Economic Data Indicate Strength

A rise in productivity showed companies continue to keep costs controlled and offered hope for jobs growth, while disparate U.S. economic reports noted continued growth in the service and manufacturing sectors.

Productivity increased while labor costs fell for the second consecutive quarter at the end of 2010, though many economists expect that a stronger economy means that businesses won't be able to keep squeezing more output from the same workers.

"There is a good chance that productivity will slow further this year, as firms are increasingly forced to hire more workers to expand output," said Paul Ashworth, chief U.S. economist at Capital Economics.

Nonfarm business productivity rose at a 2.6% annual rate in the October to December period after rising by a revised 2.4% in the third quarter, the Labor Department said Thursday. For the full year, productivity was up 3.6% in 2010 and 3.5% in 2009.

http://online.wsj.com/article/SB10001424052748703652104576121843066398666.html?mod=WSJ_economy_LeftTopHighlights

Credit Markets: The Default Deluge

This year will see a record volume of default in corporate debt, in line with expectations, as the U.S. continues to be the epicenter of economic and credit-market weakness

From Standard & Poor's RatingsDirect

http://www.businessweek.com/investor/content/sep2009/pi20090921_877700.htm

Following the end of the summer, the final stretch of 2009 offers a good opportunity to take stock of the events that roiled the economy this year and assess the tone of the financial markets for the rest of the year.
Buoyed by an encouraging stream of positive economic data, sentiment in the financial markets has been relatively upbeat. Much of the recovery has stemmed from the monetary and fiscal stimulus the government pumped into the financial system in copious amounts to revitalize critical pipelines of money and credit.
However, this year will see a record volume of default in corporate debt, in line with expectations. In the first eight months of 2009 a total of 216 corporate issuers defaulted (both nonfinancials and financials), affecting rated debt worth $523 billion. If this pace continues, the global default tally will reach 324 in 2009, the highest annual total in 28 years—since the inception of our data series on defaults. The volume of debt affected by these defaults also soared to a record high.
Other key takeaways from the year thus far:
• The U.S. is the epicenter of economic and credit-market weakness. At the beginning of the year our 12-month forward baseline prediction for the U.S. speculative-grade default rate was 13.9% by yearend, with an upper bound of 18.5% and a lower bound of 10.0%. The default rate hit 10.4% in the 12 months ended in August 2009, giving us reason to believe it is headed toward our predicted range by the end of the year. Corporate default incidence (by count) within the population or rated companies has been highest in the U.S., which blazed ahead with 158 defaults in 2009 (through Sept. 16). Of the remainder, the EU recorded 15, the other developed markets (mainly Canada) 12, and the emerging markets 31.
• Consumer discretionary sectors lead the global default count, though industrials and housing-related sectors also are reporting numerous casualties. Companies in leisure/media are in the lead globally (mainly because of the U.S.), with 53 defaults in 2009 (through Aug. 31). Next in line is the aerospace/auto/capital goods/metals category (35 defaults), followed by forest products and building materials (26 defaults), and consumer/service (24 defaults). When factoring in only speculative-grade ratings, homebuilders and forest products led with a global default rate of 18% for the trailing 12 months ended in August.
• Defaults continue to emerge from the lowest rungs of the ratings ladder. This is true not only in a single year but also on a cumulative basis. More than four-fifths (86%, or 187 entities) of this year's defaults year-to-date emerged from the speculative-grade domain, with an initial rating of BB+ or lower.
• Companies with an original rating of B face maximum default risk exposure. Among this year's defaulters, entities with an initial rating in the B rating category (which includes B+, B, and B-) accounted for the largest number of defaults, at 122. Next in line were entities with an initial rating in the BB rating category, with 54. Companies with a first rating of CCC+ or lower accounted for 11 of this year's total default count.
• An avalanche of low-rated rating originations during the credit boom indicates that considerable default risk still resides in the pipeline. For example, a total of 1,340 new speculative-grade ratings were originated globally from 2006 through the first half of 2009, of which only 100 have defaulted. This indicates a survival rate of 92.5%, which is expected to erode over time as more casualties occur and more issuers age. It is difficult to pinpoint the exact timing for such casualties because forbearance measures can delay the day of reckoning, particularly as financing conditions ease.
• The flow of distressed-debt exchanges has accelerated substantially and likely will reach an all-time high in 2009. Plummeting liquidity and deteriorating fundamentals set in motion a flurry of corporate distressed exchanges. In part, the increase reflected a pragmatic reaction to the shortage of financing options in the throes of the financial crisis. Of this year's 216 defaults, 81 were defined as distressed exchanges, by far the single leading default trigger across both developed and emerging markets. With $71.0 billion in rated debt, Ford Motor (F) was the largest issuer (by par volume) so far in 2009 to implement a distressed exchange. CIT Group (CIT), with $42.1 billion, came in second.
• By contrast, formal bankruptcy filings have been lower. The liquidity crunch created several bottlenecks for exit financing options and hastened the use of alternative pragmatic strategies, including prepackaged bankruptcies, distressed exchanges, and standstill agreements. Only 54 formal bankruptcies have been recorded globally this year, of which 48 were in the U.S., affecting rated debt worth $150.5 billion. With $53 billion in rated debt, General Motors was by far this year's biggest bankruptcy, followed by Charter Communications, with $22.5 billion.
•Troubled leveraged buyouts (LBOs) from prior years remain a fertile source of defaults this year. The actual volume of LBOs has dropped precipitously, totaling only $21.9 billion in the U.S. in the first half of 2009, compared with a peak of $433.7 billion in full-year 2007, according to Standard & Poor's Leveraged Commentary & Data. Moreover, in contrast with 2006, new deals in the U.S. are increasingly being funded with higher equity contributions and smaller shares of senior debt. Nevertheless, prior-year deals continue to emerge as casualties. In Europe, for example, 42 of 48 defaults recorded in the first half of 2009 were LBO-related.

