(most recent items first)

What's New at Leasing Game?

Staring in January 2007 Ontario will start reducing its Capital Tax with the intent of eliminating it by 2010

The CFLA is lobbying to have the Capital Lease Pilot Project renewed. See below. The programme is set to expire March 2007

December '06 Bill 152 updating Ontario's PPSA went through 3rd reading. Some of the changes include

• Need to register in province of domicile as well as province of location i.e. equipment of Ontario Co in Manitoba - register both Provinces.

• When inventory financing lessor will have to give notice to not only other registrants who have ticked Inventory but also those who have ticked Accounts.

• If we read it right personal motor vehicles up to a value of $5,650 will be exempt from seizure for default. Ditto farming implements up to $28,500 and tools of trade to $11,300 (collective value). These are already covered under the Execution Act.

• Notices to secured parties  can now be done by fax & e-mail.

Note the Bill has not yet been proclaimed.

In May 2006 the BC Court of Appeal overturned a lower court decision making Transportaction vicariously liable for a multi million plaintiff claim against its lessee. Transportaction had relied on an earlier ruling that a lessor was not liable on a purchase option lease (akin to a CSC). In Feb '07 the Supreme Court of Canada has agreed to hear the case but that could be 2-3 years away. The leasing industry is therefore in limbo for that period of time.  

It should be noted vicarious liability is only an issue in BC & Alberta.

CULease the credit union national leasing Co effective October '05 has changed its name to Concentra Financial

GE made moves August '05 to become a Canadian bank

The SEC in the US Aug '05 is fighting to kill off balance sheet lease financing.. "it can't take it anymore" saying trillions of debt is being misrepresented.

At December 2005 the leasing industry estimated its portfolio of assets at $92bn including $36bn of equipment and $15bn of commercial vehicles. This down from 2004's $103bn. The CFLA membership increased to 260.

Onset Capital Corp changed its name Jan '05 to Irwin Commercial Finance Canada Corp

National Leasing has been named to the National Post's "best managed Co's" for 2004

In December '04 MTC Leasing Inc the well known small ticket leasing Co changed its name to MCap Leasing Inc and expanded into residential and commercial mortgages

This web site's relationship with Canadian Capital has changed and while we still work with this excellent broker  we have forged additional relationships - hopefully of benefit to our visitors. CCL's new web site can be found at www.canadiancapitalleasing.com 

Effective January 1st 2004 Federal Privacy legislation came into effect. This regulates the use and collection of consumer information - basically restricting it to the original purpose intended. As a result leasing Cos are obtaining specific consent forms from consumers and unincorporated lease applicants (or guarantors). Alberta, BC and Quebec have or are introducing their own privacy legislation. The Federal rules apply elsewhere including Ontario.

Citicapital Leasing has now been acquired by the GE people

Peter McDonald & Chris Sadler of Tuckahoe fame are back in the saddle (no pun intended)! Fall of '03 they started up Liftcapital.  The new Co's primary focus as its name suggests is material handling but Liftcapital is open to a wide range of leasing transactions in the $25- 500M range & higher including the other form of "lift" - aircraft!

The CFLA as at the end of '04 had 225+ members with over $100bn of leases in place, $48Bn of this was equipment financing the balance fleet and consumer vehicle financing.

ABN-Amro Leasing are out there soliciting business once again after a period of what looked like consolidation. Essentially an arm of Lasalle out of the US ABN-Amro Leasing now specialize in $1MM+ deals for mid sized Cos.

Key Corp has acquired T-D's leasing portfolio (1/03). However the T-D staff are all gone! Key have since opened their doors to being a direct funder and work with brokers in the $100M+ range.

Alta Moneta has acquired HSBC's US leasing operations (1/03)

The Federal Government has now expanded its Small Business (government guaranteed) Loan programme to cover leases done by leasing Cos providing up to 85% guarantee on leases up to $250K..  Citicapital have signed on as have National Leasing and high risk lessor Equirex. Subsequently Wells Fargo are on board.

The programme is set to expire March 2007

TD Asset Finance has just (Dec 2001) let most of its sales and admin staff go. The Bank's leasing division has also restricted itself to transactions $500,000 and over a move likely to upset it's commercial bankers and many of its customers. Its sales staff were amongst the most experienced in the business.

CIT becomes Tyco! It's a long way from the Dundas Cotton Mill (see picture) to Tyco. CIT  (Oct 2001) was acquired by Tyco a US conglomerate. Here is a list of this leasing Co's various names over the last 20 years.

• Hamilton Group

• Nabel

• Citicorp

• Onex

• Commcorp

• Newcourt

• CIT

• Tyco

• CIT

Sorry folks in '02 CIT got out of troubled Tyco and it's back to CIT Financial Ltd and doing very nicely thank you!

Effective  June 14th 2001 the CRA has revoked IT233R - the interpretation bulletin widely used  since 1983 to determine when a lease was a lease for tax purposes of expensing the rentals and when it was a conditional sale wherein only effective interest and CCA could be claimed. The Department claims it gave notice of this in September, asked for input and received no objection. This flies in the face of the facts and doubtless there will be protests.

