Opinion ID: 149094
Heading Depth: 3
Heading Rank: 1

Heading: The Leveraged Leases

Text: In each of these leveraged lease transactions, the parties entered into a master agreement (the Participation Agreement), which specified the roles of the parties and identified the various constituent agreements. An Owner Trust was established to purchase aircraft with funds provided by (i) an equity contribution (of approximately 20%) from the Owner Trust's beneficiary (the Owner Participant) and (ii) non-recourse borrowings (of approximately 80%) from lenders (the Lenders). Each Claimant was the Owner Participant and beneficiary of such an Owner Trust. In each transaction, the Owner Trust leased the aircraft to Delta pursuant to a net lease (the Lease) that required Delta to pay all operating expenses. Basic rent payments were calculated to amortize the debt due to the Lenders and in some cases to provide a cash return to the Owner Participant. In each case, in order to provide security for the borrowed funds, the Owner Trust granted a security interest in the aircraft and assigned its interest in the Lease (subject to certain exceptions) to an Indenture Trustee acting for the Lenders, pursuant to an indenture agreement (the Indenture). The Indenture Trustee was charged with making debt payments from the Lease rentals and distributing the excess, if any, to the Owner Trust. As assignee of the lessor's interest, the Indenture Trustee was entitled to control the exercise of remedies if Delta defaulted under the Lease.