ECN Capital Corp. - ECN Capital Corp. STRATEGIC OVERVIEW. 4 ECN Capital’s Strategic

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Transcript of ECN Capital Corp. - ECN Capital Corp. STRATEGIC OVERVIEW. 4 ECN Capital’s Strategic

  • 1 ecncapitalcorp.com

    ECN Capital Corp. Geared for Growth

    August 2, 2016

  • 2 ecncapitalcorp.com

    1. Strategic Overview

    • Market Dynamics

    • Market Response

    • ECN Capital Fund Structure

    2. Separation Update

    3. IAC Acquisition Update

    Agenda

  • 3 ecncapitalcorp.com

    ECN Capital Corp. S T R AT E G I C O V E R V I E W

  • 4 ecncapitalcorp.com

    ECN Capital’s Strategic Positioning

    ECN Capital is: 1. An investment grade equipment lessor and lender, 2. Adding asset management to an already proven asset

    origination/ownership platform, 3. Driven by the yield and duration needs of institutional

    investors (lifecos, pension plans) seeking high quality fixed income investments.

  • 5 ecncapitalcorp.com

    A Disrupted Market = Opportunity

    “The largest U.S. banks are constrained by post-2008 rules that make it tougher for them to extend loans.”

    Bloomberg July 28, 2016

    “Insurers are now responsible for 11.6 percent of the loans in the global private debt market.”

    Bloomberg July 28, 2016

    “TIAA, led by Roger Ferguson, is the world’s largest investor in private debt” Bloomberg

    July 28, 2016

    “Allstate Corp., the largest publicly traded U.S. home and auto insurer, helped form a freight rail-car leasing company as Chief Executive Officer Tom Wilson expands his bets on hard assets to generate better returns than bonds.”

    Bloomberg March, 2016

    “CPPIB expands its debt business in $12B deal to buy Antares lending unit of GE Capital”

    Bloomberg July 28, 2016

  • 6 ecncapitalcorp.com

    A Disrupted Market = Opportunity

    “Investors who poured $22 billion into funds called “nontraded business development companies” are now pulling out record sums as the value of those investments flags, according to a review of public filings done for The Wall Street Journal.”

    Wall Street Journal, March 19, 2016

    “With the opening of trading in Goldman Sachs BDC Inc., New York-based Goldman joins Credit Suisse Group AG and others in having created tax-advantaged, specialty lenders called “business development companies” that enable the firms to lend to one of the fastest-growing segments of the U.S. market—small companies with no credit ratings.”

    Wall Street Journal, March 18, 2016

    http://quotes.wsj.com/CS

  • 7 ecncapitalcorp.com

    Institutional Investors’ Current Yield Environment

    Source: Bloomberg, SNL, Factset, Macquarie Capital (USA) (Lessors/Specialty Finance & Life Insurance, May 2016)

    4.57%

    2.27%

    1.50%

    2.00%

    2.50%

    3.00%

    3.50%

    4.00%

    4.50%

    5.00% 5.90%

    5.14%

    5.45%

    4.77% 4.57%

    4.92%

    4.50%

    5.00%

    5.50%

    6.00%

    Average US Life Insurer Net Yield on Invested AssetsUS Treasury Yield (10yr)

    Government Bonds Corporate Bonds

    4.1%

    15.3%

    -5.1%

    2.3%

    -0.8%

    14.5%

    -6.5%

    12.0%

    1.3%

    -4.5% -2.6%

    -10.0%

    -5.0%

    0.0%

    5.0%

    10.0%

    15.0%

    20.0%

    To ta

    l R et

    u rn

    JP Morgan Global Government Bond Index Barclays U.S. Intermediate Credit Bond Index

    0.2%

    10.1%

    1.4%

    -2.8%

    15.9%

    8.1%

    -0.2%

    0.9%

    -5.0%

    0.0%

    5.0%

    10.0%

    15.0%

    20.0%

    To ta

    l R et

    u rn

  • 8 ecncapitalcorp.com

    A Problem/Opportunity that is Getting Bigger

    Source: PWC (Alternative Asset Management 2020), PWC analysis

    ● Global Sovereign Wealth Funds are projected to reach US$8.9 trillion by 2020

    ● SWFs increasingly favor infrastructure investments to meet their economic and capital maximization objectives

    ● Alternatives are expected to account for 29% of sovereign investor portfolios by 2020

    ● Total pension fund assets globally are projected to reach US$56.5 trillion by 2020

    ● North American sponsors comprise of more than 50% of global pension fund assets

