Jeff Wieand tells of turbulent times for Business Jet lessors

These are currently hard times for business jet manufacturers. Rumors circulate of “white tails” (unsold completed jets) secreted away in locked hangars by manufacturers trying to maintain an atmosphere of healthy demand and business as usual.

Jeff Wieand tells of turbulent times for Business Jet lessors

Feb 08, 2017

These are currently hard times for business jet manufacturers. Rumors circulate of “white tails” (unsold completed jets) secreted away in locked hangars by manufacturers trying to maintain an atmosphere of healthy demand and business as usual.

Global aircraft leasing growing on low rates and rising air traffic

Aircraft lessors around the world continue to benefit from increased air travel, strong airline profitability, low interest rates and generally accessible funding markets. Fitch Ratings' latest Aircraft Leasing Sector Review reports, however, these variables are cyclical in nature or prone to temporary disruption, limiting the potential for accompanying positive rating actions.

Global aircraft leasing growing on low rates and rising air traffic

Sep 26, 2016

Aircraft lessors around the world continue to benefit from increased air travel, strong airline profitability, low interest rates and generally accessible funding markets. Fitch Ratings' latest Aircraft Leasing Sector Review reports, however, these variables are cyclical in nature or prone to temporary disruption, limiting the potential for accompanying positive rating actions.

News in brief

Profitability falters for auto captives

Jun 22, 2017

  US captive finance companies are likely to face continued pressure on profitability due to rising credit losses, declining residual values and higher funding costs, according to a review from Fitch Ratings. In addition, after a solid 2016, the consultancy warns portfolio growth is likely to moderate over the near-term, particularly for consumer-oriented companies, as US auto sales are expected to decline. Average portfolio growth for the captives in the report was 4.5% in 2016, up slightly from 3.9% in 2015. Average pre-tax earnings margins were 23% in 2016, down from 29% in the prior year, due primarily to weakening asset quality, declines in used vehicle prices, and competitive pressure on asset yields. Michael Taiano, director of Fitch Ratings, said: “Weaker credit performance is likely to continue in 2017 with both charge-offs and delinquencies climbing from historically low levels as a result of portfolio seasoning and lower recovery rates on defaulted auto loans.” Overall credit quality for consumer and commercial captives in 2016 continued to weaken, which was consistent with Fitch's expectations following post-crisis lows that were unsustainable. Average net loss rates for the captives included in the report increased meaningfully, to 0.82% in 2016 from 0.61% in 2015. The increase in net credit losses was most pronounced within the auto captive segment. Leverage has also been on the rise for several captives. Average leverage for the group ticked up slightly by the end of 2016 to 7.5x, versus 7.4x in 2015, with many captives currently at or near five-year averages. Fitch says captive leverage, as measured by debt to tangible equity, is typically higher relative to many stand-alone finance companies in part due to explicit or implicit parent support. The willingness of parent companies to inject capital and reduce or forgo dividends to support asset growth has limited further increases in leverage. Fitch expects US captive portfolio growth to moderate in 2017, which should limit further increases in leverage for most. Taiano added: “The slight increase in leverage reflects stronger portfolio growth relative to more moderate earnings growth.” With the exception of Caterpillar Financial Services Corporation, whose rating outlook was revised to negative from stable at the end of 2016, the rating outlooks for all Fitch-rated US captives are stable following the revision of General Motors Financial's rating outlook to stable from positive in conjunction with the ratings upgrade to 'BBB' from 'BBB-’ in June 2017.  

