Addition by Unification: Walters Leads EverBank’s Combined Venture
by Phil Neuffer July/August 2016
When EverBank launched its capital equipment finance group in 2014, it asked Ken Walters to come in and help lead it. Fast forward to today, and Walters is once again taking on a leadership role for a new group, which combines the structured equipment finance and ABL arms of EverBank. He shares the rationale behind the combination, how the new group is fairing in the early going and why it’s focused on taking a generalist approach to the market.
When business hours ended on June 30, EverBank’s capital equipment finance group closed its doors, never to be the same. When those same doors opened on July 1, the capital equipment finance unit had combined with EverBank’s ABL arm to create EverBank Business Capital, a business serving the asset-based lending and equipment finance needs of its customers. Ken Walters, managing director and group leader of the capital equipment finance team, was charged with the additional responsibility of managing the ABL business. The reasoning behind the combination stemmed from an extension of EverBank’s go-to-market strategy when it launched an ABL platform last year.
“One of the reasons the bank first pursued an ABL platform was the synergies they thought it would bring with the group I was running, the capital equipment finance group and our real estate business,” Walters says. “In order to provide and deliver the best product to our customers, management decided that actually combining the units under one leader would accelerate the synergy that they always anticipated getting from bringing the ABL platform on board.”
Though EverBank Business Capital did not officially launch until July, it had already been active in the months preceding its launch. According to Walters, the primary focus has been getting the teams together, building chemistry and deciding on and beginning to implement strategies to attack the market.
“That group has been meeting periodically both in person and via conference call to really determine our market strategy; we’re looking to better define the credit box to serve middle market companies,” Walters says. “We’re in the process of getting ready to launch a new ABL stretch product, which we think will really help give us some differentiation in the marketplace and make us more competitive, and we’re also exploring synergies between the two units both on the credit and operational side of the businesses.”
Walters exudes excitement when discussing the expanded team he will be working with, crediting the combined experience of the many members as a major reason he anticipates nothing but success.
“The thing I’ve been most excited about is the chemistry I’ve seen between the two teams. A lot of folks know each other already, some have worked together in the past,” Walters says. “What I find is they’re both experienced teams with really dedicated people, and they just want to have a product that they can sell successfully in the marketplace.”
Though he will now be serving two markets he calls extremely competitive, Walters is confident that the advantages the combined group can bring to customers will keep it at the top of the heap.
“I think our key strength is the quality of our team,” Walters says. “I think the other key is we’re really looking to be a niche player focused on that B- and BB- equivalent credit segment of the marketplace. It’s an area where you really have to roll up your sleeves and understand the story on the credit and then make sure you’re protected with collateral and structure to withstand any problems.”
The Road to EverBank
Walters has not always been in the equipment leasing side of the financing world, and that may be the reason he is the perfect person to run this new unit. During a career that has spanned a few decades, he’s worked in internal auditing, project finance, pricing and structuring and private equity.
He got his start in the internal audit group at CIT after graduating from Rutgers. Walters says that this was a great place to start his career, as it got him working with different operating units while getting a feel for the business as a whole. He then worked in the pricing and structuring group of the equipment and project finance group for CIT, quickly becoming known as a tax-lease pricing expert. That reputation helped him eventually lead the pricing group before running a large equipment finance shop and capital markets group for CIT.
In 1997 Walters was offered a chance to break away from CIT when a colleague left to help start an equipment group from scratch at Emigrant Bank. Walters didn’t jump then, but Emigrant would reenter the story down the road.
At the time, the main reason he decided to stay with CIT was an opportunity to run the company’s private equity investment group. He would work in that capacity for seven years, which was a pivotal time in his career that Walters believes truly enabled him to head a business that provides both ABL and equipment finance.
“I had a little bit of the stint outside of equipment finance in the private equity world, but that was a great learning experience for me, and it gives me a good background on the ABL front to help with this new endeavor,” Walters says.
Following CIT’s acquisition by Tyco and Tyco CEO Dennis Kozlowski’s criminal conviction, Walters finally made the move to Emigrant. However, it would still be a few more years before he would return to equipment finance. In fall 2004 Howard Milstein, the chairman of Emigrant, hired Walters to run Emigrant Capital, the company’s private equity group.
It was not until 2011 that Walter’s career path finally intersected with the equipment finance industry once again as he was asked to help restart Emigrant Business Credit.
“That group had gone into run off in 2009 when the bank was looking to downsize during the recession, but by 2011 they realized it was the only group in the bank that hadn’t lost any money,” Walters says.
Walters teamed up with Chief Credit Officer Sondra Rowland to get the business going once again. He joined forces with Roland again when the two moved to EverBank to launch the capital equipment finance group two years ago.
Generalists by Nature
The group started off with a small team when it launched in mid-2014. Walters says that wasn’t an accident.
“We started out with a small team kind of purposefully, with the idea being that we would build a big enough portfolio on our own to get to scale,” Walters says. “Then we would build out the team and really never try to be a drag on the profitability of the bank, and we’ve been able to accomplish that. In the first six months, we did over $50 million in business.”
After making a strong start constructing the portfolio, Walters says he turned to a new goal: bringing in new people.
“Once we had some assets on the books, we focused on building out the teams. What I’m most proud of is we’ve built a great team with great experienced people with character and great chemistry,” Walters says. “We’ve built the portfolio to over $250 million on the equipment side, and we’re on track to do $300 million of new equipment business this year alone, so that’s just on the equipment side.”
In the last year, EverBank brought in Tim King and Andy Phelps to strengthen its healthcare coverage, also hiring Michael Fuoti and Ernie Meland to expand its equipment finance team. The healthcare market is one of the few specialty areas for EverBank, which prefers to approach the market from a more generalist perspective.
“We are generalists by nature. We are looking to hire folks that can call on all industries in the middle market space,” Walters says. “I really don’t want to carve up the market from our generalists too dramatically, so we’re looking to only have specialists in the areas we really think are critical.”
Keeping to that generalist principle will be key as Walters continues to focus on building out the direct sales force of the combined group.
“We’re looking to recruit experienced account officers who can sell all of our products — ABL revolvers, ABL term loans, our new ABL stretch product, equipment term loans and leases,” Walters says. “The idea is to get experienced guys that can actually provide solutions to our customers, helping them really solve problems on the entire right side of their balance sheet.”
As he continues to build the team, Walters anticipates a fertile environment for both sides of the business.
“We’re approaching the market cautiously, and we think it’s at the back end of the credit cycle,” Walters says. “I believe that the way we approach business as a collateral lender, it will really benefit our businesses, and we’ll be able to get better rates and structures as other banks and finance companies may back up a little bit. I think that’s the best time to be in the marketplace. When there’s a little softness.”