General Electric Co. is preparing to spin off one of its most important financial assets — the unit that issues store credit cards for 55 million Americans — as it retreats from one of the high-growth businesses that defined the modern conglomerate.
According to a Wall Street Journal report, the decision to divest the business, amid concerns about the company’s exposure to banking, marks an important moment in the evolution of GE and the country’s three-decade long consumer credit boom. GE Capital expanded to the point that its portfolio of loans and other assets now would rank it as the country’s fifth-largest commercial bank.
Preliminary work to separate the business through an initial public offering is under way, according to people familiar with the matter.
GE has said the U.S. consumer-finance business earned $2.2 billion last year. The operation accounts for about $50 billion of the $274 billion in loans outstanding by GE Capital.
An IPO could come early next year, the people said. Bankers from J.P. Morgan Chase & Co. and Goldman Sachs Group Inc. are working on a possible offering, one of the people said. Alternatives including smaller spinoffs or asset sales are under consideration, the people said.
A sale of the unit would be quicker and more straightforward, but a buyer for the entire operation is unlikely to emerge given its large size and the fact regulatory hurdles largely prevent major banks from doing big deals.
GE Capital’s Commercial Distribution Finance (CDF) business said it has seen positive trends in the Canadian RV, marine and motorsports industries through the first half of the year. It expects favorable conditions to continue into 2014.
According to a press release, CDF found that dealers’ inventory orders were up in all three categories. Aging of inventory has dropped in motorsports and marine, while staying flat year-over-year in RVs.
“Cool weather in May and June resulted in a late start to the already short Canadian selling season but, surprisingly, liquidations are only slightly below last year’s levels,” said Howard Shiebler, president and CEO of CDF in Canada. “Overall, the macro-economic environment has stabilized and the Canadian economy continues to respond favorably.”
As a result of its longstanding position as a leading inventory financing provider to Canadian manufacturers and distributors and their dealers, CDF periodically provides market intelligence that may help companies throughout the supply chain manage their businesses.
The RV industry’s nine percent increase in wholesale volume shows that dealers are effectively selling through any product they had remaining in inventory from 2012. It also reflects continued strong consumer demand.
So far this year, these growth figures are being driven by the Western provinces, while Ontario and Quebec remain slower markets.
“The country’s inventory aging past the one-year mark has stayed flat year-over-year but we view it as an acceptable level,” noted Shiebler. “Of course, we actively monitor the Canadian market and work collaboratively with our customers to mitigate situations where the levels become a concern.”
A 17% increase over last year’s marine industry volume is within striking distance of pre-downturn figures nationwide. There has been considerable growth year-over-year in the prairies and in the Atlantic region, although Ontario and Quebec still account for the most volume by province.
“We saw a lot of excitement at last year’s boat shows,” Shiebler noted. “Canadian marine dealers continued to fill orders from those shows into the first half of this year.”
This strong performance can be seen in inventory aging levels, as well; the national level of inventory aged one year or more has decreased to nearly 16% from just below 19% in 2012.
A 6% increase in wholesale shipments of motorsports products through the first half of 2013 was driven largely by the Atlantic region and the west, up 18% and 11% respectively. Quebec increased by 5%, while Ontario and the prairies both showed decreases of 1%.
The national level of inventory over one year old has decreased to about 12.5% from last year’s already healthy rate of 15.5%.
“We know that weather conditions can have an extraordinary impact on dealers so we’re working with those who’ve been impacted by the severe flooding in southern Alberta,” Shiebler said. “We want to do our part to foster a strong Canadian motorsports industry.”
General Electric Corp. is shuffling some of its top finance executives, according to an Associated Press report.
The company announced Wednesday (June 12) that CFO and vice chairman Keith Sherin will run GE Capital, the company’s finance division, effective July 1.
Jeff Bornstein, GE Capital’s CFO, will take over Sherin’s role as CFO of the larger corporation.
The move was prompted by the retirement of the current head of GE Capital, Mike Neal, who will stay on as vice chairman of the company until the end of the year.
Sherin, 54, has been GE’s CFO for 14 years. He will take over a division that generates enormous profits for GE. But the division faltered badly during the financial crisis. Since then, GE has been working to shrink and simplify the division.
