AT&T Capital

AT&T Capital was the equipment leasing and commercial finance arm of AT&T


AT&T Capital’s business was relatively dependent on two major contracts with NCR and Lucent, whose equipment sales it financed. It employed around 3,500 people in more than 20 countries.

Investment strategy 

Asset-Backed: At the end of 1995, AT&T Capital had over $9.5 billion in assets. This was spread across a broad portfolio encompassing medical equipment, telecommunications, document imaging, information technology and commercial fleets.

Requiring Fundamental Change: Diverse acquisitions outside the US had reduced profitability and resulted in an overall expense ratio as a proportion of income substantially greater than the commercial finance industry average.

Creating value 

  1. Transforming strategy

    • Potential operating efficiencies were identified as AT&T Capital had been managed for asset and sales growth, with insufficient focus on managing costs.
    • A strategic shift for the business was devised and implemented, targeting new types of customers, such as computer manufacturers, and disposing of certain non-core or non-profitable business lines.
  2. Strengthening management

    • With Terra Firma’s support and guidance, a detailed plan for the realisation of operating efficiencies and corporate overhead reductions was developed. In addition, the multiple computer systems that had accumulated over years of acquisitions were rationalised and upgraded to simplify and enhance performance monitoring.
  3. Lowering the cost of capital to create extra upside

    • Detailed financial analysis identified the reliability of AT&T Capital’s cash flows and the opportunity to securitise the company’s lease receivables to finance the acquisition at a lower capital cost.

Status of Investment: The AT&T Capital investment has been fully realised. Terra Firma sold the business to a trade buyer in 1998 in a part stock, part cash deal. Terra Firma’s employees played an important role in the management of the newly-merged business and in arranging the company’s subsequent take-over by a quoted US leasing company in November 1999. Terra Firma’s stake was sold in March 2001.

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