In early May, Navitas Credit Corp., a wholly owned subsidiary of United Community Bank, announced industry veteran John Martella joined the organization as Senior Vice President of the newly formed Navitas Capital division – a division focused on middle-market transactions that will provide a variety of funding solutions for companies with revenues over $10 million.
Martella is a widely-recognized industry leader with over 35 years of experience and responsible for over $3 billion of funded transactions throughout his career; most recently having served as Senior Vice President at Somerset Capital Group, and previously he served as the President of LCA Financial, LLC, a division of Lease Corporation of America. This expansion into the middle market with a seasoned leader possessing the expertise required to successfully build and grow a middle-market lending platform is an important strategic initiative for the company.
Equipment Finance Advisor sat with Martella to learn more about this newest entrant into the middle-market lending arena and the rationale for entering this segment of the market.
Equipment Finance Advisor: Navitas has operated in the small-ticket market since inception in 2008. Why has Navitas determined this to be the right time to enter the highly competitive middle market – focusing on larger transactions for companies with over $10 million in revenues?
John Martella:The foundation of a highly efficient small ticket platform provides a solid base to implement an efficient processing model for middle-market transactions. Since inception, Navitas has been primarily funded through securitization. This funding mechanism along with its concentration and yield requirements is more efficient for small-ticket portfolios, but not well suited for larger transactions. The acquisition by United Community Bank now brings lower cost and more flexible capital to Navitas. Navitas has always had the credit, servicing and infrastructure to compete in the middle market space but not the necessary capital.
We agree that the middle market is a highly competitive space -- as is every other segment of the equipment finance market. We are very confident that our operational capabilities, funding mechanism and experienced senior management will position Navitas as a formidable competitor and premier funding source for middle-market companies, equipment vendors and other middle-market originators.
Equipment Finance Advisor: Traditionally, Navitas has generated the majority of its lease and loan volume from vendor finance partners and the indirect origination market. Please describe the origination strategy for this new middle market group? Can you describe your plans for building out the originations team?
Martella: The origination strategy is similar except Navitas Capital will be targeting origination channels that focus on middle-market transactions. In addition, we now have the resources to provide syndication support to other institutional lenders, selected captives and create “virtual captives” as well. Initially we will target third-party originators and financial institutions that we have had a long-standing relationship with Navitas. We will then begin to generate relationships with equipment vendors, certain franchise concepts and repeat transactions from our existing customer base.
Equipment Finance Advisor: Navitas is a generalist – focusing on numerous industries. What asset classes do you believe will be most pursued by this new middle-market group and why? Additionally, what is the transaction size range this new group is targeting and the average transaction size?
Martella: As you mentioned, Navitas has historically been an equipment generalist, but we have a great deal of management experience in a number of asset classes and equipment types. For our new division, Navitas Capital, the preference will be for fungible assets with some predicable residual value. There is of course a relationship between credit quality and asset value, but our preference is for harder assets. We will be providing our business partners with an asset preference guide. The transaction sizes we are targeting at this time range from $500,000 to $5 million – with a sweet spot between $1 million and $3 million.
Equipment Finance Advisor: Please describe how/if the new middle market group will leverage Navitas’ existing relationships with vendors, independent lessors, and captives.
Martella: Navitas has historically generated middle-market leads and transactions from its existing vendor relationships, but have referred them to other funding sources. We will leverage our existing relationships to the degree that they produce these qualified leads to build the new division. We will also work on database segmentation of our existing end-user population to identify any potential middle-market opportunities.
Equipment Finance Advisor: Can you share any insights into the scope and size of the origination team you will be building – beyond the hiring of Jean Cutting as Vice President of Business Development?
Martella: As most people know, Jean Cutting is a strong and talented middle-market professional with extensive third-party relationships. At this time Jean and I are the primary contacts for the division. Over time, we will be building an internal sales force to target additional vendor and end-user markets.
Equipment Finance Advisor: What pricing advantages (if any) do you see for this new middle-market group based on the fact that Navitas is owned by United Community Bank?
Martella: The pricing advantages are the difference between all-in securitization funding and direct bank funding. As discussed previously, this advantage now allows Navitas to compete effectively in the middle market. While Navitas will be able to offer competitive pricing in the market, we will also compete with our ability to quickly vet and structure transactions, and provide strong product support and service levels to our customers.