaging
                         Chemicals & Plastics                                                sub-sectors, there are still too many
                         According to industry leader Deepak                                 producers and too much capacity,” said
                         Ghosh, “The prices of two key energy                                Allan Wieman, forest products industry
                         items–-natural gas and crude oil-–are                               leader. “Work has been done to correct
                         important to the chemicals and plastics                             some of this, but we expect another
                         industry and we’ve seen those prices                                round of consolidation in the near future.
                         increase significantly over the past three                          While some areas like specialty papers
                         to four years. Prices have also been             Allan Wieman       and parts of packaging can differentiate
                         volatile, which impacts the margins of       themselves, other products have greater difficulty. A lot of the
    Deepak Ghosh         chemical and plastics businesses on          financing we see is focused on the buying and selling of assets
a quarterly basis. These businesses have to adjust between            with companies pushing the necessary consolidation.”
variability of pricing creating a constantly fluctuating margin
environment. That is the single most important factor
impacting the industry today.”
GE Corporate Lending

With significant experience in leasing and structured finance,     Focused producers who work aggressively to meet customer
Wieman leads the pulp, paper, packaging and forest products        requirements on time and at the right price will continue to be
specialization, developing new loan structures and financing       successful.”
alternatives to meet the unique needs of customers
                                                                   Rager has extensive experience in pulp, paper and packaging
                       General Manufacturing                       most recently with a leading global provider of consulting and
                       “We are currently in the late stage of      engineering services to the forest products industry and held
                       the economic expansion that began in        prior positions with International Paper, Jefferson Smurfit and
                       2001. GDP peaked back in 2004, and          Kimberly-Clark. Rager recently helped secure $160MM for
                       growth has slowed ever since. Managing      Huttig Building Products.
                       manufacturing operations during these
                       economic expansions and contractions                               Retail
                       is particularly challenging,” said Howard                          With more than 18 years of experience
                       Mikytuck, general manufacturing                                    in corporate finance, including nine
   Howard Mikytuck     industry leader. “Other challenges facing                          years of focus on the retail industry, Jim
manufacturers include increasing competition on a global                                  Hogan leads GE Corporate Lending’s
scale and volatile raw material costs. Successful companies in                            retail finance specialization. Hogan’s
the manufacturing sector are those that not only are able to                              team recently provided $200MM to KB
drive top-line growth but also remain focused on managing the                             Toys, $125MM to Bombay and $60MM to
supply chain and driving operational efficiencies.”                                       Tweeter.
                                                                        Jim Hogan
Mikytuck has more than 18 years of experience in                   “Retailing is both seasonal and cyclical in nature. Also, because
manufacturing and service industries and most recently was         sometimes-fickle consumers drive the retail business, the pace
involved with providing $75MM to Measurement Specialty.            of change is a lot faster than say for a manufacturer delivering
                                                                   products to another industrial customer. The dynamics of
                    Metals & Mining                                consumer sentiment can significantly impact the direction a
                    “For North American metals producers,          retailer takes and where they focus. It has never been more
                    the costs associated with raw materials        important for retailers to identify and keep a close watch on
                    from iron ore to electricity and natural       the key trends that determine whether a retailer will be able to
                    gas are the key profitability drivers. As      meet their growth plans.”
                    for the global market, low-cost country
                    producers like Brazil, Russia and India                               Technology & Electronics
                    have better access to raw materials,                                  Kjerstin Barley has more than 18 years
                    such as iron ore, and will continue to                                of experience in the technology and
      Greg Eck      challenge domestic suppliers to find new                              services industries and has facilitated
ways to be cost competitive.”                                                             recent deals such as $170MM for
                                                                                          ClientLogic and $110MM for Navarre
Greg Eck has been lending to the metals industry for more than                            Corporation. Barley believes that it’s
15 years and has been involved in over $9 billion of completed                            important to distinguish between the
transactions including $750MM to Ryerson, $150MM to Esmark,                               hardware and software sides of the
Inc., C$600MM for Stelco Inc., $150MM to Duferco Farrell               Kjerstin Barley    technology and electronics business.
Corporation, and $115MM to Winner Steel.
                                                                   “Software is about customer acquisition cost. Capital
                      Pulp, Paper & Packaging                      expenditure and operating costs are fairly low, so they are
                      “The forest products industry has made       high gross margin businesses whose profitability is largely
                      advances and the outlook is promising,”      driven by selling, general and administrative expenses. We’re
                      said Jonathan Rager, pulp, paper and         seeing more cash flow lending opportunities in the software
                      packaging industry leader. “Producers        space. Hardware is about capacity utilization and profitability
                      have streamlined operations to reduce        is driven by volume. This is where we see more asset-based
                      costs, stepped up to better match            lending opportunities. The technology and electronics industry
                      product supply with market demand and        has matured to the point that it’s time for companies to
                      pursued industry consolidation among         start establishing balance sheets that look like other mature
   Jonathan Rager     major grade lines to sharpen focus.          industries.”
GE Corporate Lending

