These days, everyone seems to be in banking.
Although best known as a provider of mailing products and services, Pitney Bowes Inc. is also a player in several areas of financial services.
Through its 18-year-old Pitney Bowes Financial Services group, the company offers financing and leasing for its office and mailing equipment and for large business purchases, like corporate jets. It is also active in the mortgage servicing business through its Atlantic Mortgage and Investment Corp. subsidiary.
But Pitney Bowes is also a large consumer of banking services. Just last month, the Stamford, Conn.-based company moved $1.2 billion from the balance sheet of its large-ticket finance portfolio into a new partnership with Chicago-based GATX Capital, an asset-backed financing company. The transaction was structured by Chase Securities Inc.
At the head of the Pitney Bowes financial services subsidiary is Matthew Kissner, president and chief executive officer of Pitney Bowes Credit Corp. Previously a banker working in retail banking at Citibank and in private banking at Bankers Trust New York Corp., Mr. Kissner has been with Pitney Bowes for two and a half years.
The subsidiary maintains relationships with approximately 50 banking and financial services institutions. In a recent interview, Mr. Kissner spoke with American Banker about the $1.2 billion deal and his group's banking relationships.
How does financial services fit into Pitney Bowes' business?
KISSNER: It's a niche business for us where we focus on very strong investment-grade credits. Seventy percent of our business is repeat business with some of the strongest companies in the U.S., and we're opportunistic about approaching it, meaning were not competing on a broad scale. We're competing on a narrow scale for very high quality business.
What are your banking needs?
KISSNER: It will range from-on a day-to-day basis-commercial paper, of course, and depending upon our funding needs longer term and what the asset book looks like, we have medium-term notes. We've also done some securitizations with our paper from Colonial Pacific Leasing Co. (an office equipment leasing subsidiary). So it ranges from the mundane to the more complex, as in this example (the $1.2 billion deal) where we're really, I think, doing some cutting-edge things with the transaction structuring and financing. Obviously, we have some fairly significant lock-box relationships, too.
What do you look for in a bank?
KISSNER: It's more than just price. I think it has a lot to do with the kind of values we bring to our customers, which is understanding our business, a level of responsiveness, a quick decision-making process, and a long-term interest. People who are not transactionally oriented but really want to build a long-term relationship.
What was the reason for the $1.2 billion transaction?
KISSNER: In many ways we're going through the same evolution banks have gone through in the last five to 10 years in terms of how they use their capital and balance sheet, and we're finding that it's much more efficient for us to originate and service the transactions, but to use third-party investors or secondary market activities to fund the transactions.
How was the transaction structured?
KISSNER: There's interim bridge financing. That, of course, will be syndicated and is being managed by Chase. There are two capital markets executions, which will provide permanent financing to the partnership. None of this debt has any recourse to Pitney Bowes or to GATX Capital; it's all the partnership. We will be doing what are called equipment trust certificates for the aircraft (loans), and that's the most efficient way to securitize commercial aircraft. The remainder of the assets, about $350 million worth, will be in asset-backed notes in a 144a private placement also managed by Chase.
Was Chase selected on the basis of the lowest cost of capital?
KISSNER: No, not necessarily. Cost is always important, obviously. But also we wanted a bank that understood these assets. This is a very complex transaction, because it is a very heterogeneous portfolio. That's an advantage; it's well diversified. It's also complex in terms of execution, and we wanted to make sure that our banking partner had experience with that kind of diversity of assets, as well as the tax complications. So Chase brought experience to the table. Also, GATX has a long-standing relationship with Chase, so again, the partnership element was working here. We needed a banking partner that both of us had experience with and confidence in.