PROVIDENCE, R.I. – Textron Inc. plans to exit all of Textron Financial Corp.’s commercial finance business, other than that portion of the business supporting the financing of customer purchases of Textron-manufactured products, through a combination of orderly liquidation and selected sales, the company reported in a statement yesterday.
Approximately $3.5 billion of the liquidating receivables are now designated for sale or transfer, of which about $1.3 billion are securitized receivables managed by TFC and $2.2 billion are owned assets classified as held for sale, Textron stated.
Textron has roughly 10- to 15-percent market share in the marine floor plan financing market, estimated Ed Aaron, an analyst with RBC Capital Markets, in a statement today.
“Given the tight credit conditions and Textron’s reputation for taking lower quality deals, we expect this news to ultimately cause a number of dealer failures,” he wrote. How many, Aaron suggested, depends on how Textron exits.
“If Textron exits in an orderly fashion, as Key Bank is currently doing, the impact would be less significant. However, a faster, less orderly separation could further destabilize the retail channel,” Aaron stated.
Jacobs gives advice, shares Genmar’s plans to pursue financing
In response to Textron’s news, Genmar Chairman Irwin L. Jacobs issued a letter to the boat company’s dealers, advising them on their commitments to Textron, as well as GE, and emphasizing Genmar’s commitment to pursuing its own financing solution.
He suggested Textron “did everything they could to stay in the floor plan finance business,” blaming “tumultuous credit markets” and “difficult commercial paper markets” for their exit.
“… it is no secret that Textron and GE have been experiencing substantial losses through repossessions from many of the retail boat and other recreational vehicles’ dealers,” Jacobs added.
Over the next 90 days, Textron will work to help dealers and manufacturers fulfill their financial commitments to them, after which Textron has agreed to support dealers in continuing to finance the floor plan outstandings while dealers either sell their boats at retail and/or convert their Textron floor plan financing to another finance company, he stated in the letter.
“… do everything you can to help Textron exit the business by acting professionally and financially responsible and I’m sure Textron will do everything they can to help you through the transition of its exiting the recreational boat floor plan business,” Jacobs advised. “It is extremely important for everyone to do everything they possibly can to honor their commitments to Textron, particularly at a time when other people may be looking at Textron’s recreational boat floor plan business.”
At the same time, Jacobs urged Genmar dealers, “as well as every other non-Genmar boat dealer and manufacturer, to do everything they can to fulfill their financial commitments to GE.”
“I know for a fact that GE is also experiencing a very difficult environment in the recreational boat floor plan financing business,” he commented. “There’s no doubt in my mind: GE is not going to continue to support those dealers and boat manufacturers who aren’t fulfilling their financial commitments to them. I’m also aware that GE is doing everything it can to support and help those dealers and manufacturers who are having a very difficult time, but only if they continue to act professionally and not attempt to take advantage and/or work against GE’s financial interest.”
Jacobs also re-emphasized the commitment he made during the Industry Leaders Panel Discussion at last month’s Marine Dealer Conference in Las Vegas.
“Genmar is immediately going to attempt to come up with one or more floor plan financing alternatives for our dealers,” he said. “Obviously, it won’t be easy; however, I’m of the strong belief that the time has also come for dealers to try and look to their local bankers as an additional source for floor plan financing.”
Jacobs acknowledged the difficulty of the “short-term recreational boat business environment,” but predicted “there will be a very good and profitable future for those who are fortunate enough to make it through the present challenges” and reassured his dealers that Genmar would do “everything possible to support them through these most difficult times.”
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