                       Transportation & Construction                Smarter Capital
                       From acquisition financing to structured     A lender who truly understands your business challenges
                       finance and leasing, Gene Leary has          and opportunities can be invaluable in securing the capital
                       more than 20 years experience lending        necessary to foster business plans. Indeed, lenders with deep
                       to a broad range of transportation and       industry acumen can offer intellectual and financial capital.
                       construction companies. “The types           As the capital markets continue to evolve and become more
                       of transactions we’re seeing in the          complex, a smarter approach to finance could make all the
                       construction industry are both asset-        difference.
                       based and cash flow. Asset-based loans
      Gene Leary       are typically well suited to the equipment
and building materials side of the business and cash flow loans                               Craig Reynolds , Managing Director,
                                                                                              GE Commercial Finance Corporate Lend-
work well for the services side,” Leary says. “What we like to
                                                                                              ing, leads the team of Industry Leaders and
see is our customers sticking to what they do best, doing it well                             Analysts at GE Commercial Finance Corporate
and doing it repeatedly.”                                                                     Lending, providing asset-based, cash flow and
                                                                                              structured finance from $20MM – $2B and
                      Timber & Wood Products                                                  more to companies in North America.
                      With more than 20 years of experience                         
                      including director of acquisitions and
                      divestitures for Plum Creek Timber
                                                                       Craig Reynolds
                      Company, Will Sonnenfeld has led major
                      timberland acquisition and disposition
                      activities throughout the United States.
                                                                       Get Smarter
                        “The timberland and wood product               Sign-up to receive GE’s Industry Research Monitors
     Will Sonnenfeld    sectors are currently going through            prepared quarterly by industry analysts covering more
a significant transition. Timberlands are characterized by             than 10 sectors. Visit
relatively stable product prices and increased productivity of
its primary product, trees. However, additional values are being       GE Commercial Finance Industry Research Group
recognized, including recreation and development values, as            Managing Director
well as the development of various bio-energy resources.”              Lazarus Angbazo
                                                                       Research Analysts:
Sonnenfeld continued, “Wood products prices and profitability
                                                                       Richard Aldrich
are experiencing a cyclical low as a result of a precipitous           Autos & Auto Parts
drop in housing demand from irrationally high levels. We are           Metals & Mining
currently looking at very solid timberland values, bolstered by        Matthew Brooklier
broad demand from institutional investors, and an opportunity          Transportation
for well-capitalized solid wood manufacturers to acquire               Kimberly Clyne
distressed assets with an eye to emerging with a larger market
share when housing returns.”                                           Kevin Flaherty
                                                                       Aerospace & Defense
                                                                       Food, Beverage &
                        Restructuring & Bankruptcy                      Agribusiness
                        Rob McMahon is the head of the                 Meg Kayman
                        restructuring finance group within GE          Chemicals & Plastics
                        Corporate Lending responsible for some         Paper, Packaging &
                                                                        Forest Products
                        of the largest restructuring financings
                                                                       Erik Olsen
                        in the U.S., including Delta Airlines,         General Manufacturing
                        Calpine, Kmart and Mirant. “With credit
                                                                       Serena W. Tse
                        standards tightening significantly, a          Construction
                        demonstrable drop in liquidity in the          Michael Zimm
    Rob McMahon         capital markets, and a considerable            Technology & Electronics
decline in the value of recently announced acquisitions, we            Business Services
expect the restructuring finance business to get much busier.”
                                                                                                  GE Corporate Lending   •   800-326-6342   •

To top