Lease-back transactions

While there are other forms of corporate property securitisation transactions (such as sale and lease-back transactions) and there may be some blurring of the distinctions between these categories, the majority of exposures reliant on the performance of the underlying real estate fall largely within the categories identified above. 

Volkswagen Leasing has accessed the securitisation market three times since 1997 under the umbrella of its VCL programme. All transactions are backed by German auto leases and notes and collateral are Deutschmark/euro-denominated. 

Leases are generally made to commercial parties. Under the lease contract, the lessee makes small monthly payments to the lessor and at the end of the term holds an option to purchase the vehicle for the stated RV. This option is likely to be exercised if the RV is equal to or below the retail value of the car, otherwise the lessee is likely to return the car to the dealer, which can then decide whether or not to take the car. If the dealer also decides not to purchase the car, the lessor takes possession and sells it at its wholesale price. Because of the uncertainty about the realisation of the RV, which can be large relative to the lessee s lease payments, it is important for investors to know if the pool of receivables that backs the transaction comprises only the rental component of the lease contracts or if it also includes the RV component. For example, the five transactions issued under the VCL programme are backed solely by the rental component of the lease contracts. 

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