A leveraged lease is more risky from the lessee's standpoint than is unleveraged lease?
Answers:
Yes, a leveraged lease may be riskier from the lessee's standpoint than is an unleveraged lease.
A leveraged lease is simply a lease transaction where the lessor puts within lone a portion (perhaps 20%) of the funds mandatory to buy the equipment, and the third-party lender supplies the go together. Generally, the third-party loan is on a nonrecourse-to-the-lessor font, and this nonrecourse piece finances that the lender can simply look for repayment to the lessee, the stream of rental payments that own be assigned to it, and the equipment.
The auxiliary risk to the lessee arises if the lease agreement provides that, contained by the event of a non-attendance, later the lender may foreclose on the equipment, even if the lessee is not surrounded by evasion. In this armour, the lessee could lose its lease of the equipment.
To prevent this, the lessee must ensure that the lease is not subordinate to the loan.
Hope this help.