Separated from GE, GE Capital would be among the nation’s biggest banks, with $538 billion in assets. It offers financing to customers who buy GE products, issues credit cards that retailers offer customers, and extends commercial loans.
The company says it is trying to reduce what it calls GE Capital’s “ending net investment” to a range of between $300 billion and $350 billion by the end of next year, down from $400 billion now.
Bornstein, 47, has been CFO of GE Capital since 2008 and helped steer the division to firmer ground after the financial crisis.
The Recreation Vehicle Dealers Association (RVDA) announced that GE Capital, Commercial Distribution Finance (CDF), is a Platinum Partner of the 2013 RV Dealers International Convention/Expo, Sept. 30–Oct. 4, at the Rio All-Suite Hotel & Casino in Las Vegas.
According to a press release, the convention is sponsored by RVDA, RVDA of Canada and the RV Learning Center.
“The support of GE Capital and our other partners allows RVDA and the RV Learning Center to meet dealers’ continuing education needs at this important event,” said RVDA Convention/Expo Committee Chairman John McCluskey of Florida Outdoors RV Center in Stuart. “GE has continued to stand behind its dealer business partners over the long haul and we are grateful for that unwavering support.”
GE Capital provided nearly $31 billion in financing for more than 40,000 manufacturers, dealers and distributors across North America in 2012. Programs include inventory and accounts receivable financing, asset-based lending, private label financing, collateral management and related financial products. Customers have access to exclusive online tools and analytics to manage their accounts and inventory. For more information, visit http://www.gecdf.com/.
“The RV Dealers International Convention/Expo provides great opportunity and value for dealers, which is why we are proud to be a sponsor for the 10th consecutive year,” said Tim Hyland, president of the RV Group at GE Capital. “As a lender to the RV industry for more than 30 years, we remain committed to seeing the industry thrive, and we look forward to seeing our customers at the expo.”
The conference remains affordable with an advance registration rate of $549 for members and a lower rate of $449 for additional registrants from the same dealership. RVDA also offers special registration payment plans, including an easy-pay plan of four payments and the ability to lock in early bird savings for additional employees with one paid convention registration.
Themed “Education: Your Competitive Advantage,” the convention will provide relevant learning opportunities for dealers and key members of their staff. Workshop tracks are in place for dealer/GMs, sales staff, parts and service managers, and finance and insurance professionals. New this year, Vendor Training +plus will allow registrants the opportunity for extended training during the first day and a half of the convention and it is included in the regular registration fee.
The 2013 convention will also feature an exhibit hall filled with the RV industry’s top companies offering products and services to help dealers improve profitability.
Companies interested in partnership opportunities, sponsorships, and exhibitor information can contact RVDA at (703) 591-7130, ext 103 or send an e-mail to firstname.lastname@example.org.
General Electric Co. is thinking more seriously about selling off large parts of its financial business, which by itself would be the country’s fifth-largest bank and which investors want to shrink.
The Wall Street Journal reported that CEO Jeff Immelt recently told a conference that the company is examining a range of strategic options that could include an initial public offering of some parts of the business, GE Capital. And as a measure of his commitment, Immelt set a new target to cut the assets that will be held by GE Capital at the end of 2014 to less than half their size in the run-up to the 2008 financial crisis.
“We think the timing is good to be thinking strategically,” Immelt said during an annual Electrical Products Group conference in Florida. “We think there’s a lot of techniques to do it.”
GE has been selling off real-estate businesses, insurance operations and overseas banking stakes for several years to lessen its reliance on a finance business that has accounted for about half of the company’s earnings from continuing operations.
During the financial crisis, concerns about GE Capital torpedoed GE’s stock price, cost the company its top-level, triple-A credit rating and forced it to cut its dividend.
One of the criteria of Immelt’s current pay package is to increase industrial earnings and their share of total profit. That can be achieved both by improving and growing the industrial operations as well as shrinking GE Capital’s business—a stated company goal. Immelt aims to get industrial profits up to 70% of the company’s total, up from 54% last year.
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GE Capital, Commercial Distribution Finance (CDF), announced its participation in this year’s North American Trailer Dealers Association (NATDA) annual trade show and convention, which will be held Sept. 6-8 in St. Louis.
