Securitization provides several benefits to lessors, including:
- Transformation of illiquid nonnegotiable assets into marketable instruments;
- Removal of highly illiquid assets from the originator’s balance sheet that would otherwise be held by the originator to their maturity;
- Reduction of the cost of funds by capitalizing on the higher credit quality of the segregated pool of leases, rather than obtaining financing based on the originator’s lower general credit rating;
- Improvement in cash flow (liquidity) and profitability through the conversion of the receivables into cash – income acceleration;
- Transfer of credit, interest-rate and prepayment risk of the receivables to investors;
- Reduction in regulatory capital requirements.
While captives and independent lessors commonly engage in the securitization of the leases they originate, bank lessors generally do not actively securitize their equipment-backed receivables because of their alternative funding sources, such as customer deposits.
| European Lease ABS Issuance and Outstanding 2007-2013 (EUR mn) | |||||||
|---|---|---|---|---|---|---|---|
| 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | |
| Issuance | 4,179.60 | 13,210.40 | 6,685.46 | 1,832.75 | 15,977.50 | 1,855.80 | 3,323.54 |
| Outstanding | 22,907.81 | 30,293.47 | 32,152.13 | 22,677.62 | 28,963.76 | 22,694.17 | 17,053.95 |
| SIFMA | |||||||