Abstract
The aim of this chapter is to investigate and highlight the typical features of the transactions and market covering a family of instruments known as structured leasing deals, namely, complex, intricate deals assembled ad hoc, with an organizational and contractual framework that is grafted onto a leasing transaction. To achieve the above, this chapter has been structured in four parts. The first part tackles the issue of defining structured leasing deals by examining their characteristics within the broader context of the structured finance and leasing market. The second part, instead, focuses on the market set-up, highlighting basic trends, its size and internal organization, and the types of financial intermediary operating within it. The third part looks at the leasing transaction from a tax standpoint, examining its distinctive features and possible room for maneuver, which is fundamental when assembling a structured transaction. At this juncture it would appear significant to conduct a sensitivity analysis to measure the effects on cost of capital produced by changes in the basic components of the leasing contract and tax implications for the lessee. Lastly, the fourth part examines the issue of classifying and analyzing structured leasing transactions in order to provide an initial classification scheme, illustrating their characteristics from a standpoint of the transaction’s basic set-up, tax and financial architecture and main results achieved.
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Notes
- 1.
Works published on the subject of structured leasing transactions appear to be few and far between, and so reference has to be made to studies carried out in the research environment and activities in closely associated operational areas. For this reason there is one type of material that covers the subject directly and another, broader category of material that, when referring to conventional and project leasing, deals with the issue of “structuring a leasing transaction”. For a broad overview see Ascari and Albisetti (1996) and the more recent update based on the paper written by Pinto and Pacheco (2014).
- 2.
- 3.
On this subject see: Leaseurope (2014a).
- 4.
In this regard the interpretation in terms of legal profile and product-category profile can be extended and broken down further by considering size and whether the deal is of a domestic or international nature. This latter distinction has a significant effect inasmuch as it introduces the aspect of country risk, which interacts with the various other risk aspects of the transaction.
- 5.
On this issue see evaluations made in Caselli et al. (2015).
- 6.
Particularly as regards project finance transactions, see considerations made in the study of this specific issue.
- 7.
The above maneuvers have been used widely in the past, above all in Eastern European countries, to attract foreign investors and sustain growth of the investment process at aggregate level. Moreover, similar actions can also be seen in the US market in terms of tax-based leasing transactions that offer strong tax incentives for certain specific real estate leasing transactions. In this regard see Leaseurope and KPMG (2012), Leaseurope (2014b).
- 8.
In this regard see Leaseurope and KPMG (2012).
- 9.
- 10.
See Fabozzi et al. (2006).
- 11.
The stimulus to demand mentioned represents the “virtuous” factors that encourage users to apply the sale and leaseback framework to big-ticket assets. There are undoubtedly also other stimuli, for instance the need to reduce company debt by using financial resources coming from real estate rather than plant and equipment. In this case the transaction can involve considerable margins of risk as, on the one hand, the company doesn’t acquire resources to sustain an investment and growth process and, on the other, it loses ownership of part of the company’s net worth dedicated to business growth.
- 12.
In this regard see Caselli et al. (2015).
- 13.
On this point it should be observed that the presence of specialized intermediaries in the real estate financing segment is particularly strong in Germany. In fact, the League Table prepared by Leaseurope in 2015 covering the main operators in the leasing sector (by asset and by volume) showed that in the top 100 positions at European level there were as many as six German operators specialized in real estate. No other European country shows such high-profile performance.
- 14.
On this issue see considerations in Caselli et al. (2015).
- 15.
- 16.
See Carretta and De Laurentis (1998).
- 17.
- 18.
- 19.
- 20.
Moreover, these increased tax benefits afforded by operating leasing have provided a strong stimulus to create “structured” transactions that give operating leasing the same characteristics as true financial leasing. This subject is covered in later sections dealing with synthetic leasing transactions.
- 21.
The assumption of a pre-tax loss in the case of IRAP is extreme, inasmuch as it would imply a negative difference between the total for items in section A and items considered as deductible in section B of the statutory income statement.
- 22.
- 23.
For an overview of leveraged-type leasing transactions see Caselli et al. (2015).
- 24.
From which the term “standardized” classification is derived, given that transactions are based on standard tax frameworks.
- 25.
On this subject see, in particular, Gregoriou (2008).
- 26.
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Caselli, S. (2017). Structured Leasing Transactions. In: Caselli, S., Gatti, S. (eds) Structured Finance. Springer, Cham. https://doi.org/10.1007/978-3-319-54124-2_4
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