leveraged lease


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Leveraged lease

A lease arrangement under which the lessor borrows a large proportion of the funds needed to purchase the asset. The lender has a lien on the assets and a pledge of the lease payments to secure the borrowing.

Leveraged Lease

A lease in which a bank or other financial institution provides the lessor (the party granting the lease and retaining title to the lease good) with credit, which the lessor then uses to finance the lease. For example, suppose a car dealer (lessor) extends a lease to someone buying a car (lessee). The lessor may take a loan from a bank in order to receive capital from the lease of the car while the lessee drives away with the car. The lessee then makes payments on the lease, which the lessor then uses to repay the loan to the bank. Importantly, the lessor may take the leased asset away from the lessee if the lessee defaults, and the bank may do the same if the lessor defaults.

leveraged lease

A long-term lease in which a major part of the purchase price of the to-be-leased asset is financed by a third party. Thus, the lessor uses a combination of its own funds and borrowed money in order to purchase the asset that is then leased to another party.
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Most recently, he was with MetLife managing leveraged lease and tax equity portfolio assets including commercial aircraft, rail, power plant, renewable energy, and commercial real estate.
This does not mean an investors should shell out a fortune to own a warehouse or buy a leveraged lease on an Amazon bulk warehouse with the fixed seven to eight per cent returns while bearing the full risk of an industrial cycle downturn or interest rate hike.
Such payment models are commonplace when it comes to capital equipment, where leveraged lease financing and other terms are a routine part of the acquisition process.
A leveraged lease (a true lease) is similar to a single-investor lease (also called nonleveraged leases or direct leases) but more complex in size and in the number of involved parties--it involves a minimum of three parties with diverse interests: a lessee, a lessor, and a nonrecourse lender.
Both Deloitte and KPMG stated that they thought that leveraged lease accounting for lessors should be discontinued even if the boards decided not to move forward on making other changes to lessor accounting.
Lastly, if HP purchased debt, it is worth noting that, in Frank Lyon Co., (10) a case involving a leveraged lease, the Supreme Court reversed an Eighth Circuit decision and respected the lease in form, rejecting the IRS's contention that the transaction was truly a financing arrangement (debt instrument) for the lessee.
"After vigorously marketing their assets for almost a year and soliciting 58 potential buyers/investors, it is abundantly clear that, in the current economic environment and with the debtors complicated leveraged lease structure, an out-of-court restructuring sale is not possible."
Cushman also recently finished a leveraged lease for a Manhattan office building worth around $100 million, said Hwang.
The Alta project, supported by a 1,550-MW power purchase agreement with US utility Southern California Edison (SCE), is the largest investment in the North American wind energy sector and the first wind energy leveraged lease to be placed in the debt capital markets, Vestas noted.
FASB has issued a staff position that requires companies to recalculate their leveraged leases if there is a change in the timing of cash flows relating to income taxes generated by the leveraged lease.
For illustration, let's consider a highly complicated, multiparty transaction: a large ticket leveraged lease. Here, the lessor has leased $80 million of equipment to the lessee, borrowing 70 percent of the total cost from a third party lender.
Power Play: Banks represented underwriters in a $536 million leveraged lease financing by the subsidiaries of Ahold USA Inc.