Melding ABL & Equipment Finance… At JPMorgan Chase Sharing Similar Goals, Challenges & Opportunities
Heading Chase’s ABL unit for nearly 12 years, John Goldthorpe now has the equipment finance group under his wing and is leading his team in creating a strategic dialogue between the two businesses in order to serve as a comprehensive resource for their clients’ growth plans.
Although John Goldthorpe has been running the asset-based finance division of Chase for nearly 12 years, he is no stranger to the bank’s equipment finance business, having served as its group executive from 2002-2004. Last year, the two businesses again were aligned under Goldthorpe’s leadership. Motivating the move was the desire to best utilize the strengths of these product groups in customizing solutions to meet the specific business needs of clients and prospects.
“Having run ABL for the last almost 12 years, I have now taken leasing back under my wing for a couple of reasons. Most obviously, equipment finance and business credit both are senior asset secured products. Although they are certainly in some respects distinct, they both share very similar goals, challenges and opportunities. As a result, we have created a number of syllogistic benefits in terms of managing and supporting the two businesses, and it just seems very logical to have them talking to each other on a consistent basis,” Goldthorpe explains.
As a result, Goldthorpe and his team are armed with a line of asset-based and equipment finance products that provide a synergy in the marketplace, or, as he puts it, “a very rich vein that we want to tap.”
He adds, “From the client’s perspective, the two products tend to fit slightly different risk profiles. However, we have discovered that there is a very clear area of overlap in the mid-range profile. What we are finding is when we are talking with a client about an ABL solution, it is often a very accretive execution to introduce the leasing folks who can create a far more strategic dialogue around the client’s growth plans, CAPEX and tax position, certain areas that perhaps an ABL originator wouldn’t think about.”
The ABL business of JPMorgan Chase has 25 distinct offices throughout the U.S., Canada and the UK, with the ability to structure, syndicate and manage a borrower’s domestic and cross-border financing requirements. Goldthorpe adds that his group also has a coordinated partnership with the firm’s middle-market and corporate bankers, who have a presence in 125 locations across 29 states and 13 cities abroad.
“We also have deep industry knowledge in metals, retail and consumer services. For larger transactions our go-to-market strategy is to partner with J.P. Morgan’s world-class debt and equity products in the investment bank and coordinate with their restructuring experts. It is worth mentioning that we have an enormous branch network around the country — 5,600 branches and growing, in 23 states — that helps to coordinate so many aspects of our businesses,” Goldthorpe notes.
The firm’s cross-border ABL business has found success supporting U.S. companies looking to compete more effectively in the international marketplace, where it can provide multi-jurisdictional transactions. His group has enjoyed a long-time, active ABL presence in Canada, with offices in Vancouver and Toronto. He adds, “Europe is proving to be a very fertile ground for us. This year we are undertaking several very sizable syndications and finding a lot of interest from European and U.S. banks. This is going to be a record year for us in terms of our European business.”
Because of JPMorgan Chase’s breadth and depth, his group is equipped to manage the challenges of international, multi-jurisdictional deals. “For example, each western European country, while belonging to the EU, has its own unique laws, perspectives and regulatory issues. It is most important to understand all of those and how we will be treated as a secured lender under certain circumstances before we actually go in and start executing transactions,” Goldthorpe explains.
While international opportunities are abundant for the ABL side, the equipment finance business finds most of its success in the U.S. “The vast majority of equipment leasing as we know it takes place in the U.S. and that certainly is the case for our business. We do think it is challenging to get outside of the U.S., but we are very actively considering the possibility of becoming more active in the leasing market in Canada, which has treated us well in an ABL context,” he says.
Goals & Growth
When discussing the goals of his business units, Goldthorpe says that the most important long-term goal is to ensure that both businesses always reflect the power and the reach and the underlying client requirements of a bank such as JPMorgan Chase, “which is a high bar to start with, obviously.” He adds that his groups will continue to increase their local market share and expand their services in newer markets such as the west and southeast, which they “ramped up” subsequent to the acquisition of Washington Mutual’s assets.
“We will grow our local presences in a very disciplined way, keep hiring outstanding local origination talent — both in ABL and equipment finance — wherever there is a good commercial case to do so and wherever we have sufficient banker support. We are by no means finished with our growth plans, and those expansion markets are of particular interest to us,” Goldthorpe notes.
Regarding the personnel responsible for growing business, we asked Goldthorpe, based on his deep industry experience, to share his perspective on the characteristics of business development officers on the ABL side versus the equipment finance side. “The common element to both is that they have to be very motivated, driven self-starters to be successful. The real differentiator is that on the ABL side, they need to be able to advise a client on all of the components of the balance sheet. Whereas on the equipment side, they are having an equally strategic conversation with clients, but it is more focused on understanding their growth plan, future CAPEX needs and tax position. It is ultimately finding a different path to help a customer grow its business effectively,” he explains.
Regarding the marketplace, Goldthorpe notes he has seen an increase in competition in both ABL and equipment finance in terms of spread compression and increased pressure to consider structural accommodations, adding that he also has witnessed a surprising number of new entrants at this point in the cycle. “Frankly, there is surplus capital out there looking for good business, although I do think that in the near future our industry will be forced to do a far better job of understanding the true cost of that capital. From JPMorgan Chase’s perspective, with our domestic and international presence and the size of our balance sheet, we can win by adding value and selectively lean in where we want to. Fortunately, we’re not in a position where we have to ‘fall in love’ with every deal we see,” he says.
To differentiate the ABL and equipment finance businesses from others offering similar products in the same space, Chase uses the banker-relationship model. “In terms of both products, we approach a market or client by partnering with local bankers who quarterback the relationship and understand their clients’ needs. The result is — whether we provide a leasing transaction or an asset-based lending transaction — that the banker stays involved with the relationship. It is always very seamless, and we work together as true partners to bring the right solution to the client. Conversely, some of our competitors take a more independent approach to their commercial finance businesses,” Goldthorpe explains.
Ruffling Goldthorpe’s competitive feathers are misunderstandings in the marketplace regarding the size of clients that JPMorgan Chase services. “One thing that genuinely upsets me — be it ABL or equipment finance — is when I hear that a competitor has said to a client ‘you are too small for JPMorgan Chase.’ I think there is a common misperception that JPMorgan Chase can only help with large transactions for large clients, and it’s really quite the opposite,” he notes. “We have a commercial bank that is dedicated across the country and internationally to serving all different types and sizes of middle-market business. We have approximately 30,000 clients across the country in the middle market, and that number is growing. We are intent on serving clients of every size.”
Contributions to the Industry
Goldthorpe says he has been fortunate in his career in many ways, particularly having experienced different international markets. Prior to joining Chase, he was executive vice president and head of asset-based lending with Heller Corporate Finance in Chicago. Prior to Heller, he spent 19 years with National Westminster Bank, with six years initially based in London, then 13 years in New York. He appreciates the opportunities that have contributed to developing a knowledge skill set around many different types of credit, including leverage finance, securitization and project finance, all of which help him to manage the two businesses at JPMorgan Chase.
“Most importantly what has kept me in the game is being — I hope I am every day — a great judge of character. What I mean by that is the best way to succeed over a prolonged period of time in this business is to hire really outstanding people, help them develop the right professional skills and give them the encouragement to run their own franchise,” he explains.
Lisa M. Goetz is editor of ABF Journal.