Seeking Investor(s) for Equipment Leasing Company that Finances Mining Equipment - 13% to 25%+ Yields

by Ron Smith
(Chicago, Illinois U.S.A.)

The MEC Group, Inc. offers equipment financing/leasing and equipment procurement to coal mine operators throughout the United States.

MEC began conducting business in 2011, when it brokered equipment acquisitions for several customers. Since those transactions, MEC has built strong partnerships with lending facilities who have significantly profited from MEC’s ability to secure, structure and finalize equipment lease/finance opportunities. Additionally, to date, not one of our lending partners has experienced a payment default by an MEC customer. The collateral contained in these transactions is mission critical, essential use coal mining equipment. The equipment ranges from continuous miners and shuttle cars to roof bolters, conveyance systems and generators.

Since our inception, The MEC Group has secured over $82MM in equipment finance/lease volume, so that our customers can maintain their competitive edge. Our lending partners have enjoyed strong all-in yields, which range between 15% and 25%+ with the average transaction size being $1.77MM. Since most of these opportunities are structured as Operating Leases, our lending partners receive additional tax and depreciation benefits. Subsequently, MEC receives a broker fee from its lenders, ranging from .65% - 3% of the funding amount, depending on the size of the transaction.

Due to compression within the coal industry and the rebound of coal prices, operators have an immediate opportunity to increase coal production to meet demand. MEC also views this as an opportunity to expand our business, while supporting an industry which has been the backbone of America for over 150 years. It is an industry that will also continue to lead the way for America’s energy independence, with over 32% of electricity generated by coal.

Currently, MEC is dependent on our capital partner’s credit windows and their appetite for the collateral and industry. For that reason, MEC is seeking investment capital in order to expand our business by taking control of the means in which we offer our services. The investment capital would be utilized in the following manner.

* Immediate access to capital in order for MEC to directly fund our customer’s equipment finance/lease opportunities.

* Leverage investment capital to gain access to additional investors and/or lines of credit.

* When identified and appropriate, acquire used (core) mining equipment for refurbishment and sale.

* Stimulate marketing campaigns by enhancing our electronic and print marketing material.

According to the Equipment Lease and Finance Association’s (ELFA) Finance Index Report (December, 2015) equipment leasing/financing is a $997B industry. Most companies will either lease or finance their capital equipment, which is secured through a variety of sources. Some of which are:
- Broker and packagers
- Investment banks
- Independent leasing and finance companies
- Captive finance companies
- Commercial banks

Although these sources provide various financial products for a variety of industries, very few, if any, focus solely on the coal mining industry. The lenders that do service the mining industry, such as; Macquarie Equipment Leasing, GE Capital, JP Morgan, Wells Fargo, Deutsche Bank and others, have mostly redrawn from lending into the mining space. This lack of involvement coupled with rigid lending practices at the local and regional bank levels, has created a void for coal mining operators to access lenders for their capital equipment acquisitions.

National Mining Association statistics (August 2014) report there are over 1,700 active coal mines in the United States. These mines produce over 1.1B short tons of coal annually, valued at $38B.

Though there are no statistics that divide coal mine operations into size categories, we can conservatively estimate that approximately 70% of the active coal mines in the United States are mid-size operations, $50MM - $750MM in annual revenue. Therefore, one can realize the size of the opportunity and MEC’s market.

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