A closed-end lease does not contain a purchase or renewal option, it requiring the lessor to take possession of the asset at the end of the lease term, thereby exposing the lessor…
What is an independent lessor?
An independent lessor is a leasing company that is not an affiliate, joint venture or associate of a bank, manufacturer or dealer. They purchase equipment from various unrelated m…
What is an executory contract?
Under the US Bankruptcy Code, unfulfilled executory contracts and security interests in assets to secure the performance of an obligation become the property of a bankruptcy estate…
What is an equity participant in a leveraged lease?
The lessor is the equity participant, which is one or more parties in a leveraged lease that as owner of the leased asset holds beneficial interest in the asset and has the risk, r…
What is an equipment lease agreement?
Whether lease applications or lease proposals and commitment letters are used, lease inception occurs with the closing of lease agreements. A lease agreement is a contract between…
What is an asset?
The balance sheet is a financial statement that reports the financial position of an entity at the end of an accounting period by presenting the major categories and value of its a…
What is an asset-backed security?
An asset-backed security (ABS) is a marketable security that is issued by a special purpose vehicle (SPV) that buys financial receivables, such as automotive leases and mortgage lo…
What is a voluntary restructuring?
A method of debt restructuring that operates outside insolvency law is a workout, relying on negotiations between the debtor and, generally, the lead creditors or a committee of cr…
What is a true lease?
A lessor can claim the tax benefits of a leased asset only if it is a true lease. A true lease is any lease that allows the lessor to claim the tax benefits of ownership of a leas…
What is a titling trust?
A lease titling trust is an SPV used in the securitization of leased motor vehicles that allows the sponsor lessor to transfer its beneficial rights to receive cash flows from the…
What is a syndication agreement?
A syndication agreement is a contract between the arranger and the other participants in the syndication of a lease that addresses the structure of the syndicate, how the transacti…
What is a sublease?
A sublease is an arrangement between a rental property’s principal tenant and a subtenant, whereby the lease agreement between the landlord and the tenant remains in force and gove…
What is a standstill? What is the suspension of payment?
Creditors are typically willing to afford a viable debtor in financial distress standstill relief in order to work out a restructuring plan with its creditors. A standstill is a t…
What is a servicing agreement?
A servicing agreement is a contract between a servicer and a special purpose vehicle (SPV) or an assignee under which the servicer is responsible for administering a lease and acti…
What is a service lease?
A service lease is an arrangement where the owner and lessor of the equipment maintains and services the asset and allows the asset operator operational flexibility by permitting t…
What is a security deposit?
A security deposit is an amount of cash provided by a lessee to the lessor at inception of a lease for lessor protection against defaults, delays or other failures of performance b…
What is a security agreement?
A security interest arises when debtor agrees in a security agreement that the secured party may take specified collateral that is owned by the debtor if the debtor breaches the ag…
What is a sale-leaseback?
A lease transaction that involve the sale of an asset and the leasing back of the same asset either before or after the asset is put into use is a sale-leaseback. An equipment sal…
What is a residual value guarantee? What is the stipulated loss value of a lease?
At the end of the lease term, a leased asset is equal to the residual value. Residual value can be either unguaranteed or guaranteed by the lessee or a party related to the lessee…
What is a residual sharing agreement?
A contract between a lessor and its assignee whereby the proceeds in excess of a specific amount received by the lessor upon the sale or re-lease of the leased asset following the…
What is a repurchase agreement?
A repurchase agreement is a contract between a vendor and a lessor requiring the vendor to buy back leased equipment that was purchased from the vendor, often in the event of the l…
What is a remarketing agreement?
A remarketing agreement documents a contractual arrangement under which a vendor agrees to help sell equipment when it goes off-lease at the end of its lease term or earlier due to…
What is a recourse, limited recourse and nonrecourse assignment?
The right of an assignee or buyer in a financial transaction to demand performance from the transaction assignor or seller in the event of default on the underlying debt is recours…
What is a perfected lien and lien priority?
The security interest of a creditor (lender/lessor) in personal property is perfected upon the filing of the financing statement with the appropriate authorities. Lien perfection…
What is a nontax lease?
A nontax lease is any lease in which the lessee is considered the owner of the leased asset for tax purposes, it being treated as a loan in which the lessor has a security interest…