First Citizens Bank and Sixth Street, a leading global investment firm, announced the launch of Sixty-First Commercial Finance, a new equipment finance joint venture managed by First Citizens Institutional Asset Management. This strategic partnership unites two highly successful and well-established organizations, aiming to provide middle- and large-ticket capital equipment financing solutions ranging from $5 million to $100 million. The venture will serve a diverse range of industries and asset types within the middle market.

Kevin Ronan, Head of Capital Equipment Finance at First Citizens Bank, has been appointed to lead this new initiative. Following the announcement, we had the opportunity to speak with Kevin to gain insight into the joint venture and its go-to-market strategy in the equipment finance sector.

Michael Toglia: Thanks for joining me today Kevin. To begin, what inspired First Citizens and Sixth Street to join forces to create this  joint venture in the EF space?

Kevin Ronan: Well, it's interesting. We've been working on this project for quite some time. We interviewed multiple potential partners. Through the process, we decided to move forward with Sixth Street because our interests were aligned right away. Both firms have very strong market reputations, which is something we really value on our side and was a critically important point for us in establishing this joint venture.

Toglia: Have the two organizations ever worked together in the past?

Ronan: In the past at CIT (which was acquired by First Citizens in 2022), there were a few transactions that we worked on with the Sixth Street team, so we knew the team from other transactions and really knew their reputations. They're truly first-class professionals.

Toglia: How does the newly formed Sixty-First Commercial Finance differ from the equipment financing currently provided by First Citizens’ Capital Equipment Finance unit?

Ronan: We’re really expanding our market into a different spectrum of credit profiles. This joint venture brings us more into the private debt marketplace. But from a bank perspective, it really opens up another channel for us to sell traditional bank products to new clients. It's a win-win for both groups.

Toglia: How will this new joint venture enhance the equipment finance offerings currently available to both your existing clients and prospects? Does this open the door to different underwriting capabilities/criteria?

Ronan: We have eight originators across the country already. In the normal course of our origination strategy, we come across various credit types from investment-grade credits to non-investment grade credits and below single-B credit profiles. As a bank, we typically have not targeted the lower end of the credit spectrum because they typically do not meet traditional bank credit guidelines. But through this joint venture, we now have opportunity to service clients in that lower spectrum. Additionally, in cases where we have reached a certain credit hold limit with a bank client, we may now be able to continue funding such clients through Sixty-First Commercial Finance. This represents a significant opportunity for us and our clients.

Toglia: Will these transactions be placed into a separate portfolio under the joint venture?

Ronan: Yes, and this is what will allow us to continue funding clients when we are at our credit hold limit within the bank.

Toglia: Will this joint venture target only direct originations, or will you also be looking to buy transactions in the capital markets?

Ronan: The business is set up to focus on direct originations via our direct sales force who are located in different geographies across the country. This is unique compared to some of our competitors because most of our competitors source transactions indirectly and do not possess the direct relationships with borrowers that we have built over many years.

Toglia: Will you be looking to expand the direct sales force over time?

Ronan: We very well could. We have a very big partner that wants to build a premier business as we do. If  building this business means adding more salespeople or other roles into the business, we will certainly do so at the right time. Ryan Berlage will serve as Managing Director and Chief Credit Officer and Portfolio Manager and will be a dedicated employee of the joint venture and he is hiring a team specifically dedicated to the joint venture, including underwriters, asset managers and closing professionals.

Toglia: How will this new group compete in the seemingly crowded equipment finance space occupied by both bank and non-bank equipment finance providers?

Ronan: The market differentiator for us is we already have an installed direct-to-market sales force as I mentioned. As we source transactions, our prospects could be sponsor-backed companies, but again, our go-to-market strategy will not be to solely source transactions through the sponsor channels. We believe this gives us a significant leg up in the marketplace. No other regional bank out there has the capability to source business in the large ticket equipment space and have two portfolios where they can place the financing facilities – one at the bank and the second in the joint venture portfolio. This capability allows us to effectively and efficiently service the broader equipment financing needs of our clients.

Toglia: What excites you most about this new joint venture?

Ronan: It's really exciting to build a business like this. Having the opportunity to partner with a $100 billion asset manager partner like Sixth Street is incredible as they hold such a strong presence in the marketplace. Couple that with the support we are getting from First Citizens to grow this business, we see a phenomenal opportunity. We're very excited to get going!