U.S. Manufacturing Expected to Grow in January

Manufacturing in the U.S. probably grew in January for an 18th consecutive month as the expansion strengthened at the start of the year, economists said before a report.
The Institute for Supply Management’s factory index was little changed at 58 last month from an eight-month high of 58.5 in December. Readings greater than 50 signal growth. A separate report could show construction spending rose 0.1 percent in December.
The manufacturing index reached 60.4 in March 2010, the highest point in nearly six years, as industrial output rose and helped the economy rebound. The index bottomed out at 33.3 in December 2008, the lowest point since June 1980.
A reading of 58, while lower than the previous month, would still signal solid growth at U.S. factories. Greater consumer spending on cars, household appliances and furniture, among other goods, has given manufacturers a boost. Manufacturers actually added 136,000 jobs last year, the first annual net employment gain for the sector since 1997.
Consumer spending rose 4.4 percent in the October-December quarter, the fastest pace in four years, the Commerce Department said last week. The economy grew at a 3.2 percent annual rate in that same period. Despite manufacturing’s strength, economists don’t expect the sector will do much to reduce the nation’s 9.4 percent unemployment rate.
Also at 10 a.m., the Commerce Department will release data on construction spending. Projections in the Bloomberg survey ranged from a drop of 1.3 percent to a gain of 0.5 percent, following a 0.4 percent increase in November.

Leasing- A Smart Option for New and Used Equipment

In need of new equipment, but not ready to use all your capital to purchase it? 
Leasing is a GREAT solution.  Why you ask?

Not only does leasing help you conserve your cash, it also ensures that you don't wind up paying for equipment that becomes obsolete or unsuited for your needs. And think about this: if you need the equipment only for a short time or special project, leasing saves you the hassle of having to be both a buyer and, then later, a seller. 
Mazuma Capital will work on crafting a lease to help minimize your federal income tax liability, maximize your accounting objectives and customize cash-flow solutions to your budget.  Our Associate Structuring Group has expertise in all these areas and will help guide you to the best structure for your situation.

