Dealers Take ‘Wait-and-See’ Approach with GE Capital

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Earlier this month, General Electric put its banking business, GE Capital, up for sale in an attempt to exit the banking business and invest more money its industrial businesses.

Like many RV dealers who receive floorplan financing from the company’s Recreation Finance Division, Larry Troutt, owner of Waller, Texas-based Topper’s Camping Center is watching the deal closely because it could affect rates on future lines of credit, depending on which bank purchases the division.

Troutt said that his dealership is always prepared to work with other banks, but that he’ll wait to see how, or if, an acquisition will have an effect on his business.

“When you’re in growth mode, as we are, you’re constantly having to re-evaluate what your flooring needs are,” Troutt said. “Fortunately, there’s competition in the market. … There are other (banks) out there interested in our business, and I think the banks know that.”

Thus far, dealers haven’t seen any cause for concern. GE Capital has told dealers that the potential sale shouldn’t have any effect on their business, according to Cannon Combs, president of Texas-based RV Station.

“I don’t anticipate any problems, and hopefully there are none,” Combs said. “There are always other banks if there are (problems), but for now they’re telling us nothing is changing.”

After months of speculation, GE officially put GE Capital on the auction block April 10, and has since sold most of its $23-billion real estate holdings to Wells Fargo and Blackstone, a private equity company.

While other companies could still factor into the deal, Wells Fargo has surfaced as a potential buyer for the company’s commercial lending segment.

GE Capital’s earnings and returns had shrunk in recent years, posting an 8.4 percent return in 2014, when earnings dropped 12 percent to $7 billion. Comparatively, GE received 14 percent returns from its industrial businesses. 

Wednesday (April 29), news outlets reported that GE had sent nondisclosure agreements to a dozen potential buyers of GE Capital Sponsor Finance, a GE Capital group that makes loans to private equity-backed companies but doesn’t include the recreation finance division.

The list of businesses reportedly involved in the Sponsor Finance talks included Apollo Management, Ares Management and Mitsubishi UFJ Financial Group.

Regardless of how the deal turns out, Troutt said his dealership is always ready to re-negotiate loan terms, if needed.

“Whatever it happens to be, from a dealer perspective, sometimes these things are a good opportunity for us. … But we’re not just automatically going to renegotiate interest rates,” he said. “We keep up with this all the time.”

Combs agreed, noting that re-negotiating loans isn’t uncommon for some dealers, who may be enticed to leave a lender for a more competitive offer, but he’s not in a hurry to fix something that isn’t broken.

“There’s a lot of dealers that do, but we don’t because we’re relationship-based,” he said. “That’s not to say we couldn’t or wouldn’t. Other banks have approached us, but we’ve been with GE quite a while, so GE is our guy.”

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