Leasing - Lease Financing FINC 3630 ‐ Yost Lease...

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Unformatted text preview: Lease Financing FINC 3630 ‐ Yost Lease Financing Types of Leases • Operating Leases • Financial Leases or Capital Leases • Sale ‐ and ‐ Leaseback Arrangements • Combination Leases • Synthetic Leases Operating Leases • Payments include maintenance and service Not fully amortized • Not fully amortized • Often contain cancellation clause Lease Financing FINC 3630 ‐ Yost Financial Leases or Capital Leases • Does not include maintenance or service (or insurance) • Fully amortized • Not cancellable Sale ‐ and ‐ Leaseback Arrangements • Lessee sells asset to lessor and simultaneously executes lease agreement • Lessee gets sale price today and continues to use asset • Similar to a mortgage (and financial lease); lease payments calculated like mortgage payments Combination Leases • Contain provisions of more than one of the other types. Lease Financing FINC 3630 ‐ Yost Synthetic Leases • Firm wants to acquire long ‐ term asset with debt sets up a Special Purpose Entity (SPE) SPE obtains financing: 97% debt and 3% • SPE obtains financing: 97% debt and 3%...
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This note was uploaded on 12/11/2011 for the course FINC 3630 taught by Professor Jensen,m during the Summer '08 term at Auburn University.

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Leasing - Lease Financing FINC 3630 ‐ Yost Lease...

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