William Stephenson Chairman, De Lage Landen Global Vendor Finance

MONITOR: Bill, could you please comment on the Global Vendor Finance (GVF) group as a significant component of the whole of De Lage Landen?

WILLIAM STEPHENSON: If you look at the GVF portfolio relative to the total portfolio of De Lage Landen International BV, we represent roughly two-thirds of the overall business. Numbers aside, I am particularly proud of the fact that GVF conducts business in all of the countries (35) in which De Lage Landen is focused and active.

MONITOR: In the recent press release announcing De Lage Landen’s financial performance for the first half of this year, Ronald Slaats (CEO) indicated, “We worked hard to increase the quality of our portfolio, which has now started to pay off: credit loss level is back at pre-crisis level.” Can you comment on GVF’s performance as it relates to this statement?

WS: It really boils down to some of the fundamental values, which guide our business strategy within GVF. First, we believe in partnership … long-term, sustainable and most importantly, mutually beneficial, engagement with all of the manufacturers, dealers and distributors that we support. We don’t just provide funding. We really seek to become an integral part of the vendor’s overall business and financial plans.

Secondly, we strongly believe in market segmentation and specialization. We have never tried to be “all things to all people.” Our focus in GVF is on a fixed number of defined segments, such as Office Technology, Construction & Industrial, Food & Agriculture, Healthcare and Clean Technologies. Over the years, we have sought to develop a high degree of expertise in these markets, acquiring a keen understanding of the distribution process, the sales process and the equipment itself.

These values are a significant part of the overall proposition we bring to our vendors, and they served us well during some of the darkest days of the downturn.

MONITOR: So these values guided and informed how GVF responded to the market downturn in 2009-2010?

WS: Absolutely. Let’s go back a couple of years when many lenders were suffering substantial credit losses, contending with liquidity challenges and in several cases, withdrawing from certain vendor relationships and/or entire market segments.

At the time, we recognized that if we truly believed in partnership then we needed to make every effort to stand by our vendors. We really tried to follow a course that didn’t change substantially, and I think our underwriting discipline during that time was both sustainable and prudent. Of course, we experienced losses, but we relied heavily upon that fact that we knew our vendors well and we had a significant level of expertise when it came to their equipment.

That approach paid off substantially, because if we had simply relied upon financial statement underwriting during the downturn, our credit approval rates would have dropped in half and we (like many others) would have been forced to contemplate exiting certain market segments. Rather, we expanded our reliance upon behavioral underwriting, looking deeper into elements like asset utilization and essential use, truly understanding whether a piece of equipment was mission critical to keeping an end-user and its business afloat.

MONITOR: In terms of looking at that behavioral aspect of underwriting, would you say that’s a unique approach to De Lage Landen or a fairly common practice?

WS: What I will tell you is that De Lage Landen is a sales and marketing, asset management company, not just a lender. I truly believe that is what differentiates us from a substantial portion of the market. When times were good, everyone had approval rates of 80% or higher. The past couple of years really shook things up and from a competitive perspective, separated the wheat from the chaff. You only need to look at the performance of certain companies to understand that.

I spend a good portion of my time with customers, and I can tell you I really derive great pride and satisfaction when one of our vendors acknowledges that we stood by its side during the darkest days of the downturn. Believe me, it was not always easy! Like everyone, we had many challenging moments, but we always returned to a mode of collaboration and problem solving with our customers.

There is a healthy recognition of this commitment to one another, and although uncertainty still exists in the economic environment, we are very bullish about the prospects for the future growth with our customers. You don’t need to look any further than De Lage Landen’s mid-year financial results to understand why we feel this way.

MONITOR: Could you comment on any significant changes that occurred within GVF in terms of geographic and/or industry segment perspectives?

WS: I won’t comment on any specific changes, but the obvious advantage of having a global footprint and specializing in the segments that GVF is in with sophisticated systems to support it is that you’re able to normalize growth and earnings rather well. We have a rather healthy distribution and spread of our business not only across our entire global network but also across our defined equipment segments. When certain markets are down or sub-optimal, other markets may be out-performing and compensate for that. Our diversification really provides an additional layer of resiliency to our business model and played a significant role in how we weathered the storm of recent years.

MONITOR: The news release also noted that performance was helped because of “higher prices for secondhand equipment.” Has De Lage Landen developed a new or different strategy to realize higher gains on residual realization? If yes, can you please elaborate?

WS: I think this further underscores our focus on the asset/equipment aspect of our business and honing a high degree of expertise in certain equipment markets and our technology to support it. Our efforts to understand the equipment we finance, to understand the application of the equipment in a normal business or production environment and finally to understand the secondary markets for that equipment, has played a significant role in differentiating De Lage Landen from many competitors. Further, as stated in the release, it played a contributing role to our financial performance.

MONITOR: When we spoke to Ronald earlier this year, he noted that De Lage Landen is currently doing business in 35 countries. As the new head of Global Vendor Finance, this must be a daunting task. Can you comment on some of the practical realities you face given the breadth and scope of your position?

WS: I can tell you this … while it is big, it’s manageable. What makes it manageable is the fact that we have a really strong management team, and they are further complemented by a great bunch of hard working and talented employees in each of our local country offices. The energy and passion our employees have not only for the business, but for De Lage Landen as a whole, are truly invigorating. I have been doing this for 25 years, but I still get a real charge out of visiting these offices and seeing how committed people are to our customers and our business.

Perhaps you saw that De Lage Landen is participating in the Clipper — Around the World Yacht Race? Earlier this year, we ran a contest that selected ten of our employees to join the sailing race crew for each leg of the around the world journey. The winners went through an arduous training and selection process in order to prepare for this event. At each port of call, our local offices are planning festivities for their employees and their locally based clients, plus making sure they properly welcome the incoming “DLL-sailor” and give a proper send off to the outbound “DLL-sailor.” It has been a really great program for connecting all of our employees around the world.

MONITOR: As a matter of curiosity, how much do you personally travel?

WS: My schedule has me out of the United States well over 50% of the time.

MONITOR: Then let’s talk about your outlook for the short term. What’s your take on recent developments in both Europe and the U.S. — specifically with regard to Italy and Spain being added to the list of countries in need of debt restructuring, and the substantially lowered GDP forecasts than previously predicted for the United States?

WS: You need to be prudent and disciplined in your approach to these markets, but you also need to view the glass as “half-full.” Amidst all the challenges that are customary in situations such as these, it is inevitable that opportunities will present themselves as well. I think while most companies look at the negatives in the downturns of certain countries and markets, we are mindful of these challenges, but also tend to look for the opportunities that may arise.

MONITOR: Is there anything you’d like our readers to know about with regard to what the future holds for De Lage Landen GVF?

WS: To use a nautical term, we are “staying the course.” We’re committed to our business plan, to our long-term strategy and we’re committed to our customers and to our markets. I think that our results validate this strategy is sound and is paying off for both us and our customers.