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FIA specialized in the leveraged purchase and leasing of high-tech
diagnostic medical equipment to hospitals and clinics.
FIA's leases typically ran for 60 months, which was less than
the estimated useful life of the leased equipment. FIA financed
its equipment purchases using a combination of debt and equity.
Debt (which generally represented approximately 90 percent of the
cost of equipment) was typically in the form of a 60-month,
nonrecourse loan from a money-center bank. Prior to FIA's
acquisition by Commercial Federal Corp., discussed infra, FIA
obtained equity financing from syndications,40 assembled by
investment bankers.
FIA customarily received an up-front fee or commission from
the syndications, out of which the investment bankers received
their fee. At the expiration of the lease term, the debt incurred
to acquire the equipment being leased was retired, and the
syndications' investors owned the equipment outright.
High-tech medical diagnostic equipment, particularly of the
type leased by FIA, tends to have higher residual values than most
other kinds of leased equipment. FIA projected the residual value
of the equipment it leased to be in the range of 20 to 35 percent
40 FIA was a general partner in the syndications and
received additional remuneration by sharing in the residual value
of the leased equipment with the syndications' investors.
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