A lease is a contract in which one party (the lessor) agrees to let another party (the lessee) use an asset for a specified period of time in return for periodic payments (rent). Leases can be used in securitisation transactions in a number of ways, including:
- To securitise lease receivables: Lease receivables are the payments that the lessee is obligated to make to the lessor under the lease agreement. Lease receivables can be securitised by transferring them to a special purpose vehicle (SPV) and issuing securities backed by the lease receivables.
- To use leases as collateral: Leases can be used as collateral for securitisation transactions. This means that the securities issued in the securitisation transaction will be secured by the lease receivables.
- To create synthetic leases: Synthetic leases are securitisation transactions that are structured to mimic the cash flows of a traditional lease. Synthetic leases can be used to securitise assets that are not easily securitised, such as equipment leases.
Here are some of the applications of leases in securitisation:
- To raise capital: Securitisation transactions can be used to raise capital for lessors. This capital can be used to finance new leases or to acquire existing leases.
- To reduce risk: Securitisation transactions can be used to reduce the risk of lease receivables. This is because the securities issued in the securitisation transaction will be backed by a pool of lease receivables, which will help to spread the risk.
- To improve liquidity: Securitisation transactions can be used to improve the liquidity of lease receivables. This is because the securities issued in the securitisation transaction will be traded on secondary markets, which will make it easier for investors to buy and sell them.
Leases can be a valuable tool for securitisation transactions. They can be used to raise capital, reduce risk, and improve liquidity.