March 25, 2024
Q&A with Eric Miller from Ansley Park Capital, by Rita E. Garwood, Monitor Daily, March 2024
Eric Miller shares his take on the current state of equipment finance and the mutually reliant relationship between banks and non-banks in the space. He outlines the go-to-market strategy of the new venture he is leading for Ares Capital Management, Ansley Park Capital, and provides his outlook on the future market composition of the industry.
Eric Miller is leading Ansley Park Capital, backed by funds managed by the alternative credit strategy of alternative investment manager Ares Management. Monitor editor in chief, Rita Garwood, sat down with Miller to discuss the current state of the equipment finance marketplace, as banks are pulling back from the space while private credit gains ground, the mutually reliant relationship between banks and non-banks in the industry and the go-to-market strategy of the new venture Miller is leading.
You’ve worked for many banks with equipment finance businesses in the past. Can you share your perspective on what’s happening in the banking industry as far as its interest in and involvement with the equipment finance industry today?
Most of my experience is non-bank. I spent a couple of years at Wells Fargo equipment finance early in my career but joined GE Capital in 2003. Back then, the equipment finance space was mostly non-bank; you had GE Capital, CIT, Transamerica, Merrill Lynch Capital and Heller Financial, to name a few. The independents’ dominance pivoted post the Great Financial Crisis in 2008.
It’s not a coincidence that the Fed’s monetary policies at the time, including quantitative easing, led to increased money supply, which in turn drove an increase in deposit dollars for the banks. As a result, banks increased their loan originations and grew different platforms, including the assets associated with our industry. During this time, equipment finance began to be viewed as a business as opposed to being a product for their bank customers. GE Capital had already purchased most of the other independent players in the market, so the banks didn’t really have much non-bank competition.
The main premise of a bank is to collect deposits and re-invest those deposits in their community, so it’s no great surprise to see what’s happening today. I expect the current industry dynamics to continue for many years to come. Due to recent economic events, many banks are reconsidering what types of loans they want to originate. The reality is equipment financing doesn’t drive deposit growth or treasury management. So why is it that a bank might decide to stay active in this market? Going forward, it’s likely going to once again be viewed as a product that is available to customers, not a business.
We are already seeing the significant void that’s being created in the marketplace, with several banks either having exited the equipment finance sector or shifting their strategies and approaches. While I believe this trend will continue, I expect this void to be filled by private capital. My view is not that the banks are exiting or shifting because they don’t like our industry, but rather that our industry really isn’t core to what most banks are trying to accomplish. The reality is it all comes down to business and financial strategy for both the banks and private capital.
In your opinion, how will Basel III impact banks and the equipment finance industry?
While Basel III is likely to impact bank participation in a number of traditional asset classes, it is not yet known if there are clear implications for how banks will approach direct originations of equipment loans and leases. A potentially larger consideration for banks today is how they view their direct equipment originations platforms in the context of driving long term sticky customer deposits from their equipment finance borrowers and lessees. To the extent banks are unable to generate acceptable levels of strategic customer deposits, it is possible that certain banks may decide to pull back from direct equipment finance originations, creating significant white space for well capitalized independent lessors like Ansley Park.
What are you seeing in the capital markets today? Are banks reluctant to buy paper? Are non-banks stepping up to fill the void, or is the market drying up?
The short answer is yes, yes and no. Many banks have pulled back their capital markets participation over the last year and we are seeing more deals getting funded by the independents than we were seeing previously. Some banks have drawn back to their footprints, while others are currently acting as brokers and selling most, if not all of their originations. I believe this will all take a while to normalize, years perhaps. All these changes create significant opportunities in the market for non-bank participants.
You recently launched Ansley Park Capital with the backing of Ares Management, a strong non-bank player. Can you outline your go-to-market strategy for this new business?
