A NEW LIFE OF LEASE
The US equipment leasing market is an attractive target to
Washington legislators. No wonder. The American Association of
Equipment Lessors (AAEL) estimates the total volume of leases written in
1984 at $88 billion; about 30% of all US equipment acquisitions and
about 19% of all capital expenditures, broadly defined.
In a $175 million deal for the joint GM-Toyota New United Motor
Manufacturing plant in Fremont, California, Chase Manhattan was the
equity participant or lessor, enjoying the tax benefits and exposed to
fair market residual value at lease expiration. Chase's investment
is leveraged by debt provided by a Japanese consortium: Long-Term Credit
Bank of Japan, Mitsui Bank, Tokai Bank and Golden State Sanwa Bank.
This exemplifies the basic features of the US-style leveraged
lease: transfer of residual risk from lessee to lessor and transfer of
tax benefits amplified by debt leverage, in tandem with a...
