INTERVIEWER: Today we’re here speaking with Walter J. Owens, president of Corporate Finance at CIT, about how the recent credit crunch has impacted transactions in the middle market relative to those in the large cap market.

Walter is responsible for overseeing the group's Go-To-Market model, developing integrated distribution platforms and improving the group's operational efficiencies. He is an expert on corporate financing trends, private equity, restructuring markets and designing growth strategies that capitalize on those trends.

Walter, thank you for being here.

Clearly there have been challenges across a broad spectrum of industries as a result of the credit situation that occurred this summer. Are you seeing any changes to business models as a result, and what differences do you see between the activity in the large cap market relative to the middle market? Walter J. Owens President of Corporate Finance at CIT

WALTER J. OWENS: Well, I think there are several answers to that question. If you first look at the large cap market, there's totally different dynamics that have taken place. The large cap market grew substantially over the last, I'd say, 12 to 24 months, principally with this large backlog of big deals that we've all heard about—TXU, FDR. The middle market, which is for loans less than $150 million, we did not have as big an impact from a credit crunch in terms of the withdrawal of a large amount of institutional investors. What we found as the summer progressed, the middle market was impacted, and we've now gone to more of a club arrangement in terms of getting transactions done. So while the larger cap market for a period of time really stopped any new transactions from coming out into the marketplace, the third quarter was still very robust for businesses that are financing the middle market, including CIT. And what we found is we've had to change our model, we've had to change our tactics to be more of an originate-and-hold strategy versus the traditional larger cap market, which was, to be quite honest with you, an originate-to-syndicate, or a range-and-sell model, which really ran into trouble, given the current market conditions. So far the activity in the middle market is still robust. It's been impacted from the credit crunch, but I don't think nearly as much as the large cap market has been

INTERVIEWER: Why do you think that is? Are middle market companies more nimble or resilient?

WALTER J. OWENS: Yeah, it's very interesting, as things potentially deteriorate in this economic cycle, what's the reaction of large cap companies versus small cap companies or mid cap companies. What we find in the middle market is people are used to change in the middle market. So whereas the events that have taken place over the last several months have significantly impacted the ability to finance the large cap market, and would be a surprise to certain people in that marketplace given the last four or five years, what we're finding is middle market companies traditionally are used to change. They are used to being under some form of stress from an operating perspective. And that small cap companies really define themselves either by getting larger and buying or selling themselves to larger companies, or acquiring others that aren't doing as well. So what we're finding is this current cycle is more of the same. And therefore, for middle market financing companies like CIT, we're finding that the companies are handling the current environment quite well. The banking market and the middle market are still very, very strong. And there's still a lot of liquidity in the middle market for companies to choose from. So I think the impact has been much stronger in the large cap market than it's been in the mid cap market. But again, we have to keep our eye on this because there can certainly be a spillover effect. There's been some, but not nearly as significant, I think, an impact that we've seen in the large cap market.

INTERVIEWER: Well, thank you so much for speaking with us today, Walter. Please stay tuned for our next podcast segment. Thank you all for listening. Be sure to visit podcasts.cit.com for more information and to subscribe to future podcasts.