2009 will represent challenges and opportunities for the equipment leasing and finance industry of a magnitude never before experienced. Based upon available information, my best estimate is that the first nine months of the year will present a continuing stream of hardships as experienced throughout most of 2008. These challenges will take a form of continued credit/portfolio "surprises", difficulties in raising capital to fund new business, and asset valuations plagued by wide fluctuations. In and of themselves, each of these factors will be complex and multi-faceted requiring financiers to remain diligent in the application and constant revision of their business practices. In combination, these factors will place significant pressure on lessors. That said, for companies who remain focused on this wave of difficulties, I believe the final quarter of 2009 will offer modest, sustained, performance improvement across the industry.

Portfolio quality will continue to be challenged in 2009. For any number of reasons, various industries will find themselves squeezed, by a combination of dampened product demand, and challenges raising capital to run operations. The result will be unusual patterns/trends in portfolios wherein performing/paying clients will suddenly be cash-strapped or bankrupt, causing charge offs that were not predicted via traditional portfolio metrics. Delinquency rates (typically a predictor of further softening in a portfolio) will continue to serve that purpose. However, at dramatically elevated levels these late payments will no longer solely represent a strong, forward looking indicator. Many charge-offs will result from clients who were current in their payments until such time as a sudden shock forces their liquidation.

Liquidity will be the key driver of both the aforementioned credit challenges, and the more opportunistic consideration of new business. While capital is and will be available through traditional banking lines/channels, commercial paper and other (typical) working capital/liquidity facilities will be both limited in availability, and significantly more expensive. Logical connections between operating history, track records, management aptitude, and capital availability, will be largely discounted. I anticipate that liquidity will begin to loosen, in the latter half of 2009 following the mid-year bottoming of housing markets in the U.S. and Europe as is increasingly predicted by numerous economists.

Asset values, long a differentiator in the equipment leasing space, will continue to fluctuate and in more significant ranges than experienced at any time in history. Asset values will be impacted by the significant increase in available secondary market products (as a result of the above referenced credit and liquidity challenges) thus depressing new and used equipment values. Lessors who are willing and able to take a long view regarding investments and asset categories, will be handsomely rewarded during the early years of the next decade.

On a more positive note, "when it turns, it will really turn". Component to the challenges experienced beginning in the middle of 2007, and predicted to run through the majority of 2009, terms and conditions, pricing norms, and negotiated intelligence surrounding transaction and relationship economics, have swung widely, from the foolish days of abundant capital and less-than-regimented business practices, to a highly structured and well thought out series of business norms. Thus, equipment leasing and finance companies who survive this crisis, and who are willing to walk away from fringe business (that is simply uneconomic), will find themselves able to finance many assets that will be required. Companies/organizations targeted by financiers, and who have not invested in their infrastructure for multiple years, and/or those who have begun investing at an accelerated pace based upon federally stimulated activities around the globe, will represent significant growth opportunities for the equipment financing sector.

"Normal is not" will increasingly be a cry heard globally as the financial services market(s) come to grips with significant changes. These fundamental shifts will punish companies who have failed to adapt to the new realities of today's increasingly complex financial services markets. Alternatively, organizations who have exercised discipline and a forward-looking approach will be rewarded.