Concurrent to UniCapital Corp. filing for bankruptcy, the company spun off its servicing operation, called Portfolio Financial Servicing Co., marking the new entity's return to the equipment leasing industry as a third party servicer.

The rating agencies do not anticipate taking action on UniCapital's outstanding securitizations, as both deals are wrapped by Ambac Assurance Corp. Further, a lengthy servicing transfer was avoided, since PFS, as a subsidiary of UniCapital, was already working the portfolio.

"UniCapital's problems had nothing to do with the quality and integrity of the servicing we provided," said Jerry Hudspeth, president and chief executive officer of Portland, Ore.-based PFS. "They had more of the business-issues' type problems. I think it was a benefit to everyone to have us continue to service the securitizations."

An analyst following the developments said that, prior to Chapter 11 filing, UniCapital had breached financial covenants with its primary creditor, Bank of America. According to Thomson Financial Securities Data, Lehman Brothers was also part of the syndicate of bank lenders on UniCapital's warehouse facility.

UniCapital reported a $276.6 million loss for the first quarter of this year, largely attributable to a write-off incurred as the company exited the big ticket leasing industry. Also, UniCapital suffered losses associated with its aircraft and aircraft engine leasing operations.

Following the announcement of its first quarter losses, UniCapital was bombarded with stockholder lawsuits (see ASR 6/26/00). In July, the company sold 18 aircrafts to Lehman Brothers, for more than $20 million, according to published reports. Around the same time, UniCapital's chairman, chief operating officer, chief credit policy officer and chief financial officer left the company.

UniCapital most recently brought an equipment lease-backed deal to market in March. The $300 million offering was joint managed by Banc of America Securities and Deutsche Bank Alex. Brown.

The prior deal priced in September 1999. Credit Suisse First Boston managed the $365 million transaction. Both transactions were structured in accordance with Rule 144A.

Portfolio Financial Services

The spinoff of PFS, which took ownership of the leasing portfolio from UniCapital, officially closed on Dec. 8, and was financed in part by BofA, according to a source; however, BofA's involvement is not confirmed.

In total, PFS took on approximately $1.2 billion in leases from UniCapital. The securitized portion of that is approximately $600 million.

Before being acquired by UniCapital in 1998, PFS had been a third party servicer in the equipment leasing industry since its formation in 1992, Hudspeth said.

Hudspeth said that PFS will pursue the market as a third party servicer again.

Said the analyst following the developments, "Now that they have been spun off, I think they're going to aggressively market themselves as a third party servicer, and I think there's a need for that."

PFS had serviced leasing portfolios for companies such as Heller Financial, Newcourt, First Sierra (now SierraCities), as well as several banks, Hudspeth said.

PFS was acquired by UniCapital when UniCapital launched its initial public stock offering. Prior to UniCapital, Travelers Group and Pittsburgh-based The Hillman Co. were the majority shareholders.

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