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Comdisco borrows, on a nonrecourse basis, an amount equal to the
present value of the rental payments due under the lease (existing
financing) from a financial institution or insurance company. Such
borrowing is secured by an assignment of the rents and a lien on
the equipment (existing lien). Comdisco rarely obtains sufficient
proceeds from the existing financing to fund the total cost of the
equipment. (The balance of the equipment cost is referred to as
the equity portion. The equity portion ranges from 10 to 25
percent of the cost of the equipment, depending on the length of
the lease and the type of equipment.) Comdisco recovers a portion
of the equity portion by entering into sale-leaseback transactions
with third parties.
In a sale-leaseback transaction, the third party purchases the
equipment (subject to the existing lease and existing lien) and
leases it back to Comdisco. Generally, the present value of rent
paid by Comdisco to the third party is less than the purchase price
paid by the third party. The third party obtains the depreciation
deductions associated with the equipment and is entitled to the
residual value of the equipment at the end of the lease. Ideally,
the transaction is structured so that the third party can recover
most of his investment from the residual value and profits from the
tax savings he receives from depreciation and interest deductions.
Comdisco also obtains a tax benefit from the transaction; the sale-
leaseback transaction allows Comdisco a deduction for the rent it
pays to the third party (instead of a deduction for depreciation of
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Last modified: May 25, 2011