Middle-market companies have no shortage of lenders looking to help finance the growth of their business these days. To be sure, new federal lending guidelines have made it tougher for regulated banks to commit as much capital as they did before the credit crisis. But in a persistently low-rate environment, investors are still hungry for yield and looking to partner with established, industry-focused lenders who are comfortable committing capital, hedging their interest-rate exposure and devising innovative approaches to help companies expand.
CIT Capital Markets works behind the scenes every day to help ensure CIT's wide-reaching industry teams deliver competitively structured financing to middle-market companies. The 15 professionals on the CIT Capital Markets team work alongside CIT's industry-facing businesses to better understand clients' needs, tailor financing packages to fulfill those needs and match transactions with investors in the syndication markets.
The CIT Capital Markets team is responsible for structuring, pricing and distributing a wide range of financing solutions to the middle market, including senior and asset-backed debt transactions, second-lien loans, project finance, debt and equity private placements, equipment financing and interest rate caps and swaps. In addition, the team provides syndication abilities for CIT across all product types, with experts in the syndication markets for all of the industries covered by CIT verticals.
Industries can vary quite a bit in how they are affected by the ebbs and flows of the business cycle. Credit decisions have to account for these differences and be carefully attuned to industry dynamics that may make it easier or more difficult for a business to manage its debt.
CIT Capital Markets effectively supports middle-market clients because its industry experts work hand-in-hand with CIT's sector-focused teams in a number of target markets, including communications, mobile, entertainment, retail, energy, transportation, commercial and industrial, and healthcare. This deep knowledge base helps CIT focus more of its time and energy on what matters most: finding the right financing solution for each business's needs.
"We're a technical sales force - we understand the nuances of an industry," says Neil Wessan, Group Head and Managing Director of CIT Capital Markets. "This means we're already prepared to have an in-depth conversation about the client's market and business as soon as we start working together."
As such, CIT Capital Markets supports transactions in sectors in which CIT already has a well-established role. For instance, last year CIT served as Joint Lead Arranger and Administrative Agent in a
$325 million senior secured credit facility to LCI Helicopter, the helicopter leasing subsidiary of Lease Corporation International. LCI's helicopters are in high demand in the oil and gas, search and rescue, and emergency medical services sectors. In part because of CIT's strong presence in the aerospace industry, the CIT Capital Markets team was able to generate significant interest among investors.
"We really focus on making sure we highlight our knowledge base in the areas that we're competing in to get something done," Wessan says. "People know that we have a legacy in transportation finance as well as commercial banking, and they value our experience in the transportation industry and our understanding of current trends in the sector."
Healthcare is another area where CIT Capital Markets is keeping its finger on the pulse of a changing industry. Implementation of the Affordable Care Act has resulted in uncertainty within the industry, causing some market participants and leaders to sit on the sidelines and wait for business conditions to stabilize. Not so for CIT Capital Markets. This year, the team helped CIT Healthcare Finance execute their
fourth transaction with Epic Health Services, a provider of pediatric home health and therapy services.
"Not knowing or understanding how to navigate the Affordable Care Act and other federal healthcare regulations can put a company or a lender into jeopardy," Wessan says. "We have a great team that can help a healthcare company work through these issues."
CIT Capital Markets works with CIT's origination groups to help ensure transactions are sound and structured to succeed - meaning they reflect the current market dynamics, how the market is pricing similar transactions and how terms might change in the future. Being accurate on these fronts is extremely important, as CIT often sells a portion of a transaction to other investors via the syndication markets. In these cases, CIT assumes the underwriting risk for the portion of the transaction held by CIT, and finds investors to take on the remaining balance.
At any given time, CIT Capital Markets knows which investors will likely be interested in one of the transactions CIT is financing. That's because the team keeps an open communications channel with its clients and investors. CIT Capital Markets is constantly paying attention to the financing environment in its target industries, including those transactions it doesn't end up having a part in. CIT Capital Markets professionals know what deals are being sponsored, who's doing the sponsoring and what terms and conditions are necessary in order to have a transaction be fully subscribed.
"We're responsible for all the marketing aspects of syndication," Wessan explains. "As a sales force, our work begins by being able to effectively talk about the credit with investors. We share a compelling story for each transaction based on our knowledge of the industry and marketplace, and often take that story on the road to potential investors."
For a recent transaction in the mobile communications sector, Wessan and his team organized a bank meeting to pitch to a select group of investors on the deal. Some attendees bought in on the spot. The transaction ended up being almost two times oversubscribed.
"In marketing a transaction, we work to make sure that the right balance of interest and investment is achieved, so that no one investor is concerned that they're not going to see a good allocation for their efforts," Wessan says.
These days, there is a rapidly expanding list of market participants looking for returns. Business development companies (BDCs) have been very active in the middle market of late, as have hedge funds. Another trend has been the growing use of collateralized loan obligations by special-purpose entities to provide financing.
CIT Capital Markets often treats these new players as potential partners, not rivals. Working with these institutions as clients has allowed CIT Capital Markets to tap into sources of capital for transactions that would not otherwise have been available.
"One of our responsibilities is to maintain relationships with all investors who are current or potential players in the syndication marketplace in the industries CIT serves," he says. "Financial institutions are often our competitors, to be sure, but they can also be great partners."
Keen insight into industries coupled with strong investor relationships has made CIT a key player in middle market financing. The fact that many clients are repeat borrowers with CIT speaks to CIT Capital Markets' ability to be highly responsive in a constantly shifting marketplace.
"My team's job is to pretty much know everything that's going on in the capital markets related to the industry sectors we support," Wessan says. "Our clients and investing partners benefit from that knowledge."