Takeaway: Increasing awareness of the overhang of used equipment is a big deal for Caterpillar Financial. We are very excited to hear how Caterpillar explains away falling collateral values in key equipment categories at its November 17th Caterpillar Financial investor meeting.
Feeling Used? CAT Black Book (latest of many)
Officially Denied: We are excited to see what CAT comes up with on Caterpillar Financial in the November 17th investor meeting. We think that segment is a bigger risk than investors appreciate, and our Black Book above illustrates why.
Press Coverage: While we have been tracking building used equipment pressure in resources-related capital equipment for quite some time, we saw news coverage for the first time today from an auction in Australia.
Why This Matters: Caterpillar Financial relies on used equipment as collateral for its lending activities. While the article focuses on mobile mining equipment, we expect the issues to impact a broader array of categories. Gensets look likely to become problematic, for instance. We do not expect this to go away, and it should eventually result in a painful 2016 at Caterpillar Financial. Investors typically hate problems at captive finance subsidiaries.
Feel free to ping us back for additional background.