“CDF has been supporting the trailer industry for more than 25 years,” David Wilson, commercial leader of CDF’s Diversified Products Group, said in a press release. “Today, we provide financing programs to nearly 80 manufacturers in the U.S. and Canada. Our long history in the industry, our dedicated experts and our world-class business intelligence tools demonstrate our commitment.”
GE Capital will be manning booth #816 at the America’s Convention Center in downtown St. Louis.
NATDA president Andrew Ackerman noted that an estimated $9 million in orders were written at the 2011 show. With nearly double last year’s number of manufacturers participating this year and more than double the number of dealers expected to attend, NATDA is projecting sales during the show will top $18 million.
“We’ve successfully developed this annual event into a buying show,” Ackerman said. “With specials being offered by almost every exhibiting company, dealers have incredible buying options. Cash discounts, freight allowances and free floorplan programs have made St. Louis the place to be in 2012. And for those who aren’t ready to buy, it’s a great way to see next year’s models.”
The show caters to all segments of the trailer industry, including utility, living quarter, horse, cargo, race car, marine, dump, flatbed, recreational vehicle and toy hauler markets. Attendance is free for all trailer dealers as well as dealers in related industries.
Dealers can register by visiting www.natdatradeshow.com.
GE Capital, Commercial Distribution Finance (CDF), has released its outlook for the Canadian recreational vehicle industry.
According to a press release, CDF provides inventory financing that allows dealers to stock, market and sell products from manufacturers. As a result of its longstanding position as a leading financing provider to Canadian manufacturers and distributors and their dealers, CDF “periodically provides market intelligence that may help companies throughout the supply chains to manage their businesses.”
CDF said the outlook for the Canadian RV industry is positive in light of solid overall unit sales, respectable inventory turns and the continuing strength of the national economy.
“There has been a positive increase in orders by Canadian RV dealers,” said Howard Shiebler, president and CEO of CDF in Canada. “Another encouraging and related health barometer for the industry is that the national level of dealer inventory aged over one year is just 16%.”
CDF has released an audiocast, titled “Performance of the RV Industry in Canada,” that features a discussion between CDF’s Shiebler and Garth Bromley, chairman of the Recreational Vehicle Dealers Association (RVDA) of Canada. They discuss the optimistic outlook for the RV industry and factors impacting the market, including the health of the Canadian economy, regulatory issues and RV imports. To listen, visit CDF’s Facebook page here: https://www.facebook.com/GECDF.
GE Capital, Commercial Distribution Finance (CDF) today (June 14) announced significant upgrades to its online inventory finance management tool used by dealers across a wide range of industries, including recreational vehicle, marine, motorsports, technology, and lawn and garden.
In addition, in most of these industries dealers will now have access to CDF’s industry-leading data analysis, Analytics Online, according to a news release.
Known as COMS (Customer Online Management System), CDF’s upgraded online tool is being rolled out to more than 45,000 users at dealers across the U.S., Canada and Asia. CDF said that users will process transactions more simply and access detailed metrics and real-time reports to make more informed decisions. Visit CDF’s Facebook page at http://www.facebook.com/GECDF to watch a video about COMS.
“Our dealer community will benefit from these upgrades by getting information they need to run their businesses more quickly and easily,” said Anuj Gaur, CDF’s chief information officer. “We’ve provided a robust tool that’s simple to use, allowing them to spend less time on administrative tasks and more time with their customers.”
With Analytics Online, a user can view outstandings and wholesale finance volume over a rolling 12-month period, across multiple manufacturers and distributors, and across selling seasons. CDF said that with these insights, the user can gain a better understanding of product demand based on previous seasons and order their optimal level of inventory.
General Electric’s finance unit is expanding lending to small and midsize businesses as confidence in U.S. economic strength grows.
Bloomberg reported that GE Capital said it increased proposals to U.S. commercial lending and leasing customers by 16% in the first quarter from a year ago. Earnings before interest, taxes, depreciation and amortization grew by 10% at companies to which GE Capital lends, Dan Henson, CEO of GE Capital, Americas, said in a telephone interview.
Small and midsize companies are becoming more optimistic about the outlook for their businesses, with 67% forecasting revenue growth this year and 74% expecting to hire additional workers, according to a GE Capital survey of 495 chief financial officers at companies with annual sales of $50 million to $1 billion. Ninety-four percent of the CFOs said the U.S. economy will grow or remain stable in 2012.