Ansley Park is owned by funds managed by Ares Management Corporation’s Alternative Credit strategy with $400 million of committed equity capital which we expect will enable us to originate over $3 billion in equipment loans and leases over time. Ares is a global asset manager with $419 billion of assets under management across credit, private equity, real assets and other businesses. Notably, Ares stands as one of the foremost providers of private credit to middle-market borrowers. With the support of Ares’s significant institutional expertise and broad presence in private credit, and backed with $400 million of committed equity capital, Ansley Park is uniquely positioned to successfully execute its go-to-market strategy across three primary channels:
- Capital Markets: Our capital markets group is focused on asset origination through banks, non-banks, and other financial intermediaries.
- Direct: Our direct team has been together and delivering for our customers for many years now. Our goal is and has always been to build long-term relationships with direct end-users of equipment, focusing on a consultative approach. We aim to provide custom-tailored solutions for our customers’ individual needs.
- Sponsor Coverage: Our sponsor coverage channel is focused on providing the same consultative approach but to the portfolio companies of our Private Equity sponsor relationships.
When you look at the current state of the market, how are banks and non-banks working together? Do you expect this to continue or evolve in the future?
Great question, Rita. Banks and private credit providers are mutually reliant on each other. It’s a partnership that’s always existed and one that I expect to deepen even further. In our specific case, while we have a great capital partner, we also have a great bank partner that’s providing us with a significant warehouse facility that allows greater efficiency for our capital. On the flip side, we can help a bank with loan originations for their customer base in areas that may not be core or strategic for them.
Imagine the equipment finance industry in five years. How do you anticipate the landscape of banks, independents and captives to compare to today’s market composition?
I don’t have a strong view on the captives. They exist for a completely different strategic purpose, and I don’t expect there to be much change for them. As it relates to the banks and the independents, I wouldn’t be surprised to see them having an equal participation in the market. I don’t think it will go back to where it was in 2003 when I joined GE Capital, but it will be somewhere between where we were back then and where we were pre-COVID.
Continuing that future vision, how do you expect to see the equipment finance capital markets functioning in five years?
The capital markets in our industry have become incredibly efficient. Some parts are more efficient than others, but it’s a pretty fluid and liquid market, which I expect to continue without significant change.
Is there anything else that you would like to add to this discussion? Anything important that we’ve missed?
Throughout my career, I’ve found that the only consistent theme has been change. It’s going to happen; don’t fight it; accept it. Maybe the best thing you can do is instead of moving with the momentum, try to be part of the course correction. Welcome the change and figure out how to use it for your benefit as opposed to allowing it to create anxiety. If someone told me 20 to 25 years ago that the banks would dominate equipment finance originations, I wouldn’t have believed it. No one can say with certainty what our industry will look like 20 years from now, but it’s quite possible that things will look more like 2003 than 2023. Either way, I expect the equipment finance industry to be bigger and better than ever.
Eric Miller is president and chief executive officer of Ansley Park Capital where he is responsible for the strategy of the business as well as managing its day-to-day activities. He is an accomplished industry veteran with experience in building & leading high performing commercial finance platforms focused on sourcing, structuring, underwriting and executing middle market and large corporate financing transactions across a wide array of credit products across a diverse group of industry sectors.
Prior to launching Ansley Park Capital with backing from the funds managed by Ares Management Corporation’s Alternative Credit strategy, Miller held the position of chief executive officer at BciCapital, the nationally respected specialty lending subsidiary of City National Bank of Florida, where he led the company’s equipment finance business.
Before his tenure at BciCapital, Miller served as president of CIT Asset Finance, where he provided oversight for CIT’s large ticket asset-backed Commercial Finance platforms. His responsibilities included managing key business units such as capital equipment finance, commercial aviation finance, maritime finance, logistics finance, and franchise finance.
Miller’s dedication to excellence and his ability to navigate complex financial landscapes have positioned Ansley Park Capital to become a leading independent equipment finance company. Under his leadership, the company delivers innovative financing solutions and value to its clients across various sectors.