• Tax oriented leases “true or guideline” leases
• Non-tax oriented leases
• Loan, conditional sales contracts, balloon, and other purchase option structures
• Operating leases
• Lease facilities
• Sale & lease back options
• Step up/step down leases
• Seasonal leases
• Differed payment options
• Bundled lease products
• Non-tax operating leases, and other tax/GAAP products

From technology and medical equipment to renewable energies, leasing is a great option. There's no limit to the type of equipment available for leasing. Even a one-person operation can lease equipment. Unlike loans, leases do not require a down payment. You're required to pay for the use of the equipment during the lease term. You may also be responsible for routine maintenance and other costs as well. When the lease expires, the equipment goes back to the leasing company, you can opt to purchase however you choose to complete your obligation.
Lease payments are considered an expense that you deduct from your business income, just like any other expense.

Flexibility is another leasing feature. If customers or the competition demand that you always have the latest technology, a short-term lease can help you get what you need and keep your cash in other uses. Another plus is that most leasing companies offer lease-to-own plans if you determine that purchasing the equipment is in the best interests of your business.
The Equipment Leasing and Financing Association, a trade group of leasing companies and financial services companies, has a special section that explains the basics of leasing at its website, elfaonline.org. You'll also find guidance on leasing options and benefits, loan/lease differences, leasing terminology.

Mazuma Capital is a national direct lender, financing $100K-$10MM transactions. 
Mazuma Capital offers amazing vendor services and broker programs as well. 
Contact Mazuma at info@mazumacapital.com 801-816-0800

Leasing remains the major form of finance in the aviation world

Leasing remains the most important form of finance in the aircraft sector. According to research commissioned by CIT, 54% of respondents revealed that more than 50% of their fleets are leased, and they expect this to remain fairly consistent over the next five years.

Support funding from manufacturers (51%) ties with bank loans as the second most important form of aircraft finance followed by export credit loans (39%), secured bonds (28%), government loans (25%) and tax leases (24%). Leasing makes an appearance at some 11% in terms of funding importance.

Benefits of Technology Financing

The Equipment Leasing and Finance Association (ELFA) estimates that eight out of ten U.S. companies lease at least some equipment, but what many people don’t realize is that there are flexible financing options available for almost any kind of technology equipment, including software, services and training.

Equipment financing is a popular way to maximize your purchasing power largely because it is a cost-effective way to obtain the newest equipment without a large outlay of cash.

Financing also helps shield you from the effect of equipment obsolescence, a real issue for all those using any type of technology asset. It’s easy to add the latest software version to your master lease so you don’t have to worry about working with outdated technology.

Some of the recognized benefits of financing technology equipment include:

• Reduced Tax Burden - The IRS does not consider certain leases, for example, to be a purchase, but rather a tax-deductible overhead expense. Therefore, you may be able to deduct the lease payments from your corporate income.

• 100 percent financing – Some financing options require very little money down - perhaps only the first and last month's payment are due at the time of the acquisition.

• Immediate write-off of the dollars spent - With some financing options, payments can be treated as expenses on a company income statement, so equipment does not have to be depreciated over the useful life of the equipment.

• Flexibility - As your business grows and your needs change, flexible financing options provide more opportunities for businesses to add or upgrade equipment during the lease term.

• Asset management – Financing provides the use of technology equipment for specific periods of time at fixed payments. With some financing structures, the finance company assumes and manages the obsolescence risk of equipment ownership. At the end of the finance terms, the financing company is responsible for the disposition of the asset.

• Upgraded technology – Equipment that is frequently updated, such as software, should be financed to limit your risk of being stuck with obsolete equipment. It’s easy to add the latest software version to your master lease, for example, so you don’t have to worry about working with outdated technology.

• Improved cash flow – Many finance structures can result in a lower monthly payment when compared to a standard loan. In addition, some finance companies offer seasonally adjusted payments to match a company’s needs.

Finance Services Too

Training, support and other services are vitally important to a successful technology implementation, yet they are some of the most overlooked costs involved with a technology acquisition.

Often, everything involved in a technology purchase, from the software to the services and training can be bundled into one predictable monthly lease payment, making it easy to budget for all costs associated with a technology acquisition.

Mazuma Capital’s Lee Leaves for the Senate

http://www.worldleasingnews.com/news/mazuma-capital%E2%80%99s-lee-leaves-for-the-senate/