“Our customer base continues to become more profitable, which supports the view of these CFOs that we’re on more stable footing,” Henson, who oversees commercial lending and leasing in North America, said in an interview.
“More and more they see a growing environment,” he added.
Credit availability has improved for companies in the survey, with only 7% saying access to funds has decreased over the past year. That’s compared with 24% in the first quarter of 2010, when GE Capital first conducted the poll.
GE Capital’s North American commercial loans and lease volume grew 15% last year to $106.8 billion. Worldwide, the unit’s $45.7 billion of revenue last year accounted for 32% of GE’s $142.2 billion in total sales.
The company is scheduled to report first-quarter results on April 20.
National RV Communities LLC (NRVC) is seeking to finance an aggressive acquisition plan by tapping the private equity market for up to $400 million in new capital.
Woodall’s Campground Management reported that Scottsdale, Ariz.-based NRVC, doing business as Carefree RV Resorts, has held informal talks this spring with potential investors and has scheduled four formal sessions this week in New York City.
“It’s an exciting time. The initial response we have been getting is phenomenal,” said David A. Napp, NRVC chairman and CEO.
The new capital would help NRVC go forward with its plan to double in size within the next five years.
Founded in 2005, NRVC is the nation’s 10th largest owner/operator of destination RV and manufactured housing (MH) communities in the U.S. and Canada with 58 communities containing more than 13,300 sites. Of the 58 properties, 46 are located in Florida. Other properties are located in Texas (4), New Jersey (3) and one each in California, Ontario, Massachusetts, Arizona and North Carolina.
Napp told Woodall’s Campground Management that his company has its eye on a number of prime parks across the U.S.
“I have a priority list,” he said. “Once the capital needed is secured, I’ll be paying some people some visits. A good number are in Florida; some are in California and Arizona. The Eastern Seaboard also represents some great opportunities, like Myrtle Beach, Cape May and Cape Cod.” He was not more specific about locations of prospective acquisitions.
“A real driving force is being on or close to water,” he added.
Historically, the company has sought properties in key destination vacation markets that have a proven history of attracting both leisure travelers and retirees seeking warm weather.
NRVC wholly owns 47 of its RV and MH communities and owns a 20% interest in the remaining 11 MH properties, pursuant to a joint venture with GE Capital (National Home Communities or NHC).
The 47 RV and MH properties total 11,500 sites with a gross market value of approximately $380 million, according to an executive summary of the NRVC operations. The 2012 budgeted net operating income is approximately $26 million, including new acquisitions.
According to Woodall’s Campground Management, NHC owns and operates 11 MH properties located in Florida totaling 1,800 MH sites with a gross fair market value of approximately $83 million. The 2012 budgeted net operating income of these 11 MH properties is approximately $5.2 million.
Napp projects 2012 revenues from all 58 properties to reach $56 million and operating expenses to total $24.7 million, yielding net income of $31.2 million.
He places the fair market value of the combined properties at $462 million.
NRVC is owned by its management team and Almanac Realty Investors, formerly known as Rothschild Realty Inc., a New York City-based real estate investment adviser to public and private institutional pension plans, endowments and foundations. Almanac has invested $115 million in the company since 2005.
GE Capital has provided some $190 million during its long-term relationship with NRVC, Napp added.
Napp said he and founding partner Colleen Edwards are excited about their future in the RV and MH business.
“If the first quarter is any indication, we are seeing stabilization if not a slight upswing in our business,” he said. “I think the opportunities are good out there. We have done well in the recession. We are lining up all the elements for our next level of growth. Over the last 18 months we have analyzed our business internally and decided what we need to do to double our size over the next three to four years.”
In a somewhat related development, Napp noted that Carefree RV Resorts recently partnered with Resort Data Processing Inc., which will provide property management software and reservation software.
Carefree’s principals have a 17-year track record in the destination RV resort and MH industries. They have:
• Acquired and operated 106 RV and MH properties comprising over 30,000 sites.
• Raised over $250 million in private equity and borrowed approximately $880 million in mortgage debt for acquisition financing and refinancing.
• Become one of the first groups to bring institutional capital into the RV resort sector.
• Launched three national destination RV resort brands (Encore, Sunburst and Carefree).
• Operated two park model and manufactured home sales companies with over 2,500 new and pre-owned homes sold since 1996.