Computer Equipment Company On the Ropes After Fast Decline.

When Linda Terjesen left Atlanta in late 1999 to join Woodland Hills-based El Camino Resources International, she was joining a company with a promising future.

The 20-year-old computer equipment lessor ranked No. 341 on Forbes magazine's list of 500 fastest growing private companies that year, it had topped $774 million in annual revenue, grown to almost 1,300 employees and was on target toward $1 billion in leased assets.

Things were running so smoothly that Dave Harmon, El Camino's founder and chief executive, was named Ernst & Young's 1999 Entrepreneur of the Year.

But four months after moving to California,Terjesen was out of a job. Human resources head Jo Glascock gave the reason as "lack of work and projects," according to a civil lawsuit filed earlier this year in Los Angeles Superior Court.

While the basis of Terjesen's lawsuit was sexual discrimination, her quick exodus from the company was, in many respects, a signal of events to come at El

Camino.

In the past six to eight months, El Camino has quietly sold off many of its divisions and liquidated its assets. It stopped issuing press releases last August and vacated its largest building, a 60,000-square-foot facility at 21051 Warner Center Lane, in June, according to Bill Inglis, a commercial real estate broker with CB Richard Ellis, who handled the company's original lease at the building.

The company, which had 500 of its 1,300 employees based in L.A. in 1999, had grown so large that last year it ranked No. 18 on the Business Journal's list of largest private companies.

But the tide has turned, and hard. No company official, including Harmon and Glascock, would return repeated phone calls seeking comment. But based on court filings and interviews with former employees, a picture emerges of a company on financial life support.

According to one of the 50 or so employees still left at El Camino's 35,000-square-foot facility on Warner Center Lane in Woodland Hills, the Latin American division will be the last leg to go for the company before it falls completely.

"This company has been around for 20 years and has been steadily growing, and then something happened about six months ago," said the employee, who spoke on the condition of anonymity.

So why its demise?

Blow to core business

When it was founded 21 years ago, El Camino bought and sold used computer equipment. It evolved into a reseller of new computing equipment for 10 years, primarily focused on IBM's line of products. Newer divisions enhanced the reselling business with Web-based applications and information technology services.

Its primary business, however, was in the leasing of information technology equipment, such as network switches, communications systems, servers, desktop computers and printers.

In all respects, the El Camino future looked bright. In his 1999 "Message from Management" posted on the company Web site, Harmon said: "We are happy to report that solutions to... challenges are within our grasp, and we remain confident, albeit cautious, in the long-term outlook of the company."

But the leasing business was dealt a severe blow in the latter half of last year as budgets were squeezed and capital expenditures limited, including technology infrastructure, said Richard La Vigne, president of Maynard, Mass.-based Investa Capital, a small IT leasing firm.

In addition, many large leasing firms lost money when their high-tech customers went out of business and defaulted on loans with large balances due at the end of the lease payment period.

"You lease a $100 piece of equipment, for example, to a company and you effectively get back $90 in the first three years," said Mark Jordan, an analyst with A.G. Edwards. "You either renew that lease or re-market that equipment to get back the $10 and make a profit. If the value goes down, or the customer doesn't want to renew, you don't have the ability to re-market it."

Such a situation is not a problem for larger leasing companies. El Camino, however, had net income of $13 million in fiscal 1999 -- a 2 percent return on revenues of $668 million according to a document on the company's Web site.

According to a lawsuit filed Jan. 29, 2001, in Los Angeles Superior Court, El Camino's major creditor, Fleet Boston Financial Corp., froze the company's line of credit, believed to be more than $100 million, after it began to experience what the suit characterized as "catastrophic financial problems." The move by Fleet, in October 2000, put El Camino in default of its financial agreements, leaving the company unable to find additional financing for its leases, according to court filings.

The suit was filed by 14 former sales representatives and managers at El Camino, who are seeking compensation they say the company owes them. In all, El Camino is facing nine lawsuits, including a handful filed by former employees like Terjesen whose complaint remains unanswered.

"Upon information and belief (El Camino Resources) is insolvent and, based on its admitted and severe financial crisis, will not have sufficient unencumbered assets or cash flow to pay the sale commissions owed to the plaintiffs unless it pays those commissions out of the proceeds of the sale of the (El Camino Resources) portfolio to GATX," according to the plaintiffs' complaint in the suit.

The former employees are seeking money from El Camino's sale of its leased assets in February to GATX Capital Corp. for $372.8 million in cash and non-recourse debt.

The assets, which represented the bulk of El Camino's domestic business, were folded into GATX's Technology Services division in Tampa, Fla., according to Guy Blanchard, vice president of corporate finance at GATX.

El Camino also has sold its Real Applications division to Mainline Information Systems Inc. of Tallahassee, Fla. Real Applications was El Carnino's IBM reseller business and provided disaster recovery services. The division employed about 250 to 300 employees, but Mainline kept only 15 or so employees to head up its West Coast division. It had 3,000 customers.

With the sale of the domestic leased assets, all that remains of El Camino are operations in Latin America.

After it opened a Latin American division in the mid-90s, El Camino bought a number of businesses in the market and signed a series of partnerships, including the arrangement with Popular Leasing and Rental Inc., the largest leasing company in Puerto Rico and a wholly-owned subsidiary of Banco Popular.

Now, El Camino's Latin American division, which employed 200-odd people in Miami, Mexico, Argentina, Puerto Rico, Costa Rica and Brazil, is up for sale.