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    National Rail Passenger Corporation (Amtrak) is considering financing options for Acela assets, including a leveraged lease from BNYCF. A leveraged lease differs from an operating lease in that it has a longer term equal to the asset life and the lessor bears maintenance and tax costs. Amtrak would benefit from the tax deductibility of lease payments and avoiding large upfront payments by spreading costs over 20 years. Financial analysis showed the leveraged lease would have a lower net present value than borrowing funds to purchase the assets. As a result, Amtrak is likely to negotiate a capital lease, which is irrevocable, with BNYCF.

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    National Rail Passenger Corporation (Amtrak) is considering financing options for Acela assets, including a leveraged lease from BNYCF. A leveraged lease differs from an operating lease in that it has a longer term equal to the asset life and the lessor bears maintenance and tax costs. Amtrak would benefit from the tax deductibility of lease payments and avoiding large upfront payments by spreading costs over 20 years. Financial analysis showed the leveraged lease would have a lower net present value than borrowing funds to purchase the assets. As a result, Amtrak is likely to negotiate a capital lease, which is irrevocable, with BNYCF.

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    31 views2 pages

    National Rail Passenger Corporation (Amtrak)

    Uploaded by

    nikaro1989
    National Rail Passenger Corporation (Amtrak) is considering financing options for Acela assets, including a leveraged lease from BNYCF. A leveraged lease differs from an operating lease in that it has a longer term equal to the asset life and the lessor bears maintenance and tax costs. Amtrak would benefit from the tax deductibility of lease payments and avoiding large upfront payments by spreading costs over 20 years. Financial analysis showed the leveraged lease would have a lower net present value than borrowing funds to purchase the assets. As a result, Amtrak is likely to negotiate a capital lease, which is irrevocable, with BNYCF.

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    of 2

    1/27/2015

    NationalRailPassengerCorporation(Amtrak):AcelaFinancing

    National Rail Passenger Corporation


    (Amtrak): Acela Financing
    Arlene Friner - Leveraged Lease
    How will you safely terminate the lease contract early and return back the asset to BNYCF?

    LeveragedLease
    What
    are the terms of leveraged lease proposed by BNYCF that differentiates this from
    1.Totalleaserental>assetprice
    Operating lease?
    2.Leaseperiod=lifeofassetirrevocable
    3.Itisusedforfinancingtheasset
    4.Lessorbearsmaintenance&taxes
    5.Payoutincludescostofasset&financing,lessoroverhead
    Operatinglease
    1.Neededforusinganasset
    2.CancelledbylessoronnoticeNofuturecommitment
    3.Riskofassetfallsonlessee

    Why will you accept Lease-Payment Schedule proposed by BNYCF?


    1.Schedulepaymentsaretaxdeductiblehencegeneratetaxshield
    2.Noimmediatelargepaymentsdueleasepaymentsarespread
    throughoutthe20years

    How Amtrak stands to gain by the Ealry-Buyout option?

    Why will you not Borrow and Buy?


    https://docs.google.com/a/astra.xlri.ac.in/forms/d/11qOaxUuOvwcxiYUzcDNlui6ZvFOxm_qn8IyJGwttg/formResponse

    1/2

    1/27/2015

    NationalRailPassengerCorporation(Amtrak):AcelaFinancing

    Qualitative:
    1.AlreadythereistoomuchAmtrakpaper(debt)inthemarketi.e.
    saturatedmarketgivespoorprices
    2.Leasingdoesn'thavedepreciation

    What type of financial analysis guided you to decide for Leveraged Lease?
    NPVofleasecashoutflows=173.9
    NPVofborrowandbuycashoutflows=179.5
    Leaselesscostlythanborrowandbuy

    Given a choice, when you negotiate with BNYCF, what type of Leasing contract you will
    negotiate for - Capital Lease or Operating lease? Why?
    Wewouldoptforcapitalleaseasitisirrevocable

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