Transportation Equipment Finance
As investors balance their portfolio exposures, we arrange and document tax-structured financing of rail and aircraft equipment. With contacts in the operating lease industry, we identify opportunities to reposition equipment. We have participated in creating a de novo operating lease company for a major equipment manufacturer, and played a significant role in growing one of the largest rail operating lessors’ portfolios through originating multiple equipment portfolio acquisitions.
Discuss Your Transaction Call (708) 460-6686
A Sampling of Our Work
Private equity planning and debt placement services for privately owned air and rail lessors. Section 269/382 tax memoranda for preservation of net operating loss. Diligence and pricing services for privately held equipment investors. Consulting supporting restructuring and refinancing of the largest locomotive financing with a boutique investment banking firm. Business development and marketing services for an OEM supplier of Electro-Motive locomotive water and oil pumps. Strategic and competitive market review for medical equipment lessors. FAS 142 valuation for a Marmon Group lessor subsidiary. Review of finance department lease and operational portfolio procedures and financing integration strategies for merging utilities National Grid and Niagara Mohawk.
Originated, managed, and closed sell-side engagement for the agricultural equipment finance business segment of a major German bank. Completed multiple valuation and diligence reviews for Big Ticket investment portfolios ($4 billion) for major domestic institutional investors. Provided cross-border inbound and outbound investment advisory services for major UK-based banks targeted at growing both US domestic investment business and UK-based operating investment portfolios.
Established a new $500 million operating lease investment venture with financial institutions for rail equipment investments. Over $100 million in long-term single-investor tax and synthetic lease financing underwritten and held pending placement with third-party institutional investors.
Selected transaction credits include ACF, Southern Pacific, Burlington Northern, Kansas Power & Light, Transtar, Residco, Household Financial, Bethlehem Steel, Commonwealth Edison, Union Pacific Railroad, Cargill, Helm/Union Pacific, Polysar, United Coal, Republic Bank, Union Carbide, Novacor, Canadian National, CSX, Exxon, BC Hydro, GATX, Westinghouse, McDonald Douglas, and others — totaling $500 million across 50 separate acquisition transactions over seven years.
Services for Rail and Aviation Equipment Investors
Transaction Structuring & Documentation
We arrange and document tax-structured single-investor and leveraged leases for rail and aviation equipment. Services include term sheet analysis, lease documentation, security agreements, tax opinion coordination, and closing management.
Portfolio Acquisition & Repositioning
With operating lease industry contacts, we identify opportunities to reposition equipment and originate portfolio acquisitions for lessors seeking to grow their asset base. We have played a significant role in growing one of the largest rail operating lessors’ portfolios through multiple originations.
Tax Memoranda & NOL Preservation
We prepare tax memoranda for equipment investors on issues including Section 269/382 limitations on net operating loss carryforwards, passive activity rules applicable to equipment leasing, and the tax treatment of lease terminations, modifications, and renewals.
Operating Lease Company Formation
We have participated in creating de novo operating lease companies for equipment manufacturers and institutional investors, including business plan development, entity formation, initial financing structure, and management agreement documentation.
Debt Restructuring & Workout
We have consulting experience supporting restructuring and refinancing of large locomotive and aviation equipment financing arrangements, including analysis of lender rights, intercreditor issues, and borrower remediation strategies.
Frequently Asked Questions
What makes rail and aviation equipment leasing different from other equipment finance?
Rail and aviation equipment are highly specialized asset classes with distinct regulatory frameworks, maintenance requirements, residual value characteristics, and secondary market dynamics. Rail cars and locomotives are subject to AAR interchange rules and FRA regulations; aircraft are subject to FAA certification requirements and international registry considerations. The tax treatment of these assets — depreciation class lives, bonus depreciation eligibility, passive activity rules — differs from general equipment and requires advisors with specific experience in the asset class. Investors who apply general equipment finance assumptions to rail or aviation portfolios frequently mis-price risk and overestimate residual values.
What is a single-investor lease and how is it taxed?
A single-investor (or “true”) lease is one in which the lessor provides all of the equity financing from its own resources and is treated as the owner of the equipment for tax purposes. The lessor claims depreciation deductions and any applicable tax credits; the lessee deducts the lease payments as operating expenses. To qualify as a true lease for tax purposes, the transaction must satisfy IRS guidelines on minimum lessor at-risk investment, economic substance, and residual value. A properly structured true lease can be one of the most efficient financing vehicles for equipment investors — but the documentation and tax analysis must be aligned from the outset.
What is the Section 269/382 issue for equipment lessors with NOL carryforwards?
Sections 269 and 382 of the Internal Revenue Code limit the ability of a corporation to use net operating loss (NOL) carryforwards following certain ownership changes or acquisitions made with a principal purpose of tax avoidance. For equipment lessors that have accumulated NOLs from prior lease terminations, remarketing losses, or operating losses, an acquisition of the lessor entity — or an acquisition by the lessor of another entity — can trigger Section 382 limitations that dramatically reduce the usable NOL in future periods. We prepare tax memoranda analyzing these limitations as part of pre-acquisition diligence for equipment investors.
Related Services
- Commercial Finance — debt placement, equipment leasing, and tax-structured finance for middle market companies
- Financial Due Diligence — investment and portfolio diligence services
- Tax Planning — tax-efficient transaction structuring and IRS representation
- Corporate Law — entity formation and transactional documentation
For more information contact Paul Lechner, Esq., CPA at (708) 460-6686 or schedule a consultation online.
Shipper Resources
Right-click and select “Save Link As” or “Save Target As” to download:
- Shippers Advisory Board Presentation: “Back to Basics” (PDF)
- Shippers Advisory Board Presentation: “A Framework for Contract Review” (PDF)
For more information contact Paul Lechner, Esq., CPA at (708) 460-6686 or schedule a consultation online.