A lease funder is any party other than the lessor that provides funding to the lease originator either as a lease purchaser purchasing legal title and the risks, rewards and control under a lease or lease commitment or as a lease assignee accepting rights to the rental payments from and a security interest in the leased asset in exchange for the funding that its provides.

Leases are assigned to the funder generally with no or only limited recourse to the lessor in the event of lessee default on the underlying lease.  Although there is no recourse with respect to the lessee’s financial performance on the lease, the lessor is subject to recourse for damages resulting from any breach of representations with respect to the underlying lease.

The ability of a lessor to assign its rights in a lease is one of the most contentious issues in leasing.  Whereas lessors desire the maximum flexibility to assign leased assets and interest in leases, lessees select certain lessors for such reasons as the existing relationship, preservation of confidentiality and the lessor’s creditworthiness.  Therefore, assignments commonly require the lessee’s prior consent and contain some objective criteria to evaluate assignment to potential funders.

Lessor Sources of Finance for Boeing Deliveries (2016F)
Export Credit Bank Debt Cash Capital Markets
5% 16% 26% 53%
Source: Boeing

 

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