Leveraging Your Sales Model with Finance Partnerships

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  • Good afternoon, I’m Mark Stevens, COO for Municipal Services Group. First of all, I’d like to thank Stephe Ybarro for inviting me to meet your organization and sharing our experience with leveraging resources through strategic business relationships.
  • We are a privately-held financial services firm, serving our U.S. customers through our Denver, Colorado main office in and regional offices. We utilize technology to a greater extent than other firms that are several times our size, and leverage our personnel through innovative and integrated technology systems.
  • Working with manufacturers we’ve seen 3 key problems: 1) need to accelerate the decision making process; 2) in a competitive environment the challenge is to provide greater value that is definable; and lastly; how can you sell into an account to capture it over the longterm
  • Municipal leasing is the most traditional of these tools. These transactions can also be enhanced using a grant anticipation mechanism. A GAN may be formally structured with a Full Funding Grant Agreement (FFGA) or informally with a pledge of your anticipated grant revenues. Toll credits may also be available to supplement or completely provide the local match. These are financing tools that have been approved by the FTA.
  • The result of the lease decision is shown in this chart. If customer chooses to buy CNG buses four at a time, the blue area represents its outflow for that purpose. The cost of the buses increases about 3 percent per year, from $300,000 in 2006 to over $337,000 in 2010. That little purple area on top is what remains to handle other capital expenditures. Compare that, to scale, with the red line. Under the lease scenario, lease payments are a flat $671,000 per year for twelve years. That leaves between $580,000 and $763,000 to handle other capital needs – a much more comfortable position.
  • A significant projected fuel consumption savings will be realized through the Accelerated Acquisition Plan. The operational savings is based on MST fuel consumption data, comparing the fuel consumption of the older and new buses in the fleet.
  • The real cost of the traditional acquisition includes the extraordinary maintenance costs that will be realized if the older coaches are not replaced with a modern more efficient fleet. The Accelerated plan provides Financial Savings + Fleet Rotation Optimization Savings by eliminating extraordinary maintenance costs and CARB (California Air Resources Board) rehabilitation costs.
  • The total acquisition cost of the traditional acquisition plan includes the inflationary cost increases of acquiring the coaches over a seven year period. The difference is $928,890, enough to replace about 3 buses.
  • By accelerating its fleet acquisition, Monterey was able to save about $1.4 million dollars that would have otherwise been eaten up by operating old and worn out equipment and use those funds for buying new buses.
  • To summarize we’ll run down the remainder of the list of what we provide as part of a public-private partnership with our transit agency customers.
  • As we’re preparing to transition to the interactive part of this session, when you get a chance to ask questions, let’s quickly summarize some key points of the core of a public private partnership at work.
  • We have the depth of experience and the flexibility to put together transactions for 1 or 2 buses or 2 or 3 hundred buses and everything in between to meet a transit agency’s capital investment needs.
  • internal underwriting includes creating a transaction structure and documentation to form a customized solution for a transit agency’s circumstances and current market realities. Finance firms will also handle outside rating agency and bond insurance requirements.
  • Municipal Services Group has the expertise to assist transit agencies in preparing for their financial future. You can find out more about this program and learn how it can benefit your constituents by contacting me.
  • Leveraging Your Sales Model with Finance Partnerships

