In response to the recent troubles faced by mid-sized equipment leasing companies, Chicago-based underwriter William Blair & Co. is planning to help bring to market a series of deals that would contain proprietary structures designed to address some of the difficulties encountered by the sector.
William Blair is working on behalf of the smaller equipment leasing companies - those with originations ranging from $20 million to under $300 million - to complete transactions that would contain structural enhancements addressing: transfer-of-servicing issues, security issues (in terms of who owns the collateral), and custodial and payment issues associated with lock boxes (P.O. Boxes located inside a bank where checks and accompanying documents are received), said Warren Kornfeld, director of asset-backed securities at the firm.
"A lot of the deals have not been as strong as they should have been in these areas," Kornfeld said.
Another source familiar with the transactions said that for these smaller companies, having a third party to service their deals is certainly helpful.
Several of these offerings, which make up a "significant pipeline," will likely close at the end of July or in early August. The first deals will be rated by Moody's Investors Service and Standard & Poor's.
The expected ratings for the upcoming transactions would likely range from single-A to triple-A. The triple-A deals will feature wraps by the monolines.
Kornfeld said that the investment-grade companies and the smaller, niched companies have a better chance of surviving in the market.
"Someone in the middle doesn't have the funds and the economies of scale that a large institution would have," he said. "It's a market that's extremely competitive. By being in the middle you have the larger players who have an interest in that market and you also have the smaller players who are also trying to come up into the market."
Kornfeld believes that there's a lot of opportunity in dealing with smaller companies because of the sheer number of players in this sector.
"There's definitely more small people around doing relatively well than people in the middle," he added.