French fancy

The French leveraged lease market has traditionally been overshadowed by other tax-driven structures available in neighbouring jurisdictions. But a lack of viable alternatives is attracting interest. People in Europe are looking for alternatives to the US cross-border lease; moreover, there is tax c...

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Bibliographic Details
Published in:Asset Finance International 2004-10, p.1
Format: Article
Language:English
Subjects:
Business conditions
Capital gains
Capital markets
International markets
Legislation
Lessees
Lessors
Leveraged leases
Light rail transportation
Net present value
Purchase options
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Summary:The French leveraged lease market has traditionally been overshadowed by other tax-driven structures available in neighbouring jurisdictions. But a lack of viable alternatives is attracting interest. People in Europe are looking for alternatives to the US cross-border lease; moreover, there is tax capacity available in France right now so there may be opportunities. New Jersey Transit seems to be one such opportunity. In July the transit authority closed a $38.8 million French leveraged lease, which refinances a fleet of articulated and suburban buses. Global Capital Finance acted as exclusive financial adviser on the transaction, while the equity was put up by an unnamed French institution. Whilst domestic lease structures most popularly the credit-bail or finance lease require formal approval to benefit from exemption on capital gains taxes as well as accelerated amortization, its cross-border structure does not. The unapproved lease (without seeking the tax exemption on capital gains at the end of the lease term) may have a lower net present value (NPV) benefit, but has proved a hit with a number of end users. NPV benefits range between 4 and 5%, though the reality is that there is far more demand than available capacity.
ISSN:1367-8086