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Insider Q&A: Tom Pagano – Capital Markets Leader, EverBank Commercial Finance

Tom Pagano brings 25 years of experience in structuring credit-based deals in healthcare, tax exempt, and energy lease transactions to EverBank Commercial Finance. Read on for his insider perspective on the economy and trends in the equipment leasing marketplace.

How did you get your start in this industry? 

I began my career in this industry as a credit analyst in 1984 at Commercial Funding in New York City. I moved into syndications in 1986 and have been selling deals ever since. From there, I went to a company called Charter Financial, Inc., where I became involved in selling healthcare transactions. After Charter Financial, I moved to Morcroft Capital Corporation in 1991, an independent leasing company that specialized in healthcare leasing and financing, where I worked for 18 years with four different owners. I helped build up the company from $10 to $150 million in annual equipment financing volume over my first seven years there. The company was then sold to Sanwa Business Credit in 1998. A year later, Sanwa was acquired by Fleet Bank, and in 2004, Bank of America acquired Fleet. I joined EverBank Commercial Finance in 2011 to head up their Capital Markets Group. There, I have oversight of all capital markets activity within the company’s equipment leasing business, including the secondary lease market to both buy and sell lease transactions. We successfully launched a syndications desk in 2011 and have been active in the market both buying and selling lease transactions.

What is the most rewarding part of your job?

I really enjoy getting involved in the deals early so we can price and structure them to enable the lessee and our vendor to get the most appropriate financing in place. As a syndicator, my primary purpose is to structure deals that are liquid and can be sold in the secondary market at par or better. The primary reasons for syndicating deals are to manage credit exposure levels, generate fee income and sell off deals that don’t meet our company’s Risk Assessment Criteria (RAC).

In what ways do you see the economy recovering? In what ways is it still a challenging environment to do business?

It is going to be difficult for the economy to improve at a faster rate than we’re currently experiencing until more jobs return to the U.S. We cannot continue to fully rely on overseas manufacturing for the majority of our goods and services, and the high corporate tax rate has not helped domestic job creation. Given the current economic indications, including the rate of unemployment, weak housing market and high oil prices, the economy will continue to struggle to recover in the near term.

Furthermore, the upcoming presidential election in November is causing uncertainty over government policy. Business investment has slowed and will continue to be slow until after the election. Businesses cannot make long-term investment decisions when the governmental policies and regulations are changing so quickly. In addition, Europe’s sovereign debt problems and the slowdown in emerging markets have caused uncertainty, which also slows down our economic growth.

Hospitals and other health care providers are holding off acquiring major pieces of equipment until after the election to see what the healthcare landscape will be like if Governor Romney is elected.

However, through this economic downturn, syndications and lease and portfolio acquisitions became attractive options for many companies. Through the capital markets, banks were able to manage their risk and capital requirements by selling transactions and increase profitability by generating fee income.

Where do you see the trends in funding and capital-raising this year?

I see two challenges in funding this year. The biggest funding challenge today is getting financing for the tougher credits. As the banks have tightened their credit standards and are more tightly regulated by the government, it is more difficult for B rated companies and below to access capital. There remains a void in the industry for players who are funding the B- and C rated credits. I think once the banks’ portfolios stabilize – and we are already seeing that – institutions will be more comfortable taking on more risk and will migrate to the lower rated credits. 

The second challenge facing banks is the continued margin compression as a result of this flight to quality. With banks chasing the investment grade credits, margins are at levels where it is difficult to meet return-on-investment hurdles. This margin compression is not sustainable, so the banks will be forced to move down market to get better spreads.

Where do you see funding headed in the next 10 years?


I see the securitization market slowly coming back. With all the ramped-up growth and investment we will see as the economy recovers, banks will not have enough capital to fund all this growth on their own balance sheets, so the capital markets will again be a significant resource for funding.

Do you have any other insights you’d like to offer on the industry? 

I think the industry will enjoy steady growth over the next ten years as the economy recovers. The equipment leasing and financing industry is a resilient one, and we have survived the downturn of the great recession. The Equipment Leasing and Finance Foundation reported that the July 2012 Monthly Confidence Index for the equipment finance industry rose after declining the previous two months. Overall, confidence in the equipment finance market was 51.5%, up from the June index of 48.5%. The index indicates an upturn in optimism about business activity despite continuing concern over external economic factors and regulatory and political uncertainty. We are now in a great position to reap the benefits as businesses look to invest again in their infrastructure, resources and equipment. As we experience recovery, I think companies will look more to syndications and lease and portfolio acquisitions as a way to grow while still managing their risk exposure.

If you’d like to recommend someone for an Insider Q&A e-mail the editor at abigailsutton@worldleasingnews.com.