Financing Tribes: A Long Tradition for KeyBank

When Mike Lettig attended an advanced management school at Case Western University in Cleveland in 2002, the KeyBank executive was given a big task: come up with an idea that would change the face of the company.

It took him a couple of years to get his idea off the ground, but Lettig’s idea became reality in 2005 when he started a Native American Financial Services unit for the big commercial bank.It took him a couple of years to get his idea off the ground, but Lettig’s idea became reality in 2005 when he started a Native American Financial Services unit for the big commercial bank. Click To Tweet

It was a modest effort to start, consisting of himself and one client, who had “$20 million in loans and $5 million in deposits, or maybe it was $5 million in loans and $20 million in deposits,” said Lettig, who is KeyBank’s executive vice president of agribusiness and Native American financial services, and is based out of Bellevue, Washington.

Now the unit has a core team of six executives which can expand out to a team of 20-30 depending on the kind of deal they are doing for a Tribe. And the numbers are significantly higher now: over the past three years the unit has seen $2 billion of commitments go on its balance sheet, $1.2 billion in outstanding loans, $1.8 billion in assets under management, and $900 million in deposits, as well as having tapped the capital markets for another $8 billion in capital.

KeyBank now does business with more than 70 Tribes, including the Cowlitz Indian Tribe of Vancouver, Washington; the Colville Tribe of Washington; the Yakama Nation of Washington; the Tulalip Tribe; the Puyallup; the Seminoles; the Oneida Indian Nation of New York; the St. Regis Mohawk Tribe; the Seneca, and others such as the Navajo Nation, the country’s largest Tribe.

Lettig’s core unit (three people in Washington, one in Michigan, one in Oklahoma and one in Portland, Oregon) has continued what’s been a longstanding commitment to Native finance. “Key and its predecessors have been involved in the Native space, as far as we can tell, for at least 60 years, probably longer.”

Mike Lettig has run the Native American Financial Services unit for KeyBank since 2005. (Photo courtesy KeyBank)

It wasn’t a strategic focus for the bank, more a factor of geography. “We were in close proximity to Indian Tribes, either with a physical presence with a retail branch office that had some folks that were interested in developing a better understanding of what was going on in Indian Country. Relationships started that way.”

Starting with managing funds and opening accounts for Tribes, eventually the business connections developed into lending relationships and access to capital.

The unit has been supported by KeyBank management, which targets all its individual businesses for close backing. “The support of the business has always been in the DNA of this company and its predecessors,” Lettig said. KeyBank “is very mindful of the communities it serves, and being a responsible provider of those services to the community.”

Many Indian Tribes are within KeyBank’s footprint. They include the Northeast, Washington, Oregon, Idaho, New York. It also has a close proximity to the many Tribes in California. “We’re pretty close to a major chunk of them,” the executive said.

Lettig outlined a representative effort for the unit. A Tribe comes to KeyBank looking for $650 million in capital. The Tribe submits its financial information, and describes the project. The team quickly develops an analysis in about two or three days, recommends a structure, then brings in the credit team.

A tailored solution is provided to each Tribe’s project. A new administration building, for instance, might take a tax-exempt solution because it’s essential government services, so the deal would get a lower cost of capital.

“You can do it on balance sheet with us, in essence it’s a direct loan from the bank, or we have helped Tribes create an awareness level in the market that buys municipal paper, and have introduced Native American municipal paper as an offering, and there’s an appetite for it,” he explained.

A gaming operation, for instance, can be a blend of tax exempt and taxable debt, he said.

An interesting project Lettig has worked on is an administrative building for the Colville Tribe.

When an administrative building burned down, the Tribe wanted to spruce up a dilapidated campus of governmental offices. The solution combined all the buildings into one of 153,000 square feet that now houses about 1,000 employees.

“It’s a good-sized facility,” Lettig said.

What does he think is the most challenging kind of financing in Indian Country, the biggest need?

“Governmental infrastructure and housing,” he said. “Roads, water, sewer, health facilities. To be able to bring in capital that addresses those ever-expanding needs, those are challenging but the most rewarding.”

In housing, some Tribes use a combination of federal housing block grants and augment (leverage) those from different revenue sources. Distribution from gaming, for example, can support a credit facility the Tribe could deploy for housing.

Another interesting deal Lettig remembered was financing jails and courthouses for the Navajo Nation in Tuba City, Arizona; Shiprock, New Mexico; and Window Rock, Arizona, where the deal was unsecured.

“We put together a credit facility on an unsecured basis. It was a $60 million credit facility that was unsecured, to the Navajo Nation as a general obligation. We agreed to Navajo court, Navajo law, Navajo binding arbitration.”

Lettig said the unsecured deal was an acknowledgement of the sophistication of the judicial infrastructure of the Nation, and its integrity, and that that was just as important as the financial capacity of the nation.

The Nation issued a bond after KeyBank helped them obtain a credit rating of A stable, an unusual achievement.

Key Bank has done four hefty Native debt deals in the year between August of 2017 and August of 2018, totaling nearly a half billion dollars in finance.

In June 2018, it closed an $80 million first lien senior secured lien loan for Navajo Petroleum of Window Rock, Ariz.

The company “will use the proceeds to retire its Wells Fargo-led first lien credit facility and for general corporate purposes, including the future funding of anticipated Greater Aneth Field related capital expenditures,” said the Navajo Nation.

Louis Denetsosie, President and Chief Executive Officer of NNOGC said, “The closing of this facility is a significant step toward stabilizing NNOGC’s finances after the 2014 price decline.”

Guggenheim Corporate Funding, LLC will serve as administrative agent and collateral agent for the facility. KeyBanc Capital Markets, LLC served as the financial advisor and sole placement agent.

In August 2018, it financed $130 million in senior secured credit facilities for the Stillaguamish Tribe of Indians of Arlington, Washington.

In May 2018, it closed $142 million in senior structured credit facilities with San Pasqual Casino Development Group Inc. of Valley Center, California, and in August of last year, $105 million for Laguna (NM) Development Corp.

Other top executives of the unit besides Mr. Lettig are Ryan Bumrungkittikul, relationship manager; Terence O’Farrell, senior banker; and Ben Rechkemmer, senior banker.

Sectors KeyBank funds include Casino Gaming  and Hospitality, Governmental Infrastructure and Administration, Natural Resources and Energy, Agriculture and Aquaculture, Non-gaming Economic Development, and convenience stores.

Financing options include Credit Financing, Treasury Management, Investment Management, Capital Markets Expertise and Insurance and Benefits.

—Research assistant Priestess J. Bearstops, Oglala Lakota, contributed to this article.