By: Don Loepp
May 2, 2013
Here's an off-beat angle to plastic bag legislation: a financial company is warning that bans are a potential red flag for asset-based lenders.
In other words, some lenders might start discounting the value of the machinery that plastics processors use to make plastic bags. But before film extrusion executives climb out on the ledge of their cooling towers, keep reading.
Kevin Boland, an assistant vice president with New York-based Tiger Group LLC, wrote in the April issue of the Commercial Finance Association's The Secured Lender magazine that a global backlash against plastic bags "threatens to undermine the recovery value of dedicated merchandise and equipment in this sector."
Tiger Group sent out a news release about the article -- headlined "Blowing in the Wind: Are plastic-bag bans the death knell for related M&E?"
Boland argues that the issue is significant for secured lenders because film equipment can be expensive -- worth $1 million or more.
But even if the single-use plastic bag market disappears -- unlikely, despite all the headlines to the contrary -- Boland notes that much of the equipment is actually likely to hold its value, because it could be repurposed to make other products.
"With a bit of retooling, extruders can be used to make a variety of other products, including plastic film and sheeting as well as profile extrusions such as moldings, trim products, pipe tubing and insulation for wire and cable," Boland writes. "Likewise, winders can sometimes be reapplied to the likes of textile products or plastic sheeting. Auxiliary equipment would include any number of grinders, hoppers, vacuum loaders, dehumidifiers, temperature controllers or even robots, while general support equipment could include things like chillers, cooling towers, vacuum pumps, air compressors and boilers."
"Even the widespread imposition of plastic bag bans would not totally decimate the recovery value of M&E employed in these facilities," Boland writes. "Still, it is a good idea for lenders and appraisers to keep an eye on the bag-banning trend."
This is one of the strangest bag-ban-related news releases I've seen. But it still doesn't top the debate about whether using reusable bags spreads disease.
Anyway, it's interesting to see the financial services community paying attention to bag bans.
And it's nice to see that their first word on the topic is that, although the issue is a potential concern, bans are not a "death knell" for plastics machinery and equipment.