    1. 1. Leveraging Your Sales Model with Finance Partnerships Presented by Mark Stevens Municipal Services Group
    2. 2. To Receive this Presentation: <ul><li>[email_address] </li></ul>
    3. 3. Who Are We? <ul><li>A boutique investment banking firm </li></ul><ul><ul><li>Specializing in Municipal Finance for 18 years </li></ul></ul><ul><li>Over 3100 municipal customers </li></ul><ul><li>$172 MM in recent transportation financings </li></ul><ul><li>Offices in Denver, Charlotte, Los Angeles and Seattle </li></ul>
    4. 4. The Problem for Manufacturers <ul><li>Accelerate the decision making process </li></ul><ul><li>Provide greater value to prospects </li></ul><ul><li>Control the transaction </li></ul>
    5. 5. Who Can Benefit from Tax Credits? <ul><li>Manufacturers probably have too much debt </li></ul><ul><ul><li>Can’t use tax credit </li></ul></ul><ul><li>Investors can benefit with pass through using </li></ul><ul><li>Certificates of Participation </li></ul><ul><ul><li>Lease divided into shares or Certificated Leases </li></ul></ul><ul><ul><li>Pass Through Tax Credit to Investor </li></ul></ul><ul><ul><li>Subject to final IRS rules </li></ul></ul>
    6. 6. Accelerate Decision Making Process <ul><li>Financial models that detail: </li></ul><ul><ul><li>Fuel Expense Model </li></ul></ul><ul><ul><li>Maintenance Expense Model </li></ul></ul><ul><ul><li>Equipment Pricing Model </li></ul></ul><ul><li>AAA – Accelerated Acquisition Analysis </li></ul>
    7. 7. Buy Now, Not Later: Example <ul><li>Buying 4 CNGs under traditional model subject to inflationary pressure leave little for capital expenditures </li></ul><ul><li>Leasing model – lease pymt $671K for 12 years fixed </li></ul><ul><ul><li>Leaves $580K 0- $760K to handle capital needs </li></ul></ul>
    8. 8. Fuel Expense Model
    9. 9. Maintenance Expense Model
    10. 10. Equipment Pricing Model Traditional acquisition cost vs. Accelerated = $929,000 in savings
    11. 11. Acquisition Model Example: Monterrey Salinas Transit
    12. 12. What Should You Expect from a Financial Partner <ul><li>Asset acquisition management </li></ul><ul><li>Underwriting management </li></ul><ul><li>Regulatory agency coordination </li></ul><ul><li>Multi-year procurement plans – with indexed pricing </li></ul><ul><li>Service (throughout the term) </li></ul>
    13. 13. Key Points of a Public-Private Partnership <ul><li>Capital investment assessment </li></ul><ul><li>Analyze funding options </li></ul><ul><li>Design acquisition model </li></ul><ul><ul><li>Asset cost factors </li></ul></ul><ul><ul><li>Asset revenue generation factors </li></ul></ul><ul><ul><li>Asset efficiency savings factors </li></ul></ul><ul><ul><li>Asset useful life factors </li></ul></ul><ul><ul><li>Asset debt service factors </li></ul></ul>
    14. 14. Sample List of Properties
    15. 15. Underwriting Management <ul><li>Internal Underwriting includes: </li></ul><ul><ul><li>Developing financing structure and documentation </li></ul></ul><ul><ul><li>Working with outside rating agenices </li></ul></ul><ul><ul><li>Handling all bond insurance requirements </li></ul></ul>
    16. 16. Value in Vendor – Finance Partnerships <ul><li>Private Label Programs </li></ul><ul><li>Building turn-key finance program for manufacturer </li></ul><ul><li>Platform including: </li></ul><ul><ul><li>Finance </li></ul></ul><ul><ul><li>Marketing </li></ul></ul><ul><ul><li>Technology </li></ul></ul>
    17. 17. Private Label Platform <ul><li>Branded Finance program </li></ul><ul><li>Joint customer list sharing – 3000 municipalities under our Master Lease </li></ul><ul><li>Co-Op Marketing Programs for direct marketing both online and offline </li></ul><ul><li>Technology initiatives – building online tools for marketing automation, online financial modeling </li></ul>
    18. 18. Real World Examples <ul><li>List Sharing: Leveraging Master Lease </li></ul><ul><ul><li>Midwest Manufacturer </li></ul></ul><ul><ul><li>Co-Op marketing program to prospects </li></ul></ul><ul><ul><li>$12 million in volume in 1 st 4 months </li></ul></ul><ul><li>Technology + Finance: Online </li></ul><ul><ul><li>Engineering firm: 100+ years in business </li></ul></ul><ul><ul><li>private intranet launch to 40 locations </li></ul></ul><ul><ul><li>$63 Million in quoted activity within 1 st 7 weeks </li></ul></ul><ul><li>Direct Marketing + Finance </li></ul>
    19. 19. For More Info and an Online Demo <ul><li>Mark Stevens </li></ul><ul><li>Neville McGilchrist </li></ul><ul><li>Judy Dennis </li></ul><ul><li>[email_address] </li></ul><ul><li>www.MuniBank.com </li></ul><ul><li>(800) 530-3100 </li></ul>

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