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CLFP EXAM (Sources of Financing) with Questions & Answers Graded A
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CLFP EXAM (Sources of Financing) with Questions & Answers Graded A
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CLFP EXAM (Sources of Financing)with Questions & Answers Graded
A
What determines the quality of the debt available to a lessor? - ✔✔1.) reputation
2.) Amount of capital
3.) Historical stability
4.) Integrity of financials
5.) Cash flow
6.) Type of leases
7.) Originations - now and projected
8.) Size of portfolio
9.) Servicing/remarketing capabilities
10 Tax, credit, financial and business risks
What is Subordinated Debt? - ✔✔1.) One level up from equity, a form of debt viewed as equity
from the lender perspective
2.) In liquidation, subordinated debt holders are paid after secured and unsecured lenders.
3.) For closely held companies, typically supplied by ownership
4.) For larger companies, private equity, commercial finance firms, insurance or pension funds
5.) cost significantly higher than senior debt
What are Revolving Lines of Credit? - ✔✔1.) Used to manage the funding and liquidity
requirements of leasing operation.
, 2.) temporarily fund or warehouse until permanent financing is established
3.) supplied by commercial banks with pricing tied to index
4.) typically one year notes
How do Revolving Lines of Credit function? - ✔✔1.) lender does not typically underwrite transaction
2.) lenders does not fund or take security interest in individual transaction
3.) lender takes a general pledge of lessor assets
4.) availability based on borrowing base certificate provided monthly
5.) BBC includes net investment
6.) Lender often requires over collaterilization - 70-90% of underlying cost
7.) as lease are sold, line is repaid
How does Permanent or Term Debt function? - ✔✔1.) simple - single lease single note
2.) complex - bungle leases into one note with common/blended characteristics
3.) limited advance amount to less than the investment
4.) should lesse default - note is to be repaid.
5.) lessor is responsible for servicing
How does Asset Securitization compare with Lines & Term Debt? - ✔✔1.) different
lenders 2.) more complex
What are Commercial Paper Conduits? - ✔✔1.) Originator -> Conduit -> Investor;
2.) Facilities whereby lessor can participate in the issuance of commercial paper or company
issued short term debt
3.) Conduit means there is only one issuer, but many participating originators
4.) Conduit aggregates paper from many originators and issues commercial paper
5.) complex with up front legal cost and usually > $50MM transactions
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