Essentially CRA is saying  "a lease is a lease and a sale is a sale" This may put stretch leases into question though it is too early to say.

"Conditional Sales Contracts vs. Leases - Change in Policy." (6/01)

The Ontario Minister of Finance has decided  to reconsider its policy on the application of Ontario retail sales tax to bargain option leases. Two years ago Harris' "pro business" Tories decided to gang up on the leasing industry and require PST on the purchase price up front. Leasing Cos have not passed this on to customers and late last year under pressure from the leasing lobby the practice was put under moratorium.

Following the policy "reconsideration", the RST Branch "will now consider that a true lease has occurred where leasing companies, in the normal course of their business, write leases on lease paper in specific lease language, regardless of whether the option payment is a nominal amount."

Canadian leasing volume reached $16bn in '99 or about 22% (US 30%) of total capital equipment expenditures. That ranks Canada 7th worldwide after US, Japan, Germany, UK, France & Italy.

Mellon Leasing has been sold to GE (5/01). This latest incarnation of the "guys" who started leasing (US Leasing International) had been an excellent presence in Canada but  Mellon Bank itself appears to have had trouble understanding the industry.

Ian Hamilton - well known throughout the leasing industry as the "feisty wee Scot" died suddenly late April (01) of a heart attack. He was in his late 50's. Ian held court at Eglinton & Yonge, liked a pint and a good laugh - Ian we miss you!

NEW YORK  (11/30/00) Citigroup Inc. (NYSE: C) and Associates First Capital Corporation ("Associates") today announced the completion of Citigroup's acquisition of Associates. The acquisition was consummated through a merger of Associates with a subsidiary of Citigroup pursuant to which each share of Associates common stock has become a right to receive .7334 of a share of common shares of Citigroup. The acquisition followed the approval by
Associates' shareholders and the approval by certain domestic and foreign antitrust, banking and insurance regulators. Citibank recently acquired Associates which has changed its name to Citicapital.

Locally this is the 3rd transition for Tuckahoe i.e. from Tuckahoe - Textron - Associates - Citicapital!

Note effective '04 Citicapital's portfolio was acquired by GE Capital!

Recently released figures ( 10/00) indicate US$427bn worth of leasing was done worldwide in 1998. The Canadian market ranked 8th with an estimated volume of US$9.6bn, The US remains the big market at US$183bn close to three times its closest rival Japan.

The big news item since October has been the demise of Banker's Acceptance and the disappearance of its owners Ron & Loren Koval - widely believed to be in Panama. Banker's  specialized in medical leasing especially for hospitals. Its portfolio appears to have been funded by Soc Generale and Associates - on a non notification basis. Only problem most if not all the leases were fictitious and anticipated losses are now expected to "well exceed" $100MM. Concurrently the owners operated a private medical clinic for the well heeled and that also is in trouble. Ontario's neo conservative government appears to also have been taken for a ride - as good a message as any that 2 tier health care in Canada is as fraud ridden as it is in the US. There is also a message here for funders as to the risk of taking assignments of leases which remain managed by the assignor. This is by no means the first time the "portfolio" has turned out to be "empty crates".

Late December the Kovals turned themselves in at the Niagara border crossing after a two stage taxi ride from S Carolina. Turns out they had spent most of their time in a modest motel there. Police were reported ready to lay charges against their daughter which one might speculate as a neat sting to pressure the parents to surface. Both are in separate jails in Toronto awaiting their next court appearance (Jan 4). "$100MM dollars bail please"!

Newcomers on the lease funding scene in 2000

De Lage Landen Leasing a leasing division of Dutch Rabo Bank. DLL focuses on the under $100M market. However a Jan 01 news release from Holland indicated N A operations will be expanded into construction etc which would suggest an appetite for a larger ticket.

Corp Alter Moneta ("Other money") is a middle ticket asset based funder owned by National Bank and Quebec based pension institutions.

Foreign owned Cos got a scare in the February 2000 budget when Ottawa decided to include loans guaranteed by a parent in its "thin capitalization" rules (limiting the extent of interest paid to a foreign parent that can be claimed for tax purposes). This would have meant that interest on money raised in Canadian markets by such Cos where the debt required the guarantee of the parent could not be expensed for tax purposes making them (taxwise) hugely profitable ! The proposal would have killed half of the leasing Cos in Canada and has since been dropped! 

Under Bill C-53 adopted December '98 and going into effect April '99 capital leasing was to be added to the SBLA (Small Business Loans 85% guaranteed by the Federal Government) programme on a pilot project basis. Newcourt (now CIT) have in fact been running a pilot project since'96! Un March '00 the CFLA was still discussing implementation. By July '00 the government was holding public hearings.