Penske Truck Leasing signs acquisition deal

Jun 22, 2017

  Penske Truck Leasing has announced it has entered into an agreement to acquire Richmond, Virginia-based Old Dominion Truck Leasing. Old Dominion Truck Leasing serves approximately 360 customers in diverse industry sectors from 11 locations in five states. The company’s products and services align with Penske’s existing service offering that includes full-service truck leasing, truck rental, contract fleet maintenance and dedicated contract carriage. The acquisition adds approximately 1,400 tractors, trucks and trailers to Penske's fleet. The transaction is subject to customary closing conditions and the parties anticipate closing during the month of July. Brian Hard, president and CEO, Penske Truck Leasing, said: “Old Dominion Truck Leasing and Penske Truck Leasing customers will benefit from synergies in our products, technology, and services available across our combined network of facilities. “We share a strong commitment to service and will continue to enhance the high-quality service their customers have come to expect." Headquartered in Reading, Pennsylvania, Penske Truck Leasing is a partnership of Penske Corporation, Penske Automotive Group, GE Capital Holdings and Mitsui & Co. Penske operates more than 250,000 vehicles and serves customers from more than 1,000 locations in North America, South America, Europe, Australia and Asia.  

Confidence in equipment finance market holds steady

Jun 22, 2017

Confidence levels in the equipment finance market remained steady in June, according to the latest data from the Equipment Leasing and Finance Foundation’s monthly confidence index. Overall, confidence in the equipment finance market remained steady in June at 63.5, relatively unchanged from the May index of 63.2. When asked about the outlook for the future, survey respondent Valerie Hayes Jester, president of Brandywine Capital Associates, said: “Our business volume remains steady, but it is not on pace to exceed last year's numbers.” He said larger companies are moving ahead and making capital investments but smaller businesses seem to be more worried about instability in Washington. Jester added: “The optimism of Wall Street is not shared by Main Street. Portfolio performance remains strong but certainty needs to return to the environment of the average small business owner before investment of a growing scale returns.” Around 31% of executives believe business conditions will improve over the next four months, an increase from 22.6% in May. None believe business conditions will worsen, a decrease from 6.5% the previous month. However, fewer (17.2%) survey respondents believe demand for leases and loans to fund capital expenditures will increase over the next four months, a decrease from 38.7% in May. The majority (82.8%) now believe demand will “remain the same” during the same four-month time period, up from 54.8% the previous month. None believe demand will decline, down from 6.5% who believed so in May. There has been a slight increase in executives’ expectations of raising funds, with 13.8% of the respondents saying they predict more access to capital to fund equipment acquisitions over the next four months, up from 12.9% in May. The majority (86.2%) of executives indicate they expect the “same” access to capital to fund business, up from 83.9% last month. None expect “less” access to capital, a decrease from 3.2% last month. Paul Menzel, president and CEO, Financial Pacific Leasing, said: “The fundamental health of the business community and consumer participation are positives for the near term. The risk to the economy is the political climate and uncertainty it is creating in various industries dependent upon trade, tourism, and policies that support growth.” His views were echoed by Thomas Partridge, president, Fifth Third Equipment Finance, who said: “The economy appears to be moving along at a good pace.” However, he went on to caution that “uncertainty in Washington and lack of momentum around tax policy could impact capital spending in the second half of the year.”

Westlake acquires credit union auto lessor

Jun 22, 2017

Westlake Financial Services has acquired Credit Union Leasing of America (CULA), headquartered in San Diego, California, in a move which raises the sub-prime specialist’s total managed assets from $4 billion to $5.5 billion. Founded by Terry Bowdler nearly 30 years ago, CULA is a noted automobile lessor in the credit union market. Westlake says its investment will support the continued growth of CULA by providing additional resources and financial stability. Don Hankey, chairman of Westlake Financial Services, said: “Along with its subsidiaries, Westlake Financial offers indirect financing, dealer floorplan financing, direct-to-consumer lending and insurance products. “CULA’s lease model complements Westlake’s offerings. In addition, CULA’s current affiliations strengthen our growing relationships within the credit union industry.” Westlake Financial has appointed Ken Sopp (current vice president of Midway Leasing – Fleet, a Hankey Group subsidiary) as chairman/managing general partner of CULA. John Thomas will remain CEO of CULA, and Terry Bowdler will transition to a strategic advisor role. Bowdler said: “Our credit union clients, my talented team and our extended family of service providers have been my life for the past 29 years. “As I transition to an advisory role for CULA, I am confident that the company is in great hands with Westlake Financial. The leadership team at Westlake has a deep comprehension of auto finance, a strong balance sheet and an entrepreneurial spirit that will enable CULA to autonomously continue growth for years to come.”

