In leading a 14-bank syndicate that will provide a $15 million line of credit to CSX Corp., a minority-owned Atlanta bank hopes to capture a larger piece of the railroad giant's business.
Indeed, if the deal is as productive as others have been for the $350 million-asset Citizens Bancshares Corp., Citizens could add to its portfolio of blue-chip corporate leases, gain contacts with CSX's larger suppliers and 34,000 employees, and generate deposit business.
Small, minority-owned banks like Citizens have been combining to offer lines of credit to major corporations for years, largely because they are hard-pressed to provide meaningful services to such companies on their own. (Citizens, one of the nation's largest black-owned banks, has a legal lending limit of $4.5 million.)
But "once that door" to a big corporate relationship opens, "it can lead to commercial opportunities that benefit people from all walks of life," said James Young, Citizens' president and chief executive, in the Aug. 2 press release announcing the CSX deal. "That's what our new relationship with CSX means."
The one thing Citizens does not expect is that CSX, of Jacksonville, Fla., will actually tap the line of credit.
Citizens has had a part in several line-of-credit deals involving minority bank syndicates and large companies. In 2002 it assembled a 24-bank group that provided a $26.5 million line to Coca-Cola Enterprises Inc., and before that it participated in several deals brokered by the $37.4 million-asset Gateway Bancorp Inc. of St. Louis, including one in 1997 that provided a $73 million credit line to Wal-Mart Stores Inc.
In only a few cases, however, did the borrowers use their lines of credit, according to Willard "Chuck" Lewis, Citizens' senior executive vice president and chief operating officer.
What the deals really offer is a chance to build relationships with big corporations.
"What we're looking for in all these cases is deeper penetration," Mr. Lewis said in interview this week. "Every bank wants to cross-sell its products and services, and that is our intent here."
The line-of-credit strategy was used successfully by Gateway, which in the late 1990s put together several big deals. But those early deals provided little to the participating banks besides fee income, which the borrower paid to keep the line of credit open, and the cachet of having names like Wal-Mart and Anheuser-Busch Co. on the client list.
Dina Curtis, a principal at the Washington consulting firm Stewart Partners LLC, said: "It's important for other companies that are thinking of doing business" with minority banks "that they see those relationships. It does enhance the image of the bank."
For the corporations, the lines of credit serve as bridges to minority businesses.
The credit lines also expand a corporation's capacity to issue commercial paper (short-term unregistered debt), Mr. Ward said.
Over time Citizens has set higher goals for the line-of-credit strategy.
In a 2000 deal, for instance, Microsoft Corp. agreed to deposit $4.5 million with the 83-year-old Citizens Trust Bank; and Mr. Lewis said a long-running relationship with Lockheed Martin Corp. has generated millions of dollars of deposits and loans.
It was not always that way. At first Citizens' main objective was to get corporate business, primarily opportunities to buy high-grade leases on the secondary market.
With the CSX deal Citizens is still looking for opportunities to buy leases, but it also aims to market loans and cash management services to CSX's major suppliers and to market mortgages, college savings plans, and other retail banking products to the railroad enterprise's huge employee base.
"When you do anything over and over again, you try to evolve," Mr. Lewis said. "We don't want to stay in a holding pattern."
