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Feature: More tax Leases as economy picks up
21 April 2011
Tax leasing has suffered from a shortage of equity in the downturn because of minimal corporate profits. With the market moving again, Patrick Winters looks at which credits are best suited to this channel of finance.
Customers always want a cheaper
lease rental. Along with sale/leasebacks, tax leases offer some
of the most attractive rates and, in some cases, 100%
In the commercial loan market
predelivery payment finance is difficult to obtain because
fewer banks are willing to take risk on this kind of structure.
Spreads for aircraft loans rise 70% when the loan-to-value of
an aircraft mortgage rises from 75% to 90%.
While providing an attractive
form of financing, the market for tax leases is marginal
compared with sale/leasebacks and export credit, because equity
can be hard to source.
"Tax lease structures are
fairly limited to supposedly good credits because an early
termination of a tax lease structure is always costly for the
tax provider," says Jose Abramovici, global head of aviation,
Instead, equity providers prefer to invest into airlines
that have a lower risk of defaulting before expiry of...
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