GM rolls self-driving cars off production line

Jun 22, 2017

General Motors has announced that it has completed production of 130 Chevrolet Bolt EV test vehicles equipped with its next generation of self-driving technology. Vehicles were assembled at its assembly plant in Orion Township, Michigan, and mark a key stage in plans to begin mass production of autonomous vehicles. The vehicles will join more than 50 current-generation self-driving Bolt EVs already deployed in testing fleets in San Francisco; Scottsdale, Arizona; and metro Detroit. GM chairman and CEO Mary Barra said: “This production milestone brings us one step closer to making our vision of personal mobility a reality. “Expansion of our real-world test fleet will help ensure that our self-driving vehicles meet the same strict standards for safety and quality that we build into all of our vehicles.” GM became the first company to assemble self-driving test vehicles in a mass-production facility when its next generation of self-driving Chevrolet Bolt EV test vehicles began production in January. GM and Cruise Automation engineers have been testing Chevrolet Bolt EVs equipped with self-driving technology on public roads in San Francisco and Scottsdale, Arizona, since June 2016 and on public roads in Warren, Michigan, since January 2017. Cruise Automation CEO Kyle Vogt said: “To achieve what we want from self-driving cars, we must deploy them at scale. “By developing the next-generation self-driving platform in San Francisco and manufacturing these cars in Michigan, we are creating the safest and most consistent conditions to bring our cars to the most challenging urban roads that we can find.” Political push US politicians are pushing the federal government to prevent California and other states from setting their own rules governing design and testing of self-driving cars. The draft legislation prepared by US House Republicans is a long way from becoming law, but would make the US National Highway Traffic Safety Administration the lead agency for regulating self-driving cars. States could still set insurance and registration rules but could not use them as a way to regulate self-driving technologies. One of the bills in the proposal would allow the US Transportation Department to exempt up to 100,000 vehicles per year from federal motor vehicle safety rules, which currently prevent the sale of self-driving vehicles without steering wheels, pedals and other human controls. US representative Bob Latta, who chairs a key panel overseeing automobile regulation, called the draft legislation "an important step in establishing a framework to allow innovators to safely develop and test autonomous vehicles." He said Republicans “want to continue working with all parties in a bipartisan manner as we refine language and move toward a consensus package."

Jaguar Land Rover in $25m tie-up with Lyft

Jun 14, 2017

Jaguar Land Rover has announced a $25m investment in Lyft, the fastest-growing ride-sharing company in the US, to support its ongoing investment in mobility services. The manufacturer will supply a fleet of vehicles as part of the deal and said the money would help develop and test technology for self-driving cars. The investment will be made through Jaguar Land Rover’s mobility services business InMotion Ventures. Sebastian Peck, InMotion Ventures managing director, said: “We are excited to collaborate with a leading platform like Lyft not only on developing premium mobility solutions but also devising innovative solutions to the transport problems Jaguar Land Rover’s customers face. “Personal mobility and smart transportation is evolving and this new collaborative venture will provide a real-world platform helping us to develop our connected and autonomous services.” Hanno Kirner, Jaguar Land Rover’s executive director of corporate and strategy, said: “This is a strategic investment for both parties as we focus on innovating new mobility solutions for our customers. Collaborating with an expanding technology business like Lyft is going to help us both accelerate our ambitions.” Venture InMotion’s latest investment follows its recent seed investment in SPLT, the Detroit-based digital carpool business, which works with Lyft to provide non-emergency medical transport. The Lyft investment was included as part of the ride-hailing company's most recent round of fundraising, which closed in April. Uber-rival Lyft was founded in June 2012 by Logan Green and John Zimmer and is the fastest-growing ride-share company in the US, currently available in more than 350 cities. John Zimmer, Lyft president and co-founder (pictured above), said: “We’re excited to join forces with Jaguar Land Rover and InMotion. Lyft envisions a future where shared mobility will transform cities and improve people’s lives. This partnership will help us achieve that ambitious goal.”