Thursday, September 13, 2007

Solar: Leveraged Lease Structured Financing

From AltEnergyStocks, an example of the interplays between finance and reality:

On August first, Acciona Energy closed financing on Nevada Solar One, in the first leveraged lease structured financing in the United States.

This begs two questions:

  1. What the ?*!@ is a leveraged lease structured financing?
  2. Why do we care?

What the...

An in-depth analysis of the economics of leverage leasing for all three parties involved is available here. Structured financing is a generic term for any form of financing more complex than a loan or a rental. For those of you who need to remain awake, here's the short version: a leveraged lease is a way of obtaining financing that allows the three parties (lenders, equity investors, and lessee) involved to parcel out the risks, tax benefits, and income streams in a way that suits each of their needs.

Why We Care

While using structured finance can lead to substantial financial benefits for the parties involved, the deal can only be done if the lenders believe that the cash flows from the underlying asset, in this case Nevada Solar One, a Concentrating Solar Power (CSP) plant, are sufficiently reliable that they are willing to loan money in exchange for a share of those cash flows....MORE>

And from FT Alphaville, the intersection of finance and unreality:

Chemical Finance? Snowball Notes

Us innocent types on FT Alphaville thought a snowball was a slightly naff cocktail, an Advocaat-based drink from the 70s. Either that, or a little white pill popped occasionally on a Saturday night.

But no. This snowball is another, potentially more noxious variety.

The question of what a financial snowball looks like was prompted by this release, a notice of a class action lawsuit filed by Aidikoff, Uhl & Bakhtiari against Morgan Stanley in the US District Court for the Central District of California. The suit is filed on “behalf of all persons who purchased or otherwise acquired “Snowball notes” issued by Bayerische Landesbank and underwritten by Morgan Stanley” between August 30, 2004 and the present.

The significance of which is unclear. In the US they chuck class actions around like confetti so frankly it’s hard to tell.

But snowball notes we find intriguing. The release states:

Snowball notes are complex structured financial products underwritten by Morgan Stanley that have components of straight debt instruments and derivatives combined into one investment structure. Snowball note returns are tied to quarterly fluctuations of the London Interbank Offered Rate (”LIBOR”)....