In the Marketplace
March 29, 2006
Highlights of the latest equipment leasing news from around the country.
Legislative Update
March 29, 2006
At its Feb. 15, 2006 Board Meeting, the Financial Accounting Standards Board affirmed decisions on the remaining issues concerning the proposed FASB Staff Position FAS 13-a, 'Accounting for a Change or Projected Change in the Timing of Cash Flows Relating to Income Taxes Generated by a Leveraged Lease.' These issues had been discussed at the Board's Feb. 8 educational meeting.
Like Kind Exchange for Equipment Leasing
March 29, 2006
Competitive pressures in the Equipment Leasing Industry continue to build into 2006. Although industry surveys project a healthy 7% to 8% growth in overall leasing volumes from 2004 to 2006, readily available capital continues to drive down returns as well as margins, especially for the best credit customers. In reaction to these competitive pressures, savvy lessors are increasingly taking advantage of a tax strategy involving the implementation of a Like Kind Exchange ('LKE') Program. LKE Programs enable equipment lessors to systematically avoid current recognition of taxable gain on the disposition of tax leased equipment and defer the requisite payment of state and federal income tax.
Using Technology to Lease Technology
March 29, 2006
Since leasing was first used as a financial tool, pricing has been a complex matter. To price properly, many variables must be taken into account including: funding date, credit rating of lessee, residual assumed, tax rate, term of the transaction, desired spread over an index, etc.
Dismantling the 'Great Wall' of Risk: The Key to Turning Lease Financing into a Mainstream Financial Product in China
March 29, 2006
A growing number of lessors exhibiting cautious optimism are slowly, but successfully, knocking down the 'great wall' that separates them from turning lease financing into a mainstream financial product in China. Investing in the Chinese leasing market can be a sound decision for lessors whose customers are asking for leases there; who can effectively manage the risks; and who are equipped to deal with major differences between the United States and China, which include language, culture, and the number and nature of business regulations.
Assuring the Lessors' Protections Afforded By the Finance Lease
February 28, 2006
Generally, the lessor/lessee relationship is governed by Article 2A of the Uniform Commercial Code (the "UCC"). In many respects, Article 2A mirrors Article 2, treating ordinary lessors like sellers. 2 James J. White & Robert S. Summers, Uniform Commercial Code '13-3 (4th ed. 2005). For example, under UCC '2A-210 the ordinary lessor has express warranty liability similar to that incurred by a seller under UCC '2-313. Additionally, Sections 2A-212 and 2A-213 impose the familiar warranties of merchantability and fitness for a particular purpose on ordinary lessors. A lessee can assert the lessor's breach of these warranties by effectuating setoff, by suit for damages or by withholding performance. <i>Id.</i> Furthermore, where the lessee has filed a petition for relief under Title 11 of the United States Code (the "Bankruptcy Code"), the debtor-lessee may object to the allowance of the creditor-lessor's claim for rejection damages by asserting that the leased equipment was defective or unsuitable for the lessee's particular business.
In The Marketplace
February 28, 2006
Highlights of the latest Equipment Leasing news from around the country.
Captive Financing: The Economic Advantages ' A Detailed Financial Analysis
February 28, 2006
Captive finance has become a major contributor to the earnings of U.S. manufacturing companies. Per the CFO Magazine, March 2003 article titled <i>What Goes Around</i>, a Morgan Stanley study says that more than 28% of all revenue of S&P 500 companies comes from captive finance activities. This is understandable as, not only does captive finance add revenue to the consolidated results of the parent, there are several economic advantages available only to U.S. captive finance companies and not available to bank lessors or independent finance companies that vie for their business or compete against them. There is also the customer relations factor that is hard to measure and is always in jeopardy when using a third-party vendor finance company.
Involuntary Bankruptcy: A Useful Tool for Lessors and Creditors
February 28, 2006
Bankruptcy." To many creditors this term is understood to mean a lost cause, a write-off and the end of the collection process. To other creditors, including those that appropriately use the filing of an involuntary bankruptcy petition, bankruptcy can mean the beginning of a successful strategy. Many of the benefits leasing creditors and others derived from the filing of an involuntary bankruptcy petition against a delinquent customer under the former Bankruptcy Code are preserved in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA"), with some favorable additions. Used intelligently, and in the right situation, the filing of an involuntary bankruptcy petition can still be a useful tool.
