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Funds News

US capital equipment financing down in Dec-survey

CHICAGO, Jan 27 (Reuters) - U.S. capital equipment lending and leasing activity contracted sharply for a fifth straight month in December as businesses cut back new investment in everything from airplanes to trucks and computers to office equipment, the industry’s trade group said on Tuesday.

Survey results released by the Equipment Leasing and Finance Association showed the value of loan and lease originations tumbled 13.3 percent last month from a year ago.

The 25 member lenders which participate in the survey said they wrote $8.77 billion in loans and leases for capital equipment in December. That was up from the $4.02 billion in November but down from $10.12 billion in loans and leases booked during December last year.

It was the fifth straight monthly decline in year-over-year originations levels, according to ELFA, signaling how the economic downturn is gutting orders for capital equipment.

"The year-over-year decline in volume levels reflects a very difficult economic and business environment as investment in capital equipment slows," Kent M. Adams, president of Caterpillar Inc's CAT.N in-house finance arm, said in a statement.

Caterpillar is one of the commercial lenders that participates in the monthly survey, along with Bank of America Corp BAC.N, CIT Group Inc CIT.N and Deere & Co's DE.N in-house finance unit, among others. On Monday, Caterpillar posted weaker-than-expected earnings and announced 20,000 job cuts.

Most other key metrics tracked by the group also showed signs of deterioration last month.

The percentage of receivables 30 days old or older -- a measure of borrower delinquencies -- slipped to 3.5 percent in December from 3.7 percent in November, but they rose from 2.5 percent a year ago.

Charge-offs as a percent of overall receivables also grew, according to the survey, to 1.18 percent in December, up from 1.09 percent in November and 0.64 percent last year.

Credit approval ratios, meanwhile, continued to fall. The percentage of loan applications that wound up getting approved declined during December to 71.5 percent, down from 72 in November and 74.8 percent last year.

“The year-end numbers underscore the transformation of a financial market recession to a Main Street recession,” ELFA President Kenneth Bentsen Jr said in a statement.

“While demand for commercial credit held up through the first three quarters, as did credit quality, the fallout from the financial sector has spilled over.” (Reporting by James Kelleher; editing by Richard Chang) (james.kelleher@thomsonreuters.com; +1 312 408 8130; Reuters Messaging: james.kelleher.reuters.com@reuters.net)

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