Home » BLOG » Bad energy loans hit oilpatch equipment prices as banks try to sell assets of insolvent companies

Bad energy loans hit oilpatch equipment prices as banks try to sell assets of insolvent companies

The market for buying and selling used equipment has now changed - and prices are falling.

CALGARY C Prices for used industrial equipment in Western Canada are falling as banks look for a method of getting money out of progressively more delinquent loans in oil-producing provinces.

“Recent auction results have included generally softer pricing in secondary markets, designed for specialized equipment,” Canadian Western Bank president and CEO Chris Fowler said during his company’s quarterly earnings call a week ago.

The Edmonton-headquartered bank uses auctions as a way to secure its loans, specifically for industrial equipment, and Fowler said that, during previous quarters, prices remained high at industrial auctions despite the dramatic fall in oil prices as well as an overall slowdown in industrial activity in Alberta and Saskatchewan.

But the marketplace for buying and selling used equipment has now changed – and prices are falling.

“The cross-purpose yellow iron that can be used in forestry, gas and oil, municipal infrastructure, were down definitely, but not significantly. It was the more specialized equipment (where prices fell further),” Fowler said.

When a borrower does not meet its payment obligations, a bank can proceed to sell that equipment on “secondary markets” at auction houses, making the need for a company’s equipment instrumental to a application for the loan.

“If there is a lower valuation, once we consider what secondary financial markets are like, it does affect the approach we take to take a look at (loans), no doubt,” Fowler said.

Related

About privatefinancetips

x

Check Also

U.S. job growth slows and profits tumble as a strong dollar and cheap oil undercut earnings

WASHINGTON – U.S. economic growth slowed within the fourth quarter, although not as sharply as ...

The REIT sector’s next challenge: CEO succession and board renewal

Getting there C with new chief executives and groups of new directors for that firms ...

Commodities could be headed for ‘buffalo jump’ as investors rush for the exits, Barclays warns

Commodities including oil and copper are in chance of steep declines as recent advances aren’t ...