    $1.4

    $3.3

    $5.2

    $8.9

    $0.0

    $2.5

    $5.0

    $7.5

    $10.0

    $12.5

    2004 2007 2012 2020

    U SD

    T ri

    lli o

    n

    $21.3

    $29.4 $34.0

    $56.5

    $0.0

    $10.0

    $20.0

    $30.0

    $40.0

    $50.0

    $60.0

    $70.0

    $80.0

    2004 2007 2012 2020

    U SD

    T ri

    lli o

    n

    Sovereign Wealth Fund AssetsPension Funds Assets

    11.3% Growth

    2.9% Growth

    6.6% Growth

    33.1% Growth

    9.5% Growth

    6.9% Growth

  • 9 ecncapitalcorp.com

    Market is moving to tailor made investment products Institutional investors are increasing allocations to alternative asset classes and are seeking direct co-investment opportunities

    Evolving Market

    Conditions

    ECN Capital Opportunity

    ● Uniquely positioned to provide investors with specialist-funds and co-investment opportunities

    — Using proprietary origination channels and structuring capabilities

    ● Offering exposure to asset classes uncorrelated to traditional markets

    — Predicable asset-based cash flows over medium to long-term durations

    — Embedded security features

    — Broad diversification benefits

    ● Institutional investors have an ongoing need to deploy capital

    — Life insurance companies, pension funds, sovereign wealth funds tasked with increasing AUMs

    ● Traditional fixed income investments no longer provide sufficient returns to meet their requirements

    — Declining yields and inconsistent total returns

    ● Resulting in higher allocations to alternative investments

    — Initial focus on infrastructure and real estate has expanded into other long lived capital assets

    — Growing interest in the transportation sector

  • 10 ecncapitalcorp.com

    Institutional Relationships

    Asset Managers and Pension Funds Insurance Companies

  • 11 ecncapitalcorp.com

    Equipment Lease Funds Private Debt Funds

    ECN Capital Fund Structure

    ECN Capital Funds

    Commercial Aviation Funds

    Commercial Rail Funds

    Vendor Finance Funds

    New Debt Fund Offerings

    1 2 3 4

     2015: $2.2B

     2016: $2.0B

     Total: $4.2B

     2017: $0.5 - $1.0B  2017: $2.2B

     Long useful life

     Broad and global user- base

     Material shift from owned to leased assets

     Long useful life

     Broad North American asset base

     Minimal risk of technological obsolescence

     Provides shorter duration opportunities

     Achieves higher risk-adjusted returns through participation in large broad diversified portfolios

  • 12 ecncapitalcorp.com

    Demand For Equipment Funds Strong appetite for customized investment funds and a desire to build strategic relationships with specialist asset managers

    • North American based funds are increasingly seeking strategic relationships with specialist managers

    — Numerous asset managers are investing in specific pooled-aircraft portfolios with debt financing executed in the capital markets (e.g. ECAF I, Shenton Aircraft 2015-1, Diamond Head Aviation 2015-1, RISE Ltd. 2014-1)

    — Ontario Teachers’ Pension Plan formed a joint venture with Aircastle Limited to invest in leased aircraft

    — A number of insurance companies and institutional investors invested in Blackbird, an aircraft leasing co-investment vehicle with Air Lease Corporation

    — PSP Investments partnered with ATL Partners, a private equity fund, to form an aircraft lessor, SKY Leasing

    — A number of leading U.S. insurance companies teamed up with Trinity Industries and Napier Park, an alternative asset manager, to form a railcar leasing fund vehicle

    — Allstate Corp. teamed up with two Chicago-based private equity funds to form Riverside Rail, a railcar leasing platform

    • Strong investor demand for commercial aircraft exposure has prompted international institutions to establish customized aircraft leasing funds

    — Hong Kong billionaire Li Ka-Shing’s Cheung Kong Holdings Ltd acquired a portfolio of commercial aircraft from GECAS

    — Sumitomo Mitsui Trust Bank and Novus Aviation Capital launched Ortus Aircraft Leasing Fund

    — Chow Tai Fook Enterprises formed a joint venture with Aviation Capital Group

    — Quantum Investment Bank and Palma Capital launched a shariah-compliant aircraft leasing fund together with Airbus

    Source: Element research

  • 13 ecncapitalcorp.com

    Case Study

    ECAF I

    ● Proven asset origination capabilities

    — Well-established relationships with lessors and OEMs

    — “First-call” level connectivity with founders and CEOs

    ● Asset expertise

    ● Market leading experience in structured capital origination

    ● Award-winning team

    Element, together with a syndicate of institutional co-investors, executed ECAF I in June 2015

    Element Institutional Co-Investors

    ● Co-invest alongside an industry