Death of the Pickle Lease

Just when the shipping industry was beginning to take notice of a financing structure commonly used by the aircraft and railroad industries, the US Internal Revenue Service (IRS) put the kibbosh on it.

New IRS rules, which effectively eliminate the Pickle lease and its key feature, the replacement lease, were proposed in April. A public hearing is scheduled for July, and even if the final rules change substantially- which is not anticipated – the Pickle is banned for transactions from April 20.

At least one deal is rumored to be on ice due to the rule changes. Other financiers who have been proponents of the structure say it won’t be used anymore, but the impact is insignificant. One firm, Kleinwort Benson Ltd., had anticipated the changes and, therefore, had tempered prospective market benefits so as not to deter lessees with any bad news.

This is only an excerpt of Death of the Pickle Lease

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