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EXCEL - IDEA: XBRL DOCUMENT - Macquarie Equipment Leasing Fund, LLCFinancial_Report.xls
10-K - FORM 10-K - Macquarie Equipment Leasing Fund, LLCd265500d10k.htm
XML - IDEA: XBRL DOCUMENT - Macquarie Equipment Leasing Fund, LLCR7.htm
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EX-31.2 - CERTIFICATION OF PFO PURSUANT TO RULE 13A-14(A) / 15D-14(A) - Macquarie Equipment Leasing Fund, LLCd265500dex312.htm
EX-32.2 - CERTIFICATION OF PFO PURSUANT TO SECTION 906 - Macquarie Equipment Leasing Fund, LLCd265500dex322.htm
EX-31.1 - CERTIFICATION OF PRESIDENT PURSUANT TO RULE 13A-14(A) / 15D-14(A) - Macquarie Equipment Leasing Fund, LLCd265500dex311.htm
EX-32.1 - CERTIFICATION OF PRESIDENT PURSUANT TO SECTION 906 - Macquarie Equipment Leasing Fund, LLCd265500dex321.htm
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LEASED EQUIPMENT AT COST
12 Months Ended
Dec. 31, 2011
LEASED EQUIPMENT AT COST

4. LEASED EQUIPMENT AT COST

In October 2010, the Fund acquired 451 new NCR Self-Serv kiosks (customer self-service terminals). These customer self-service terminals are on lease to a leading U.S. retailer for a period of 59 months and will be used in the retailer’s stores across the U.S. The retailer is an existing client of an entity affiliated with the Fund’s Manager. The acquisition of the equipment was facilitated by the entity affiliated with the Fund’s manager purchasing the equipment and then simultaneously selling it to the Fund. The purchase price for the equipment, including the estimated initial direct costs was $2,097,353, paid directly by the Fund to the manufacturer of the equipment. The Fund also paid acquisition fees to its Manager for this transaction. No leverage was used to finance this acquisition by the Fund. Rentals of $38,361 are paid monthly and at the end of the lease term, the lessee may return the equipment, continue to rent the equipment, or purchase the equipment for its then fair market value.

In March 2011, the Fund entered into an agreement to purchase a 2002 vintage Bombardier CRJ-700ER aircraft (“the Aircraft”). The Aircraft is on lease until April 2014 to an airline which is wholly owned by the Government of India and will be used by the airline for its domestic routes in India. The purchase price for the aircraft, including the estimated initial direct costs was $9,758,734. The Fund also inherited the related maintenance reserve of $1,236,497, which is recorded as a liability on the Balance Sheet. No leverage was used to finance this acquisition by the Fund. At the end of the lease term, the lessee may return or continue to rent the equipment. Rentals of $181,000 are received monthly by the Fund. In addition to the inherited maintenance reserve balance, the Fund is entitled to receive additional rentals based on the usage of the aircraft during the lease term. Cash received for the additional rentals is presented as restricted cash in the Fund’s Balance Sheet and will be used to reimburse the lessee for the maintenance of the aircraft.

In July 2011, the Fund acquired an ETS-364B Test System, an item of semiconductor testing equipment manufactured by Teradyne, Inc. This equipment is on lease to the U.S. subsidiary of a semiconductor manufacturing company headquartered in Germany. The lease is for 36 months and the equipment will be used in the client’s U.S. facilities. The purchase price for the equipment, including the initial direct cost, was $383,898. No leverage was used to finance this acquisition by the Fund. The first rental was $92,729, including an amount of revenue which will be deferred for accounting purposes. For the subsequent monthly rental periods, rentals of $8,211 are to be received by the Fund. At the end of the lease term, the lessee may return the equipment, continue to rent the equipment, or purchase the equipment for its then fair market value. The lease will be recorded as an operating lease with rental income recognized on a straight-line basis over the lease term.

In September 2011, the Fund entered into a sale and assignment agreement with Macquarie Electronics USA Inc. (“MEUI”), a member of the Macquarie group of companies, to acquire semiconductor manufacturing tools of various makes on lease to a major global manufacturer of semiconductor products. The remaining term of the lease is for 10 months and the equipment will be used in the client’s U.S. facilities. The purchase price for the equipment, including the initial direct cost, was $6,400,800. No leverage was used to finance this acquisition by the Fund. The first rental was $699,129, including an amount of revenue which will be deferred for accounting purposes. For the subsequent quarterly rental periods, rentals of $699,129 are to be received by the Fund. At the end of the lease term, the lessee may return the equipment, continue to rent the equipment, or purchase the equipment for its then fair market value. The lease will be recorded as an operating lease with rental income recognized on a straight-line basis over the lease term.

In October 2011, the Fund agreed to enter into a sale and leaseback arrangement with a leading Dubai airline over two new CFM56-7B aircraft jet engines (“Engines”) to power the airline’s fleet of 737NG aircraft. The Engines are on lease for a 108 month period. The purchase price for the Engines, including the estimated initial direct costs was $25,338,321. No leverage was used to finance this acquisition by the Fund. The first engine was delivered in October 2011, and the second engine was delivered in December 2011. Rentals of $186,131 are received monthly by the Fund in U.S. dollars. At the end of the lease term, the lessee may return the Engines, purchase them at their then fair market value, or continue to rent them. No leverage was used to finance this acquisition by the Fund.

Leased equipment at cost consisted of the following:

 

     December 31, 2011     December 31, 2010  

Aircraft engines

   $ 25,338,321      $ —     

Aircraft

     9,758,734        —     

Semiconductor Tools

     6,400,800        —     

Self-serve checkout equipment

     2,097,353        2,097,353   

Semiconductor Equipment

     383,898        —     

Less: Accumulated depreciation

     (2,058,143     (56,877
  

 

 

   

 

 

 
   $ 41,920,963      $ 2,040,476   
  

 

 

   

 

 

 

Annual minimum future rentals receivable over the next 5 years consist of the following:

 

For the year ending December 31, 2012

   $ 6,890,552   

For the year ending December 31, 2013

     4,964,438   

For the year ending December 31, 2014

     3,466,394   

For the year ending December 31, 2015

     2,578,823   

For the year ending December 31, 2016

     2,233,572   

Thereafter

     8,562,357   
  

 

 

 
   $ 28,696,136   
  

 

 

 

 

The Fund is exposed to risks under these transactions, including risk associated with a leasing client’s creditworthiness and risk associated with the future market value of the equipment. Although the Fund currently has no reason to believe that their clients will fail to meet their contractual obligations, a risk of loss to the Fund exists should a client fail to meet its payment obligations under the lease. As at December 31, 2011 and December 31, 2010, the Fund did not have a reserve for allowance for credit losses for its lease receivables.

A risk of loss or lower than expected returns also exists if the market value of the equipment at the end of the lease term is lower than anticipated.