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December 1, 2009updated 25 Jan 2022 10:58am

Bank-owned lessors in battle to win share of lucrative Microsoft Financing portfolio

Three major European bank-owned lessors are vying to win a share of the lucrative Microsoft Financing programme, it emerged late last month.

By Fred Carwaley

Uncertainty over future of DLL’s involvement in €500m programme

Three major European bank-owned lessors are vying to win a share of the lucrative Microsoft Financing programme, it emerged late last month.

BNP Paribas Lease Group (BPLG), Key Equipment Finance International (KEF) and SG Equipment Finance (SGEF) are understood to be in negotiations with the software giant to win the contract.

Meanwhile, there is uncertainty over the future of De Lage Landen’s (DLL) involvement in the vendor finance programme, which is believed to involve around €500 million of software lease agreements.

In July, DLL, which was unavailable to comment for this article, won a bid to replace CIT, which last month filed for Chapter 11 bankruptcy, as the funding provider for Microsoft’s products in Europe. However, it now appears that Microsoft either plans to use more funding partners, or switch from DLL to another provider.

Sources close to the deal said BNP Paribas Group has become the frontrunner in the bid to win the contract.

Nigel Jenkins, managing director of Microsoft Financing EMEA, said no long-term partnership had been agreed.

“We are yet to contract with any organisation, and should this occur, we will be making any announcements through our PR team,” he said.

This is not the first instance that DLL has taken over CIT’s portfolio. At the start of this year, when CIT pulled out of the UK health care market, DLL stepped in to buy its leasing portfolio – incorporating all of CIT’s operating leases with the NHS – for €18.5 million.

Earlier this year, DLL also acquired CIT’s Lansing Linde materials handling programme. CIT had previously acquired this vendor finance agreement, along with several others, from Barclays in 2006.

Several members of DLL’s UK materials handling division, including some connected to the Lansing Linde vendor agreement, are understood to have been made redundant in recent weeks. They include Louise Hanlon, who was based in the West Midlands, and Mike Dunn, who operated from Northampton.

Commenting on the reasons for the redundancies, a source said: “It was not working out from a costs perspective as they were not seeing enough volume coming through.”

DLL has transferred some of its own internal sales staff to manage the Lansing Linde programme, it is believed. The ones made redundant joined DLL when it acquired the Linde programme from CIT.

It is understood that DLL has been playing a major part in Microsoft’s contingency plans, as it now looks after the financing programme internationally.

At the end of November, DLL was responsible for Microsoft Financing in Australia, Belgium, Canada, France, Germany, Italy, the Netherlands, New Zealand, Spain, Switzerland, the United Kingdom and the United States.

In July, a spokesperson for Microsoft said: “We will ensure any credit-approved customer financing commitments are honoured… Microsoft Financing has contingency plans in place to protect our customers’ and partners’ needs.”

Sources have said that CIT’s flagship vendor agreement with Dell remains stable. Although the Dell relationship still has challenges to meet in terms of cost of funds, it is still writing healthy business volumes and offering staff good bonuses. Whether this was likely to continue in 2010 was a different matter, however, the sources added.

CIT’s relationship with Belgian imaging technology manufacturer Agfa-Gevaert is also still running. Agfa Financial Solutions confirmed finance was still available through CIT, and it would continue to work with CIT “for the moment”.

The industrial sector has been a more difficult for CIT, however, with international tool manufacturer Snap-On exercising its right to buy CIT’s stake in its financial services joint venture during the second quarter of 2009.

Sources said CIT is seeking to exit Chapter 11 by the end of the year, and is using this to keep its ties with its key vendor partners.

One well placed source commented: “CIT could be out of Chapter 11 by the end of the year and is trying to raises funds and secure lines so they can achieve this. CIT has very good political ties with the senior guys at all the vendor programmes they have at the moment. These vendors are giving them leeway to sort this out.”

IT-related financing capability represents 3.9 percent of BPLG’s financing portfolio, while it is believed to represent a much bigger part of SGEF’s business. However, once Fortis Lease Group and BPLG become fully integrated, vendor finance will represent around two-thirds of total business, making it well positioned to handle a client the size of Microsoft Financing.

BPLG in the UK has a particularly strong office and IT equipment finance division. Based in Bristol with 60 staff, the IT division is managed by Mike Camm, who reports to management of the leasing company in Paris. Camm is said to have regular meetings with the lessor’s UK country manager, Benoit Tilly, who is responsible for all business lines for the lessor except IT.

Meanwhile, BPLG is said to be keen not to lose headcount and to retain the strength of its business lines as much as possible during its integration with Fortis Lease Group, which is due to be completed in 2010.

One source said: “Across Europe, they are trying to make sure they get rid of as few a number of people as possible, and where possible are realigning staff in new jobs.”

A KEF spokesperson said: “Key Equipment Finance does not want to comment on any relationships with any existing or non-existing clients.”

UPDATE (01/12/09): Following publication, Microsoft Financing has provided Leasing Life with a statement denying that BNP Paribas Lease Group has become the front runner in the bid to win the contract, or that DLL had won a bid to replace CIT last summer. 

“In August, Microsoft announced it was working with De Lage Landen, among other vendors, after it ended the relationship with CIT,” the statement said.

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