Bank Loan Blues

Wednesday, March 11th, 2009

With all the talk about banks not lending and no credit, I feel the need to say it has not been our experience.

Today’s historically low interest rates demand that we refinance long-term debt. We’ve got a 75,000 square foot facility financed with two notes: an SBA 504 loan on 40% and conventional bank loan for the 50% with 10% equity investment.

With our 5 year prepayment penalty having recently expired on the bank note, which is currently a variable rate adjusted quarterly, I have sought lenders to refinance into the longest fixed rate they would offer, and got three offers. Three.

I’ll admit that the bank has a very secure position, since the SBA takes the second lien, meaning that the bank gets their 50% first, should a default occur. Also, our balance sheet is, well, in balance, but we’re a small business in an uncertain economy with…you know the tiring refrain.

The offer we took will get our payments fixed for ten years in the high six percent range, so much better than the variable rate that has soared to over 9% at times during the past five years. As a business manager, I can now budget more accurately, and my guess is that there will certainly be higher interest rates in the next ten years that will make this deal, well, a deal.

Maybe this locked-up credit market is about what the talking heads call “interbank” lending, which my international finance background (not) doesn’t understand. The point is, not all lending is shut down, and we will be better off financially because of it.

Does anyone else have a similar experience?

Posted in Business | 1 Comment »

Let’s Define Forestry Carbon Offset Standards

Tuesday, March 3rd, 2009

A recent article on the Cleantech blog website (www.cleantechblog.com) by David Niebauer provides a thorough discussion of the forestry element of the coming carbon credit market. Let me summarize.

There seems to be little doubt that with the new administration, carbon offsets will soon become mandatory. That issue can be discussed in a different forum, but our interest lies in the standards by which forestry projects will be evaluated, measured and priced, including afforestation and reforestation.

Additionality For a project to be additional, the funds generated by the sale of carbon credits must be critical to the project’s viability rather than simply a means for the developer to enhance financial returns.

Verification Use of third parties to validate, monitor and register carbon credits. The process adds cost both initially, then also as a charge per ton of $.30 to $.50.

Socio-economic and Environmental Benefits Does the project provide jobs, recreation, biodiversity, aesthetics and improved land use? Forestry projects score high marks in this category in comparison to some offset projects like landfill methane capture.

Permanence A measure of risk, since forests can be destroyed (fire, tree rotting) which must be accounted for using credit set-asides or even insurance.

Another post will discuss the pricing of credits and the impact the recent collapse in the European market may have on this, but one aspect of our emerging commitment to stop global warming.

As always, I welcome your comments.

Posted in Carbon Offsets, Certification, Forestation | No Comments »