【正文】 LeaseBack ?Occurs when a pany sells an asset it already owns to another firm and immediately leases it from them. ?Two sets of cash flows occur: ? The lessee receives cash today from the sale. ? The lessee agrees to make periodic lease payments, thereby retaining the use of the asset. Leveraged Leases ?A threesided arrangement between the lessee, the lessor, and lenders. ? The lessor owns the asset and for a fee allows the lessee to use the asset. ? The lessor borrows to partially finance the asset. ? The lenders typically use a nonrecourse loan. This means that the lessor is not obligated to the lender in case of a default by the lessee. ? The lender is protected in two ways: – The lender has a first lien on the asset – In the event of loan default the lease payments are made directly to the lender Leveraged Leases Lessor buys asset, Firm U leases it. The lenders typically use a nonrecourse loan. This means that the lessor is not obligated to the lender in case of a default Lessor borrows from lender to partially finance purchase In the event of a default by the lessor, the lender has a first lien on the asset. Also the lease payments are made directly to the lender after a default. Manufacturer of asset Lessor 1. Owns asset 2. Does not use asset Creditors Lessee (Firm U) 1. Uses asset 2. Does not own asset Accounting and Leasing ?In the old days (before November 1976), leases led to offbalancesheet financing. ?In November 1976, FASB issued FAS 13, leases are either classified as capital leases or operating leases. ? Operating leases do not appear on the balance sheet. ? Capital leases appear on the balance sheet—the present value of the lease payments appears on both sides. Accounting and Leasing ?An Example: ? Some years ago, a firm issued $100,000 of equity to purchase land. It now wants to use a $100,000 truck, which it can either purchase or lease. The balance sheets reflecting the purchase, operating lease and capital lease are in the next slides. ?What are the effects in terms of accounting if lease is not reported in the balance sheet? ? The firm looks financially stronger because liability is lower. ? The firm has higher performance because assets is lower. ?Given the choice, a firm will classify all leases as operating leases. Balance Sheet Truck is purchased with debt Truck $100,000 Debt $100,000 Land $100,000 Equity $100,000 Total Assets $200,000 Total Debt amp。 Equity $100,000 Capital Lease Assets leased $100,000 Obligations under capital lease $100,000 Land $100,000 Equity $100,000 Total Assets $200,000 Total Debt amp。 it is not tax deductible. ? The periodic payments for lease is an expense。 the firm cannot use as much regular debt as it would otherwise. We say leases displace debt. ?This is a hidden cost of leasing, because the interest tax shield will be lost. Debt Displacement and Lease Valuation ?For the Xomox example: ? It Xomox purchase the machine, it will have $2,330 more cash flows per year from year 1 – 5 than if it leases. ? These cash flows can support additional debt level of $10, at year 0. ? The additional cash inflows associated with buying relative to leasing in future increases the Xomox’s debt capacity by $10, today. 5432 )(3 3 0,2$)(3 3 0,2$)(3 3 0,2$)(3 3 0,2$3 3 0,2$ 8 7,10$ ?????Year 0 1 2 3