a day at the office
Chicago on line
dairy reminder
Specialist service
Debt diet
For an F&A and health care focused bank, Rl is certainly a growing name in the
expanding US media and telecom market. How does our dedicated team in Chicago
operate in this exciting market and what are its strategie aims to build Rl into a top
player? We spent a day with Bill Welch and his team to find out.
Limited risk
Unusual clients
Huge market
What sNewS Issue 10-0ctober 1998 I
Although we're not looking for
compliments, when asked how
Rabobank rates in terms of bedside
manner, Gonner says: 'I don't know if I
could say honestly that 1 know a bank
that truly understands health care - I
think Rabobank probably comes closest.
Local financial institutions don't really
understand it. A group of local banks
tried to get together to do something for
us - simply because of our size, but they
couldn't agree on the structure because
they were all looking from their own
perspective. Basically, in terms of our
banking relationships, we shop around
for specialist service - our day-to-day
business is done locally; we work with
■Rabobank for all our debt needs; and
™ur retirement plan is with a third -
specialized bank.'
Lydia Crowson and Jeff Gonner worked
out an interesting bond issue for the
group which has been successful. Clearly,
she is keen to do more with the Iowa-
based multi-specialty practice. Says
Gonner: 'I am trying to go on a debt diet
for a while. Health care is going through
some changes. Until we understand the
dynamics of the new environment, we
are in a situation where revenues are
flattening and expenses are continuing.
So we need to have things under control
before we take on anything else. The
does will spend it if Lydia will provide
it,' he adds, laughing, 'but I'm trying to
teep them on a debt diet, too.' The food
nalogy, it seents, works for both Gonner
and Crowson. For her, the needs of her
multi-specialty practice, like those of all
her customers, are anything but 'cookie-
cutter business'. Every need has to be
diagnosed and the correct remedy
prescribed, a prescription that must have
the ingredients Gonner defined as
essential to this key industry - know
how, understanding and discipline.
Time is running out for inclusion in the
November 4 and 5 European Dairy
Conference, a Rl-created platform ofglobal
experts brought together to exchange views
on all aspects of the ever-important dairy
Wsector. It's still not too late foryou andyour
clients to be part ofthis impressive
conference. For more information, contact Rl
marketing directly on tel +31 30 216 2804.
If you break down the media and
telecom business into its component
parts, the sector consists of five primary
areas: telephony, cable television,
broadcasting, publishing and equipment
supply. All five are included in Chicago's
portfolio, although the Windy City
designation is somewhat misleading.
'We're based in Chicago,' says Welch, 'but
our business covers customers throughout
the whole US.' When you consider the size
of the US market and the size of Welch's
team (three relationship managers,
including himself, four credit analysts and
two support), then the goal of building a
strong 'local' base may seem overly
ambitious. 'We certainly spend a lot of
time on the road,' he confirms. 'Our
customers are dispersed. We don't have
people in other offices, it's part of our
philosophy. If you are going to specialize,
you need to be under one roof.'
The media and telecom team looks at the
business by sector. 'By focusing,' says
Welch, 'relationship managers can go
deeper into the sector. For example, Doug
Zylstra is specialized in cable companies,
which also represent around half of our
portfolio. You can't get the kind of depth
we're looking for if you're focused on
more than one sector.' Presently, the team
have around 25 clients and over USD 630
million in commitments. They are what
Welch ealls 'very particular' when it
comes to picking deals. 'Our business
strategy,' he says, 'is to look at companies
on the distribution side of the
Communications industry, the companies
delivering the airwaves and tv programs.
We do not handle program-making, so
we don't have fashion and taste risk. We
feel that our areas of focus are where the
risk, also the credit risk, is lintited.'
The returns, he smiles, are quite generous
if, you know how to analyze the industry.
'Companies tend to be a little unusual
relative to F&A companies,' he explains.
'They often have substantial amounts of
intangible assets on the balance sheet, so
Chicago telecoms team putting down their
cables left to right: Marie Kramer, Doug Zylstra,
Bill Welch, Uri Sky and Judi Ross (centre)
they don't look like classic F&A
corporates. If you look ar the numbers, it's
hard to feel good about the quality of
these companies. So we have to be able to
look beyond numbers at the real value
behind the cash flow, as well as the value
of the companies themselves. They tend to
trade quite regularly. This is a fairly deep
and liquid market. As I said, it is a very
attractive business - relatively low cost
and comparatively high yield.'
By exercising sector insight, careful risk
analysis and caution - 'we probably only
pursue 20% of all deals we're invited into'
- the Chicago media and telecom team is
looking for expansion of its own. 'The
industry here is huge,' Welch confirms.
'It's around half a trillion dollars in
revenue, larger than the GNP of some
countries. Growth is between 7 and 8% a
year. If we are to build our relatively small
position here, we need to expand.' At
present media and telecom has added all
the necessary people for 1998, 'next year,'
says Welch, 'we may be looking to add
another three to four.' Wherever these
new additions come from the team know
one thing is sure: there are lots of
opportunities in media and telecoms, if
you know how to put down your cables.
As we go to press, Chicago office has
announced Bill Welch will be leaving
banking for a new career in - you guessed
it, F&A. We wish him all the best and
congratulate his successor Doug Zylstra.
