Promising environment
Crossing into new markets
The structureel finance team has taken the familiar sale/lease-back system and
applied it in a new deal to a strategie new market - environmental protection.
This complex and potentially trend-setting
deal was set up by a two-man structured
finance team, Jos Schreurs (left) and
Wilfried Mulder (right), and designed in
close cooperation with the Dutch
Environment Ministry and the
Waterschapsbank - the house bank for
Holland's 88 independent water boards.
These boards have been Dutch institutions
for centuries. They have looked after the
essential task of managing water levels
and keeping the North Sea at bay. More
recently, the boards have taken on more
prosaic but equally necessary
responsibilities such as waste
management.
The innovative lease-back deal makes use
of the so-called Vamil tax incentive aimed
at stimulating the construction of
environmentally friendly projects. 'These
projects tend to be quite costly and
without such incentives many important
investments would never be made,'
remarks Schreurs. Under the Vamil
program, green schemes become
immediately eligible for depreciation; thus,
at a marginal tax rate of 35 per cent, the
NLG 100 million deal will yield a NLG 35
million fiscal benefit. Needless to say,
Rabobank will still pay tax on income
from the water authorities' lease. But this
burden can be spread over the next ten
years, while the depreciation benefit takes
effect at once. The result is tantamount to
an interest-free loan from the Dutch
government, the benefits of which are
shared among all the parties concerned.
In effect, the 'green sale/lease-back'
succeeds in pairing the water authority's
highly crucial role in the history of Dutch
water management with creative
engineering on a more contemporary,
financial plane.
Looking ahead it seems clear that green
investments by the water authorities will
accelerate. There are proposals to expand
the Environment Ministry's special tax
facility from NLG 850 million to NLG
1 billion for 1996, and the structured
finance team is cautiously optimistic that
it can capture a substantial proportion of
the green deals on the way.
Cross-border leasing is a highly specialized and ferociously competitive market.
A dedicated team of four people within structured finance pursues cross-border
lease deals in a rapidly changing market.
'The customarily favoured assets were
aircraft,' says the team's Erica van Ooijen.
'They are movable, easy to identify and
quite valuable, all of which are conditions
for setting up these complex long-term
deals.' What's more, cross-border leasing
deals were traditionally assembled by a
small handful of 'packagers', like
Citibank, who acted as the sole
intermediaries between the US investor
and a European lessee. Because of its
starting point, financing on this market
was dominated by the traditional aircraft
banks which included ABN, Amro (still
independent at that time,) plus NatWest
and Barclays of the UK. But the market
has developed and the asset base has
steadily widened to include other big
ticket assets such as rolling stock, paper
mills, power plants and even large
industrial facilities.
Rabobank is determined to carve out a
role for itself in the cross-border lease
market in order to build its market profile
and buy entry to the top 100 corporates.
The bank recently teamed up with a
technical adviser and is assuming a more
active role in directly structuring deals for
the European lessees. The Rabobank
leasing team - which includes Ronald
Dirksen, Hem Mulders, and Wim
Roozenboom - has targeted Holland,
Belgium, France and Spain as its priority
markets. 'A packager's main interest is to
satisfy his or her cliënt, i.e. the US
investor,' says Dirksen. 'We feel we can get
a better deal for our European lessees than
if they accepted what was offered by the
packager alone. We can not only help
structure the deals, but we're also better
placed to advise lessees on cross-border
leasing opportunities in general.'
Technically, for foreign investors, cross
border leasing is a vehicle for tax
management and long-term investment. A
US bank might acquire title to some big
capital asset in Europe under terms
structured to produce a US tax advantage.
For the user of the equipment, or lessee,
this can also result in attractive financing,
or a top-up on existing financing. The
investor shares the benefit with the lessee.
Rabobank was recently involved in a so-
called US Pickle lease involving USD 157
million worth of trams connected with De
Lijn, the Flemish Public Transport
Company.
As the current US market now stands,
benefits to the lessee, measured as a
percentage over equipment cost, can
amount to 5 to 8 percent net of cost.
Of course, Rabobank is ready to assume
either roles: to function either as a
traditional financier or as an architect of
deals. 'It takes a long time to set up a
mandate,' remarks Mulders. The only way
you can keep your finger on its pulse is to
constantly compete for every deal.' The
results? Over the past six months,
Rabobank has won the mandate to
structure one deal, to act as financier for
two more, and is now fighting for another
three.
F.l.t.r. Hem Mulders, Martba van den Berg,
Ronald Dirksen (sitting) and Erika van
Ooijen (sitting).
