Equipment leasing company set for rapid growth

Hey there, time traveller!
This article was published 23/05/2024 (681 days ago), so information in it may no longer be current.

Winnipeg’s Chipman family once owned the largest independent financing company in the country and to some extent that may yet happen again.

The Megill-Stephenson Company Ltd., the holding company for the Chipman family, has invested in Sonoma Capital, becoming its second largest shareholder.

Sonoma is in exactly the same business that the Chipmans’ former National Leasing was in — equipment leasing for small- and medium-sized enterprises (SMEs).

After only two years in business Sonoma is already managing about $160 million worth of equipment leases.

The company is run out of Winnipeg by Michael Dubowec, who took over as president of National Leasing in 2018. (National Leasing was acquired by Canadian Western Bank in 2009.)

Neither Dubowec nor Jeoff Chipman, chairman of Megill Stephenson, would disclose the size of the investment.

Dubowec said the addition of the Megill Stephenson investment in the company will allow it continue on its rapid growth trajectory.

“We’ve been on track for pretty significant growth in the last two years,” Dubowec said. “This investment from the Chipmans now allows us to ramp up and put that new investment into the marketplace to support businesses.”

Leasing companies need equity on their books to be able to securitize its leases and extend credit to more customers. The additional equity will allow Sonoma to leverage access to more capital allowing it to continue to grow its leasing portfolio.

Just as was the case with National Leasing — before it was sold the CWB — Dubowec said there are many business owners across the country who would prefer to not have to have all of their debt financing attached to banks.

Dubowec said, “Banks will ask for extra collateral versus an independent funder like us who takes security only in the asset (that is being financed). You don’t want to tie up all your debt commitments with one financial institution. That’s why equipment leasing is a nice alternative.”

Chipman said Sonoma’s business model is similar to National Leasing’s and they are familiar with the management team.

In fact, a large percentage of Sonoma’s 40-person staff are former CWB-National Leasing staffers.

“We know the people. We know what they can do,” Chipman said. “It’s a non-starter if you don’t think there is a fit. If we’re not sure about the people you don’t do anything. It’s a key part. We know what their culture is.”

Dubowec reciprocated the sentiment.

“We had a lot of people who wanted to invest in the company. There is a great strategic alignment with the Chipman family and Megill-Stephenson,” he said. “Reputationally they will further allow us to tap great people, never mind their relationships with funding sources. Now we are that much stronger and have greater credibility within the financial markets.”

Sonoma is majority owned by Calgary-based Geminus Acquisition & Management run by CEO Randy Smyth.

Among other operating companies in the private financing space Geminus also owns Arundel Capital and Arundel Quebec, which are leasing companies that target the sub-prime market, meaning they provide equipment leasing for businesses with lower credit rating.

Sonoma targets SMEs further up the credit chain. Its target customer base is across the economic landscape including construction, agriculture, transportation and healthcare sectors.

Brad Peacock, president and CEO of Megill Stephenson said the attraction to Sonoma was familiarity with the business and with the people.

“Michael Dubowec worked for us in that business for about 25 years,” Peacock said. “We have a lot of confidence with him and his team. We’re very, very comfortable.”

In addition to its ownership of the Birchwood Group, Longboat Development and True North Sports + Entertainment, Megill Stephenson also owns a stake in Careica Health, a Winnipeg-based sleep and respiratory care company that operates across the country.

martin.cash@freepress.mb.ca