The IASC (Int'l Accounting Standards Committee) is considering an end to the operating lease treatment (see CICA page) currently recognized by the CICA in Canada and FASB13 in US. A paper published Dec '99 by the US, UK, Canadian, Australian & NZ  accounting bodies supports this position. Effectively all leases would have to be capitalized. The CFLA and other members of the World Leasing Council are coordinating an effort to resist this move. From our perspective structured operating leases are a sham that mislead readers of financial statements and the sooner they are "toast" the better. Where the lessee has the right to end the lease at any time without a huge penalty or obligation to buy the equipment (i.e. the obligation is not committed term) we feel the off balance sheet treatment is legitimate. The new rules could very well be in place by 2003

Mid November '99 it became official! CIT has taken over Newcourt and  by late June 2000 Newcourt has changed its name to CIT Financial Ltd. The new organization is believed to be #2 in terms of managed assets in North America (CIT pre acquisition was 4th)

Two small ticket leasing Cos LSI Canada (which took over Bayshore) & Onset got into difficulties '98. Onset overcame its funding problems and is back in operation & doing well. LSI  went under late 1999 due we understand to failure of its US parent. Bombardier left the leasing marketplace early 2000. Probably still financing its parent's products though!

Rumour has it that the Dept of Finance is looking into ways to simplify the currently complex car expense calculations. The ceiling on the capital cost of a car for CCA purposes has been raised to $27,000 from $26,000 (for 2000 tax year). Now at $30,000 as at Jan 1/04

Another rumour surfacing early 2000 indicates Ontario's "business friendly" PC government is attacking securitizations by refusing to exclude them from debt for capital tax purposes!

Since late '98 Ontario Lessors  have been reporting that Ontario Sales Tax Auditors were ruling that leases with $1 purchase options should be treated like Conditional Sales Contracts for tax purposes - that is the sales tax should be remitted up front by the lessor based on the cost of the equipment. For many years virtually all provinces have taken leases at prima facie value - that is required tax to be collected and remitted on the periodic rental. The CFLA has had enough success in fighting this practice so that by October '99 The Dept had agreed to a moratorium which remains in effect as at July 2000

Sept 17th '99 Quebec's Bill 181 - the Register of Personal & Movable Real Rights came into effect. This much delayed legislation brings Quebec into line with the rest of Canada & the USA in providing a vehicle to register leases, Conditional Sales etc.

This is the equivalent of the PPSA system in other Provinces and the UCC system in the US.

Highlights re leasing

Lessors are required to register leases to businesses or consumer vehicles within 15 days of the date of the lease contract.

All lease contracts entered into prior to Sept 17th must be registered before Sept 16th 2000

While there is no specific penalty for failing to register it is reasonable to assume that the lessor's rights would fail as against a third party.

There are specific arrangements in the bill for Master Leases ie one time registration.

The Canadian Banking industry's push for entry into the auto and light truck leasing industry appeared likely to meet with success after the MacKay Report favoured such entry. However Paul Martin late June '99 nixed their entry once again.

National Leasing Group (which services the small ticket broker market) announced late June '99 it is closing all its branches and centralizing all operations in Winnipeg. NLG is probably one of the most computerized operations out there and obviously feels it can work with its brokers effectively through its intranet. A year later all seemed OK though we have the impression funders such as Copelco have made inroads. 

Cost of Credit Disclosure Both the Federal & Provincial Governments have undertaken to have standardized disclosure regulations in place before 2000. As we understand it leasing would finally be covered by such laws. So far Alberta is the only Province that is on target (enacted & in force Sept '99).  NWT, BC & Quebec expect to have legislation in effect before the end of 2000. Ontario in typical Orwellian fashion enacted such legislation under its Red Tape Reduction Act  Dec '99 but hasn't brought it into force (they're cutting the tape lengthwise!)

The MacKay Report reported spring '99 that the leasing and finance sectors reflected a total asset base of $50bn

The industry continued to see Newcourt gobble up the competition. In fall '97 Newcourt acquired Commcorp and early '98 it acquired the worldwide assets of AT&T Leasing making it the 2nd largest leasing/finance Co in North America. Of course this made room for US and offshore leasing Cos to set up shop in Canada and we saw the likes of Charter, Orix, Onset and ABN-Amro do just that. Competition hates a vacuum! See above re CIT acquisition of Newcourt!!

A '98 Supreme Court of Canada decision (Garland v Consumers Gas - class action) seems to mean that late fees and other penalties will be considered as part of the overall interest rate on bills, loans, leases etc. In the Garland case a 5% of bill late payment fee was computed to work out to 60% thus bringing it under the Interest Rate Act which having been designed to catch loan sharks has very severe penalties. We haven't heard whether the executives of Consumers Gas got marched off to jail or not!

For some time vehicle lessors have felt that they did not have to register under the PPSA particularly where they were using a closed end format. The May '98 decision of the Supreme Court of Canada to rule in favour of a bankruptcy trustee as against the lessor in such a case makes it clear LESSORS MUST REGISTER IN ALL CASES.